Super League Enterprise, Inc. 10-K

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA   The consolidated financial statements and related financial information required to be filed hereunder are indexed under Item 15 of this report and are incorporated herein by reference.   ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE   None.   ITEM 9A. CONTROLS AND   PROCEDURES   Evaluation of Disclosure Controls and Procedures   Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, have evaluated the effectiveness of our disclosure controls and procedures as of December 31, 2022. Disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) are designed to provide reasonable assurance that information required to be disclosed in our reports filed or submitted under the Exchange Act is (i) recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and (ii) accumulated and communicated to the company’s management, including its principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure. Based on the evaluation of our disclosure controls and procedures, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures were effective as of December 31, 2022.    Limitations on Effectiveness of Controls and Procedures   Our disclosure controls and procedures are designed to provide reasonable assurance of achieving the desired control objectives. Our management, including our Chief Executive Officer and Chief Financial Officer, does not expect that our disclosure controls or our internal control over financial reporting will prevent or detect all errors and all fraud. Our management recognizes that any control system, no matter how well designed and operated, is based upon certain judgments and assumptions and cannot provide absolute assurance that its objectives will be met. The design of a control system must reflect the fact that there are resource constraints and that management is required to apply judgment in evaluating the benefits of possible controls and procedures relative to their costs. Further, because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud, if any, have been detected. The design of any system of controls is based in part on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.   -49- Table of Contents   Management ’ s Report on Internal Control over Financial Reporting   Internal Control Over Financial Reporting   Our management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. Our internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of consolidated financial statements for external purposes in accordance with generally accepted accounting principles. This process includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our assets; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of consolidated financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures are being made only in accordance with authorizations of our management and directors; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on our consolidated financial statements.   Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of the internal control over financial reporting to future periods are subject to risk that the internal control may become inadequate because of changes in conditions, or that the degree of compliance with policies or procedures may deteriorate.   Management ’ s Assessment of the Effectiveness of our Internal Control Over Financial Reporting   Management has evaluated the effectiveness of our internal control over financial reporting as of December 31, 2022. In conducting its evaluation, management used the framework set forth in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). Based on our evaluation under such framework, our management has concluded that our internal control over financial reporting was effective as of December 31, 2022.   Report of Independent Registered Public Accounting Firm   We are an “emerging growth company,” as defined in Rule 405 of the Securities Act and, accordingly, we are not required to provide the attestation report of our independent registered public accounting firm on our internal control over financial reporting required by Item 308(b) of Regulation S-K.   Changes in Internal Control over Financial Reporting   There were no changes in our internal control over financial reporting that occurred during the fiscal quarter ended December 31, 2022 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.   ITEM 9B. OTHER INFORMATION   None.   -50- Table of Contents   PART III   ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE   Except as provided below, in accordance with General Instruction G(3) to Form 10-K, certain information required by this Item is incorporated herein by reference to our definitive proxy statement for our 2022 annual meeting of stockholders to be filed with the SEC no later than April 30, 2023.   ITEM 11. EXECUTIVE COMPENSATION.   Except as provided below, in accordance with General Instruction G(3) to Form 10-K, certain information required by this Item is incorporated herein by reference to our definitive proxy statement for our 2022 annual meeting of stockholders to be filed with the SEC no later than April 30, 2023.   ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS   Except as provided below, in accordance with General Instruction G(3) to Form 10-K, certain information required by this Item is incorporated herein by reference to our definitive proxy statement for our 2022 annual meeting of stockholders to be filed with the SEC no later than April 30, 2023.   ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE   Except as provided below, in accordance with General Instruction G(3) to Form 10-K, certain information required by this Item is incorporated herein by reference to our definitive proxy statement for our 2022 annual meeting of stockholders to be filed with the SEC no later than April 30, 2023.   ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES   Except as provided below, in accordance with General Instruction G(3) to Form 10-K, certain information required by this Item is incorporated herein by reference to our definitive proxy statement for our 2022 annual meeting of stockholders to be filed with the SEC no later than April 30, 2023.   -51- Table of Contents   PART IV   ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES   Exhibit No. Name   Incorporation by Reference 2.1 Agreement and Plan of Merger, dated March 9, 2021, by and among Super League Gaming, Inc., SLG Merger Sub II, Inc., and Mobcrush, Inc.   Exhibit 2.1 to the Current Report on Form 8-K, filed on March 11, 2021. 2.2 Amendment No. 1 to Agreement and Plan of Merger by and between Super League Gaming, Inc., and Mobcrush Streaming, Inc., dated April 20, 2021.   Exhibit 10.1 to the Current Report on Form 8-K, filed on April 21, 2021. 2.3 Asset Purchase Agreement, dated October 4, 2021, among Super League Gaming, Inc., Bloxbiz Co., Samuel Drozdov, and Benjamin Khakshoor.   Exhibit 2.1 to the Current Report on Form 8-K, filed on October 7, 2021. 3.1 Second Amended and Restated Certificate of Incorporation of Super League Gaming, Inc., dated November 19, 2018.   Exhibit 3.1 to the Registration Statement, filed on January 4, 2019. 3.2 Second Amended and Restated Bylaws of Super League Gaming, Inc.   Exhibit 3.2 to the Registration Statement, filed on January 4, 2019. 3.3 Certificate of Amendment to the Second Amended and Restated Certificate of Incorporation of Super League Gaming, Inc., dated February 8, 2019.   Exhibit 3.3 to the Amendment No. 2 to the Registration Statement , filed on February 12, 2019. 3.4 Certificate of Amendment to the Second Amended and Restated Certificate of Incorporation of Super League Gaming, Inc., dated July 24, 2020.   Exhibit 3.1 to the Current Report on Form 8-K, filed on July 24, 2020. 3.5* Certificate of Designation of Preferences, Rights and Limitations of the Series A Preferred Stock   Filed herewith. 3.6* Certificate of Designation of Preferences, Rights and Limitations of the Series A-2 Preferred Stock   Filed herewith. 3.7* Certificate of Designation of Preferences, Rights and Limitations of the Series A-3 Preferred Stock   Filed herewith. 3.8* Certificate of Designation of Preferences, Rights and Limitations of the Series A-4 Preferred Stock   Filed herewith. 3.9* Certificate of Designation of Preferences, Rights and Limitations of the Series A-5 Preferred Stock   Filed herewith. 4.1 Form of Common Stock Certificate.   Exhibit 4.1 to the Amendment No. 2 to the Registration Statement , filed on February 12, 2019. 4.2 Form of Registration Rights Agreement, among Super League Gaming, Inc. and certain accredited investors.   Exhibit 4.2 to the Registration Statement on Form S-1 , filed on January 4, 2019. 4.3 Common Stock Purchase Warrant dated June 16, 2017 issued to Ann Hand.   Exhibit 4.3 to the Registration Statement on Form S-1, filed on January 4, 2019. 4.4 Form of 9.00% Secured Convertible Promissory Note.   Exhibit 4.4 to the Registration Statement on Form S-1, filed on January 4, 2019. 4.5 Form of Callable Common Stock Purchase Warrant, issued to certain accredited investors.   Exhibit 4.5 to the Registration Statement on Form S-1, filed on January 4, 2019. 4.6 Form of Representative’s Warrant.   Exhibit 4.6 to the Amendment No. 2 to the Registration Statement on Form S-1, filed on February 12, 2019. 10.1 † Super League Gaming, Inc. Amended and Restated 2014 Stock Option and Incentive Plan.   Exhibit 10.1 to the Registration Statement , filed on January 4, 2019. 10.2 † Form of Stock Option Agreement under 2014 Stock Option and Incentive Plan.   Exhibit 10.2 to the Registration Statement , filed on January 4, 2019. 10.3 Subscription Agreement, among Nth Games, Inc. and certain accredited investors.   Exhibit 10.3 to the Registration Statement , filed on January 4, 2019. 10.4 Subscription Agreement, among Super League Gaming, Inc. and certain accredited investors.   Exhibit 10.4 to the Registration Statement, filed on January 4, 2019. 10.5 Form of Theater Agreement, filed herewith.   Exhibit 10.5 to the Registration Statement , filed on January 4, 2019. 10.6 Lease between Super League Gaming, Inc. and Roberts Business Park Santa Monica LLC, dated June 1, 2016.   Exhibit 10.6 to the Registration Statement, filed on January 4, 2019. 10.7+ License Agreement between Super League Gaming, Inc. and Riot Games, Inc., dated June 22, 2016.   Exhibit 10.7 to the Registration Statement , filed on January 4, 2019. 10.8+ Amended and Restated License Agreement between Super League Gaming, Inc. and Mojang AB, dated August 1, 2016.   Exhibit 10.8 to the Registration Statement , filed on January 4, 2019. 10.9+ Master Agreement between Super League Gaming, Inc. and Viacom Media Networks, dated June 9, 2017.   Exhibit 10.9 to the Registration Statement, filed on January 4, 2019. 10.10 Form of Common Stock Purchase Agreement, among Super League Gaming, Inc. and certain accredited investors.   Exhibit 10.10 to the Registration Statement , filed on January 4, 2019.   -52- Table of Contents   10.11 Form of Investors’ Rights Agreement, among Super League Gaming, Inc. and certain accredited investors.   Exhibit 10.11 to the Registration Statement, filed on January 4, 2019. 10.12 † Employment Agreement, between Super League Gaming, Inc. and Ann Hand, dated June 16, 2017.   Exhibit 10.12 to the Registration Statement , filed on January 4, 2019. 10.13 † Employment Agreement, between Super League Gaming, Inc. and David Steigelfest, dated October 31, 2017.   Exhibit 10.13 to the Registration Statement, filed on January 4, 2019. 10.14 Riot Games, Inc. Extension Letter, dated November 21, 2017.   Exhibit 10.14 to the Registration Statement, filed on January 4, 2019. 10.15 Form of Note Purchase Agreement, among Super League Gaming, Inc. and certain accredited investors.   Exhibit 10.15 to the Registration Statement , filed on January 4, 2019. 10.16 Form of Security Agreement, between Super League Gaming, Inc. and certain accredited investors.   Exhibit 10.16 to the Registration Statement, filed on January 4, 2019. 10.17 Form of Intercreditor and Collateral Agent Agreement, among Super League Gaming, Inc. and certain accredited investors.   Exhibit 10.17 to the Registration Statement , filed on January 4, 2019. 10.18 Form of Investors’ Rights Agreement (9% Secured Convertible Promissory Notes), among Super League Gaming, Inc. and certain accredited investors.   Exhibit 10.18 to the Registration Statement , filed on January 4, 2019. 10.19 Master Service Agreement and Initial Statement of Work between Super League Gaming, Inc. and Logitech Inc., dated March 1, 2018.    Exhibit 10.19 to the Registration Statement , filed on January 4, 2019. 10.20 Asset Purchase Agreement, between Super League Gaming, Inc. and Minehut, dated June 22, 2018.   Exhibit 10.20 to the Registration Statement, filed on January 4, 2019. 10.21 † Amended and Restated Employment Agreement, between Super League Gaming, Inc. and Ann Hand, dated November 15, 2018.   Exhibit 10.21 to the Registration Statement , filed on January 4, 2019. 10.22 † Amended and Restated Employment Agreement, between Super League Gaming, Inc. and David Steigelfest, dated November 1, 2018.   Exhibit 10.22 to the Registration Statement, filed on January 4, 2019. 10.23 † Employment Agreement, between Super League Gaming, Inc. and Matt Edelman, dated November 1, 2018.   Exhibit 10.23 to the Registration Statement, filed on January 4, 2019. 10.24 † Employment Agreement, between Super League Gaming, Inc. and Clayton Haynes, dated November 1, 2018.   Exhibit 10.24 to the Registration Statement , filed on January 4, 2019. 10.25++ Commercial Partnership Agreement between Super League Gaming, Inc., and ggCircuit, LLC, dated September 23, 2019.   Exhibit 10.1 to the Quarterly Report on Form 10-Q for the period ended September 30, 2019, filed November 14, 2019. 10.26 Form of Registration Rights Agreement, dated March 2021.   Exhibit 10.1 to the Current Report on Form 8-K, filed on March 11, 2021. 10.27 Form of Voting Agreement, dated March 2021.   Exhibit 10.2 to the Current Report on Form 8-K, filed on March 11, 2021. 10.28 Form of Securities Purchase Agreement, dated March 19, 2021.   Exhibit 10.1 to the Current Report on Form 8-K, filed on March 23, 2021. 10.29 Equity Distribution Agreement, dated as of September 3, 2021, by and between Super League Gaming, Inc. and Maxim Group LLC.   Exhibit 1.3 to the Company’s Registration Statement on Form S-3 (File No. 333-259347, filed September 7, 2021. 10.30 Share Purchase Agreement, by and between Super League Gaming, Inc. and Bannerfy Ltd., dated August 11, 2021.   Exhibit 10.4 to the Quarterly Report on Form 10-Q for the period ended June 30, 2021, filed August 16, 2021. 10.31 Common Stock Purchase Agreement, dated March 25, 2022, by and between Super League Gaming, Inc. and Tumim Stone Capital LLC   Exhibit 10.31 to the Annual Report on Form 10-K for the period ended December 31, 2021, filed March 31, 2022. 10.32*++ Form of Placement Agent Agreement   Filed herewith. 10.33*++ Form of 2022 Series A Subscription Agreement   Filed herewith. 10.34*++ Form of Registration Rights Agreement, among Super League Gaming, Inc. and certain accredited investors.   Filed herewith. 10.35*++ Form of Series A Placement Agent Warrant   Filed herewith. 14.1 Super League Gaming, Inc. Code of Business Conduct and Ethics.   Exhibit 14.1 to the Registration Statement , filed on January 4, 2019. 23.1* Consent of Independent Registered Public Accounting Firm – Baker Tilly US, LLP   Filed herewith. 31.1 *  Certification of Principal Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act.     31.2 *  Certification of Principal Financial and Accounting Officer Pursuant to Section 302 of the Sarbanes-Oxley Act.     32 .1* Certification Pursuant to Section 906 of the Sarbanes-Oxley Act.         101.INS Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document 101.SCH Inline XBRL Taxonomy Extension Schema Document 101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase Document 101.DEF Inline XBRL Taxonomy Extension Definition Linkbase Document 101.LAB Inline XBRL Taxonomy Extension Label Linkbase Document 101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase Document 104 Cover Page Interactive Data File (embedded within the Inline XBRL Document and included in Exhibit 101)   *  Filed herewith.  † Identifies exhibits that consist of a management contract or compensatory plan or arrangement. + Confidential treatment has been requested for certain confidential portions of this exhibit pursuant to Rule 406 under the Securities Act of 1933, as amended, and Rule 24b-2 under the Securities Exchange Act of 1934, as amended (together, the “Rules”). In accordance with the Rules, these confidential portions have been omitted from this exhibit and filed separately with the Securities and Exchange Commission. ++ Certain portions of this exhibit (indicated by “[*****]”) have been omitted as the Company has determined (i) the omitted information is not material and (ii) the omitted information would likely cause harm to the Company if publicly disclosed.   -53- Table of Contents       INDEX TO CONSOLIDATED FINANCIAL STATEMENTS SUPER LEAGUE GAMING, INC.     Page     Report of Independent Registered Public Accounting Firm (PCAOB ID: 23 ) F-2     Consolidated   Financial Statements for the Years Ended December 31, 2022 and 2021       Consolidated Balance Sheets as of December 31, 2022 and 2021 F-3 Consolidated Statements of Operations for the years ended December 31, 2022 and 2021 F-4 Consolidated Statements of Stockholders ’   Equity for the years ended December 31, 2022 and 2021 F-5 Consolidated Statements of Cash Flows for the years ended December 31, 2022 and 2021 F-6 Notes to Consolidated Financial Statements F-7     F-1 Table of Contents   REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM   To the Stockholders and Board of Directors Super League Gaming, Inc.   Opinion on the Financial Statements   We have audited the accompanying consolidated balance sheets of Super League Gaming, Inc. (the “Company”) as of December 31, 2022 and 2021, the related consolidated statements of operations, stockholders’ equity and cash flows for the years then ended, and the related notes to the consolidated financial statements (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2022 and 2021, and the results of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.   Going Concern Uncertainty   The accompanying financial statements have been prepared assuming the Company will continue as a going concern. As noted in Note 2 to the financial statements, the Company has suffered recurring losses from operations and negative cash flows from operations. This raises substantial doubt about the Company’s ability to continue as a going concern. Management’s plans in regard to these matters are also included in Note 2. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.   Basis for Opinion   These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.   We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.   Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.     /s/ Baker Tilly US, LLP   We have served as the Company’s auditor since 2016.   Los Angeles, California March 31, 2023   F-2 Table of Contents     SUPER LEAGUE GAMING, INC. CONSOLIDATED BALANCE SHEETS DECEMBER 31, 2022 AND 2021       2022     2021   ASSETS                 Current Assets                 Cash and cash equivalents   $ 2,482,000     $ 14,533,000   Accounts receivable     6,134,000       6,328,000   Prepaid expense and other current assets     1,381,000       1,334,000   Total current assets     9,997,000       22,195,000   Property and Equipment, net     147,000       104,000   Intangible and Other Assets, net     20,066,000       24,243,000   Goodwill     -       50,263,000   Total assets   $ 30,210,000     $ 96,805,000                     LIABILITIES AND STOCKHOLDERS ’ EQUITY                 Current Liabilities                 Accounts payable   $ 6,697,000     $ 5,514,000   Accrued contingent consideration (Note 5)     3,206,000       -   Deferred revenue     111,000       76,000   Convertible note payable and accrued interest (Note 6)     679,000       -   Total current liabilities     10,693,000       5,590,000   Deferred taxes     313,000       518,000   Total liabilities     11,006,000       6,108,000                     Commitments and Contingencies (Note 10)                               Stockholders ’ Equity                 Preferred stock, par value $ 0.001 per share; 10,000,000 shares authorized; 10,323 and no shares issued and outstanding as of December 31, 2022 and 2021, respectively (Note 7).     -       -   Common stock, par value $ 0.001 per share; 100,000,000 shares authorized; 37,605,973 and 36,809,187 shares issued and outstanding as of December 31, 2022 and 2021, respectively.     47,000       46,000   Additional paid-in capital     229,900,000       215,943,000   Accumulated deficit     ( 210,743,000 )     ( 125,292,000 ) Total stockholders’ equity     19,204,000       90,697,000   Total liabilities and stockholders’ equity   $ 30,210,000     $ 96,805,000     The accompanying notes are an integral part of these consolidated financial statements.   F-3 Table of Contents     SUPER LEAGUE GAMING, INC. CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 2022 AND 2021       2022     2021                     REVENUES   $ 19,677,000     $ 11,672,000                     COST OF REVENUES     11,162,000       6,547,000                     GROSS PROFIT     8,515,000       5,125,000                     OPERATING EXPENSE                 Selling, marketing and advertising     12,036,000       9,670,000   Engineering, technology and development     15,876,000       11,100,000   General and administrative     12,094,000       9,435,000   Contingent consideration     3,206,000       -   Impairment of goodwill     50,263,000       -   Total operating expense     93,475,000       30,205,000                     NET OPERATING LOSS     ( 84,960,000 )     ( 25,080,000 )                   OTHER INCOME (EXPENSE)                 Interest expense     ( 679,000 )     ( 5,000 ) Gain on loan forgiveness     -       1,213,000   Other     ( 17,000 )     13,000   Total other income     ( 696,000 )     1,221,000                     LOSS BEFORE BENEFIT FROM INCOME TAXES     ( 85,656,000 )     ( 23,859,000 )                   Benefit from income taxes     205,000       3,111,000                     NET LOSS   $ ( 85,451,000 )   $ ( 20,748,000 )                   Net loss attributable to common stockholders - basic and diluted                 Basic and diluted loss per common share   $ ( 2.30 )   $ ( 0.69 ) Weighted-average number of shares outstanding, basic and diluted     37,189,495       29,882,828     The accompanying notes are an integral part of these consolidated financial statements.   F-4 Table of Contents     SUPER LEAGUE GAMING, INC. CONSOLIDATED STATEMENTS OF STOCKHOLDERS ’ EQUITY FOR THE YEARS ENDED DECEMBER 31, 2022 AND 2021       2022     2021   Preferred stock (Shares):                 Balance, beginning of period     -       -   Issuance of Series A preferred stock (Note 7)     5,359       -   Issuance of Series A-2 preferred stock (Note 7)     1,297       -   Issuance of Series A-3 preferred stock (Note 7)     1,733       -   Issuance of Series A-4 preferred stock (Note 7)     1,934       -   Balance, end of period     10,323       -                     Preferred stock (Amount):                 Balance, beginning of period   $ -     $ -   Issuance of Series A preferred stock at $ 1,000 per share, net of issuance costs (Note 7)     -       -   Issuance of Series A-2 preferred stock at $ 1,000 per share, net of issuance costs (Note 7)     -       -   Issuance of Series A-3 preferred stock at $ 1,000 per share, net of issuance costs (Note 7)     -       -   Issuance of Series A-4 preferred stock at $ 1,000 per share, net of issuance costs (Note 7)     -       -   Balance, end of period   $ -     $ -                     Common stock (Shares):                 Balance, beginning of period     36,809,187       15,483,010   Issuance of common stock at $ 9.00 per share, net of issuance costs (Note 7)     -       1,512,499   Issuance of common stock at $ 4.10 per share, net of issuance costs (Note 7)     -       2,926,830   Issuance of common stock at $ 2.60 per share, net of issuance costs (Note 7)     -       3,076,924   Issuance of common stock at $ 3.50 per share, net of issuance costs (Note 7)     -       -   Common stock issued for Mobcrush acquisition (Note 5)     -       12,067,571   Common stock issued for Bannerfy acquisition (Note 5)     53,660       415,855   Common stock issued for Super Biz acquisition (Note 5)     -       1,030,928   Stock-based compensation     362,062       295,570   Other Issuances of Common Stock (Note 7)     381,064       -   Balance, end of period     37,605,973       36,809,187                     Common stock (Amount):                 Balance, beginning of period   $ 46,000     $ 25,000   Issuance of common stock at $ 9.00 per share, net of issuance costs (Note 7)     -       2,000   Issuance of common stock at $ 4.10 per share, net of issuance costs (Note 7)     -       3,000   Issuance of common stock at $ 2.60 per share, net of issuance costs (Note 7)     -       3,000   Issuance of common stock at $ 3.50 per share, net of issuance costs (Note 7)     -       -   Common stock issued for Mobcrush Acquisition (Note 5)     -       12,000   Common stock issued for Super Biz Acquisition (Note 5)     -       1,000   Other Issuances of Common Stock     1,000       -   Balance, end of period   $ 47,000     $ 46,000                     Additional paid-in-capital:                 Balance, beginning of period   $ 215,943,000     $ 115,459,000   Issuance of Series A preferred stock at $ 1,000 per share, net of issuance costs (Note 7)     4,607,000       -   Issuance of Series A-2 preferred stock at $ 1,000 per share, net of issuance costs (Note 7)     1,128,000       -   Issuance of Series A-3 preferred stock at $ 1,000 per share, net of issuance costs (Note 7)     1,508,000       -   Issuance of Series A-4 preferred stock at $ 1,000 per share, net of issuance costs (Note 7)     1,683,000       -   Issuance of common stock at $ 9.00 per share, net of issuance costs (Note 7)     -       13,540,000   Issuance of common stock at $ 4.10 per share, net of issuance costs (Note 7)     -       11,927,000   Issuance of common stock at $ 2.60 per share, net of issuance costs (Note 7)     -       7,924,000   Common stock issued for Mobcrush Acquisition (Note 5)     -       59,843,000   Common stock issued for Bannerfy Acquisition (Note 5)     220,000       1,768,000   Common stock issued for Super Biz Acquisition (Note 5)     -       2,999,000   Stock-based compensation     4,491,000       2,381,000   Stock option exercises     -       111,000   Other Issuances of Common Stock (Note 7)     320,000       ( 9,000 ) Balance, end of period   $ 229,900,000     $ 215,943,000                     Accumulated Deficit:                 Balance, beginning of period   $ ( 125,292,000 )   $ ( 104,544,000 ) Net Loss     ( 85,451,000 )     ( 20,748,000 ) Balance, end of period   $ ( 210,743,000 )   $ ( 125,292,000 ) Total stockholders ’ equity   $ 19,204,000     $ 90,697,000     The accompanying notes are an integral part of these consolidated financial statements.   F-5 Table of Contents     SUPER LEAGUE GAMING, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2022 AND 2021       2022     2021                     CASH FLOWS FROM OPERATING ACTIVITIES                 Net loss   $ ( 85,451,000 )   $ ( 20,748,000 ) Adjustments to reconcile net loss to net cash used in operating activities:                 Depreciation and amortization     5,403,000       3,323,000   Stock-based compensation     4,263,000       2,381,000   Impairment of goodwill     50,263,000       -   Write off of intangible asset     423,000       -   Amortization of convertible notes discount (Note 6)     280,000       -   Gain on loan forgiveness (Note 6)     -       ( 1,213,000 ) Change in valuation allowance (Note 5)     -       ( 3,073,000 ) Changes in assets and liabilities:                 Accounts receivable     193,000       ( 4,270,000 ) Prepaid expense and other current assets     182,000       ( 348,000 ) Accounts payable and accrued expense     1,402,000       1,328,000   Accrued contingent consideration (Note 5)     3,206,000       -   Deferred revenue     35,000       ( 54,000 ) Deferred taxes     ( 205,000 )     ( 38,000 ) Accrued interest on notes payable     180,000       5,000   Net cash used in operating activities     ( 19,826,000 )     ( 22,707,000 )                   CASH FLOWS FROM INVESTING ACTIVITIES                 Cash acquired in connection with Mobcrush Acquisition (Note 5)     -       586,000   Cash paid in connection with Bannerfy Acquisition, net (Note 5)     -       ( 497,000 ) Cash paid in connection with Super Biz Acquisition, net (Note 5)     -       ( 3,000,000 ) Purchase of property and equipment     ( 149,000 )     ( 22,000 ) Purchase of third-party game properties     ( 500,000 )     -   Capitalization of software development costs     ( 923,000 )     ( 1,065,000 ) Acquisition of other intangible and other assets     ( 118,000 )     ( 205,000 ) Net cash used in investing activities     ( 1,690,000 )     ( 4,203,000 )                   CASH FLOWS FROM FINANCING ACTIVITIES                 Proceeds from issuance of preferred stock, net of issuance costs (Note 7)     8,926,000       -   Proceeds from issuance of common stock, net of issuance costs (Note 7)     320,000       33,390,000   Proceeds from note payable (Note 6)     4,000,000       -   Payments on convertible notes (Note 6)     ( 3,781,000 )     -   Proceeds from stock option exercises     -       111,000   Net cash provided by financing activities     9,465,000       33,501,000                     (DECREASE)INCREASE IN CASH AND CASH EQUIVALENTS     ( 12,051,000 )     6,591,000                     CASH AND CASH EQUIVALENTS – beginning of year     14,533,000       7,942,000                     CASH AND CASH EQUIVALENTS – end of year   $ 2,482,000     $ 14,533,000                     SUPPLEMENTAL NONCASH FINANCING ACTIVITIES                 Issuance of common stock in connection with Mobcrush Acquisition   $ -     $ 59,855,000   Issuance of common stock in connection with Bannerfy Acquisition     220,000       1,705,000   Issuance of common stock in connection with Super Biz Acquisition     -       3,000,000     The accompanying notes are an integral part of these consolidated financial statements.     F-6 Table of Contents   SUPER LEAGUE GAMING, INC.   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS       1. DESCRIPTION OF BUSINESS   Super League Gaming, Inc. (Nasdaq: SLGG), (“Super League,” the “Company,” “we,” “us” or “our”) is a leading publisher of games, monetization tools and content channels across metaverse gaming platforms that empower developers, energize players, and entertain fans. Our solutions provide incomparable access to an audience consisting of players in the largest global metaverse game environments, fans of hundreds of thousands of gaming influencers, and viewers of gameplay content across major social media and digital video platforms. Fueled by proprietary and patented technology systems, the Company’s platform includes access to vibrant in-game communities, a leading metaverse advertising platform, a network of highly viewed channels and original shows on Instagram, TikTok, Snap, YouTube, and Twitch, cloud-based livestream production tools, and an award-winning esports invitational tournament series. Super League’s properties deliver powerful opportunities for brands and advertisers to achieve impactful insights and marketing outcomes with gamers of all ages.   Super League was incorporated on October 1, 2014 as Nth Games, Inc. under the laws of the State of Delaware and changed its name to Super League Gaming, Inc. on June 15, 2015. We are an “emerging growth company” as defined by the Jumpstart Our Business Startups Act of 2012, as amended.   Acquisition of Mobcrush Streaming, Inc. On June 1, 2021, the Company completed the acquisition of Mobcrush Streaming, Inc. (“Mobcrush”), a live streaming technology platform used by gaming influencers who generate and distribute original content to fans and subscribers across the most popular live streaming and social media platforms, including Twitch, YouTube, Facebook, Instagram, Twitter, and more. Mobcrush also operates Mineville and Pixel Paradise, two of only seven official Minecraft servers in partnership with Microsoft Corporation (“Microsoft”).   Acquisition of Bannerfy, LTD. On August 24, 2021, the Company completed the acquisition of Bannerfy, Ltd., (“Bannerfy”), an intelligent technology platform that enables digital video and live streaming creators to collaborate with tier one sponsors on their social media channels including YouTube through scalable and custom premium placements.   Acquisition of Bloxbiz Co. (doing business as, and hereinafter referred to as “ Super Biz ” ).  On October 4, 2021, the Company acquired (i) substantially all of the assets of Super Biz, and (ii) the personal goodwill of the founders regarding Super Biz’s business, as described at Note 5. Super Biz is a dynamic ad platform designed specifically for metaverse environments. Super Biz’s initial deployment enables brands to advertise across popular Roblox game titles and helps Roblox creators with monetization and game analytics.   In accordance with the acquisition method of accounting, the financial results of Super League presented herein include the financial results of the fiscal year 2021 acquisitions described above for the applicable periods subsequent to the respective transaction closing dates. Refer to Note 5 for additional information.     2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES   Basis of Presentation   The consolidated financial statements and accompanying notes have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”).   Principles of Consolidation   The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries.   Use of Estimates   The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expense during the reporting period. Actual results could differ from these estimates. The Company believes that, of the significant accounting policies described herein, the accounting policies associated with revenue recognition, impairment of goodwill and intangibles, stock-based compensation expense, capitalized internal-use-software costs, accounting for business combinations, accounting for convertible debt, including estimates and assumptions used to calculate the fair value of debt instruments, accounting for convertible preferred stock, and accounting for income taxes and valuation allowances against net deferred tax assets, require its most difficult, subjective, or complex judgments.   F-7 Table of Contents   Going Concern   The accompanying consolidated financial statements have been prepared assuming the Company will continue as a going concern, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. Including a noncash goodwill impairment charge of $ 50.3 million in fiscal year 2022, the Company incurred net losses of $ 85.5 million and $ 20.7 million during the years ended December 31, 2022 and 2021, respectively, and had an accumulated deficit of $ 210.7 million (including fiscal year 2022 noncash goodwill impairment charges of $ 50.3 million) as of December 31, 2022. For the years ended December 31, 2022 and 2021 net cash used in operating activities totaled $ 19.8 million and $ 22.7 million, respectively.   The Company had cash and cash equivalents of $ 2.5 million and $ 14.5 million as of December 31, 2022 and 2021, respectively. To date, our principal sources of capital used to fund our operations and growth have been the net proceeds received from equity and debt financings. We have and will continue to use significant capital for the growth and development of our business, and, as such, we expect to seek additional capital either from operations, or that may be available from future issuance(s) of common stock, preferred stock and / or debt financings, to fund our planned operations. Accordingly, our results of operations and the implementation of our long-term business strategies have been and could continue to be adversely affected by general conditions in the global economy, including conditions that are outside of our control. The most recent global financial crisis caused by severe geopolitical conditions, including conflicts abroad, and the lingering effects of COVID-19 and the threat of other outbreaks, have resulted in extreme volatility, disruptions and downward pressure on stock prices and trading volumes across the capital and credit markets in which we traditionally operate. A severe or prolonged economic downturn could result in a variety of risks to our business and could have a material adverse effect on us, including limiting our ability to obtain additional funding from the capital and credit markets. In management’s judgement, these conditions raise substantial doubt about the ability of the Company to continue as a going concern as contemplated by ASC 205-40.   Management’s Plans   The Company experienced significant growth in fiscal year 2022 and 2021 through organic and inorganic growth activities, including the expansion of our premium advertising inventory and quarter over quarter and year over year increases in recognized revenue across our primary revenue streams. In fiscal year 2022, we focused on the continued expansion of our service offerings and revenue growth opportunities through internal development, collaborations, and through opportunistic strategic acquisitions, as well as management and reduction of operating costs. Management continues to consider alternatives for raising capital to facilitate our growth and execute our business strategy, including strategic partnerships and or other forms of equity or debt financings.   During the fourth quarter of 2022, we entered into subscription agreements with accredited investors relating to offerings with respect to the sale of an aggregate of 10,323 shares of newly designated Series A, A-2, A-3 and A-4 Convertible Preferred Stock, each series having a $ 0.001 par value and a $ 1,000 purchase price, raising net proceeds totaling $ 8.9 million, after deducting placement agent and other financing costs totaling $ 1.4 million. Use of net proceeds from the preferred stock offerings included the repayment of certain indebtedness and working capital and general corporate purposes, including sales and marketing activities and product development. In addition, on January 31, 2023, we entered into subscription agreements with accredited investors in connection with the sale of an aggregate of 2,299 shares of newly designated Series A-5 Convertible Preferred Stock, par value $ 0.001 per share, at a purchase price of $ 1,000 per share, raising net proceeds of $ 2,000,000 , after deducting placement agent costs of $ 299,000 . Pursuant to the terms of the SPA (Note 7), $ 4.2 million of the net proceeds were utilized in connection with the partial redemption of the Notes as of March 31, 2023.   On May 16, 2022, as further described at Note 6, the Company entered into a securities purchase agreement with three institutional investors, providing for the sale and issuance of a new series of senior convertible notes in the aggregate original principal amount of $ 4,320,000 , of which 8 % is an original issue discount.   As further described at Note 7, on March 25, 2022, we entered into a common stock purchase agreement with an institutional investor. Pursuant to the agreement, the Company has the right, but not the obligation, to sell to the investor, and the investor is obligated to purchase, up to $ 10,000,000 of newly issued shares of the Company’s common stock, from time to time during the term of the agreement, subject to certain limitations and conditions.   F-8 Table of Contents   The Company considers historical operating results, costs, capital resources and financial position, in combination with current projections and estimates, as part of its plan to fund operations over a reasonable period. Management's considerations assume, among other things, that the Company will continue to be successful implementing its business strategy, that there will be no material adverse developments in the business, liquidity or capital requirements, and the Company will be able to raise additional equity and / or debt financing on acceptable terms. If one or more of these factors do not occur as expected, it could cause a reduction or delay of its business activities, sales of material assets, default on its obligations, or forced insolvency. The accompanying financial statements do not contain any adjustments which might be necessary if the Company were unable to continue as a going concern. No assurance can be given that any future financing will be available or, if available, that it will be on terms that are satisfactory to the Company.   We may continue to evaluate potential strategic acquisitions. To finance such strategic acquisitions, we may find it necessary to raise additional equity capital, incur debt, or both. Any efforts to seek additional funding could be made through issuances of equity or debt, or other external financing. However, additional funding may not be available on favorable terms, or at all. The capital and credit markets have experienced extreme volatility and disruption periodically and such volatility and disruption may occur in the future. If we fail to obtain additional financing when needed, we may not be able to execute our business plans which, in turn, would have a material adverse impact on our financial condition, our ability to meet our obligations, and our ability to pursue our business strategies.   Reclassifications   Certain reclassifications to operating expense line items have been made to prior year amounts for consistency and comparability with the current year’s consolidated financial statement presentation. These reclassifications had no effect on the reported total operating expense for the periods presented.   Revenue Recognition   Revenue is recognized when the Company transfers promised goods or services to customers in an amount that reflects the consideration to which the Company expects to be entitled in exchange for those goods and services. In this regard, revenue is recognized when: (i) the parties to the contract have approved the contract (in writing, orally, or in accordance with other customary business practices) and are committed to perform their respective obligations; (ii) the entity can identify each party’s rights regarding the goods or services to be transferred; (iii) the entity can identify the payment terms for the goods or services to be transferred; (iv) the contract has commercial substance (that is, the risk, timing, or amount of the entity’s future cash flows is expected to change as a result of the contract); and (v) it is probable that the entity will collect substantially all of the consideration to which it will be entitled in exchange for the goods or services that will be transferred to the customer.   Transaction prices are based on the amount of consideration to which we expect to be entitled in exchange for transferring promised goods or services to a customer, excluding amounts collected on behalf of third parties, if any. We consider the explicit terms of the revenue contract, which are typically written and executed by the parties, our customary business practices, the nature, timing, and the amount of consideration promised by a customer in connection with determining the transaction price for our revenue arrangements. Refunds and sales returns historically have not been material.   The Company generates revenue from (i) innovative advertising including immersive game world and experience publishing and in-game media products, (ii) direct to consumer offers, including in-game items, e-commerce, game passes and ticketing and digital collectibles, and (iii) content and technology through the production and distribution of our own, advertiser and third-party content.   The Company reports revenue on a gross or net basis based on management’s assessment of whether the Company acts as a principal or agent in the transaction and is evaluated on a transaction-by-transaction basis. To the extent the Company acts as the principal, revenue is reported on a gross basis net of any sales tax from customers, when applicable. The determination of whether the Company acts as a principal or an agent in a transaction is based on an evaluation of whether the Company controls the good or service prior to transfer to the customer. Where applicable, the Company has determined that it acts as the principal in all of its advertising and sponsorships, content and direct to consumer revenue streams, except in situations where we utilize a reseller partner with respect to direct advertising sales arrangements.   Revenue billed or collected in advance is recorded as deferred revenue until the event occurs or until applicable performance obligations are satisfied.   F-9 Table of Contents   Advertising and Sponsorships   Advertising revenue primarily consists of direct sales activity along with sales of programmatic display and video advertising units to third-party advertisers and exchanges. Advertising arrangements typically include contract terms for time periods ranging from several days to several weeks in length.   For advertising arrangements that include performance obligations satisfied over time, customers typically simultaneously receive and consume the benefits under the arrangement as we satisfy our performance obligations, over the applicable contract term. As such, revenue is recognized over the contract term based upon estimates of progress toward complete satisfaction of the contract performance obligations (typically utilizing a time, effort or delivery-based method of estimation). Revenue from shorter-term advertising arrangements that provide for a contractual delivery or performance date is recognized when performance is substantially complete and or delivery occurs. Payments are typically due from customers during the term of the arrangement for longer-term campaigns, and once delivery is complete for shorter-term campaigns.   Sponsorship revenue arrangements may include: exclusive or non-exclusive title sponsorships, marketing benefits, official product status exclusivity, product visibly and additional infrastructure placement, social media rights, rights to on-screen activations and promotions, display material rights, media rights, hospitality and tickets and merchandising rights. Sponsorship revenue also includes revenue pursuant to arrangements with brand and media partners, retail venues, game publishers and broadcasters that allow our partners to run amateur esports experiences, and or capture specifically curated gameplay content that is customized for our partners’ distribution channels. Sponsorship arrangements typically include contract terms for time periods ranging from several weeks or months to terms of twelve months in length.   For sponsorship arrangements that include performance obligations satisfied over time, customers typically simultaneously receive and consume the benefits under the agreement as we satisfy our performance obligations, over the applicable contract term. As such, revenue is recognized over the contract term based upon estimates of progress toward complete satisfaction of the contract performance obligations (typically utilizing a time, effort or delivery-based method of estimation). Payments are typically due from customers during the term of the arrangement.   Revenue from sponsorship arrangements for one-off branded experiences and/or the development of content tailored specifically for our partners’ distribution channels that provide for a contractual delivery or performance date, is recognized at a point in time, when performance is substantially complete and or delivery occurs.   Content Sales   Content sales revenue is generated in connection with our curation and distribution of esports and entertainment content for our own network of digital channels and media and entertainment partner channels. We distribute three primary types of content for syndication and licensing, including: (1) our own original programming content, (2) user generated content (“UGC”), including online gameplay and gameplay highlights, and (3) the creation of content for third parties utilizing our remote production and broadcast technology.   For content arrangements that include performance obligations satisfied over time, customers typically simultaneously receive and consume the benefits under the arrangement as we satisfy our performance obligations, over the applicable contract term. As such, revenue is recognized over the contract term based upon estimates of progress toward complete satisfaction of the contract performance obligations (typically utilizing a time, effort or delivery-based method of estimation). Revenue from shorter-term content sales arrangements that provide for a contractual delivery or performance date is recognized when performance is substantially complete and/or delivery occurs. Payments are typically due from customers during the term of the arrangement for longer-term campaigns, and once delivery is complete for shorter-term campaigns.   Direct to Consumer   Direct to consumer revenue primarily consists of monthly digital subscription fees, and sales of in-game digital goods. Subscription revenue is recognized in the period the services are rendered. Payments are typically due from customers at the point of sale.   InPvP Platform Generated Sales Transactions. Our Mobcrush subsidiary generates in-game Platform sales revenue via digital goods sold within the platform, including cosmetic items, durable goods, player ranks and game modes, leveraging the flexibility of the Microsoft Minecraft Bedrock platform, and powered by the InPvP cloud architecture technology platform. Revenue is generated when transactions are facilitated between Microsoft and the end user, either via in-game currency or cash.   Revenue for digital goods sold on the platform is recognized when Microsoft (our partner) collects the revenue and facilitates the transaction on the platform. Revenue for such arrangements includes all revenue generated, bad debt, make goods, and refunds of all transactions managed via the platform by Microsoft. The revenue is recognized on a monthly basis. Payments are made to the Company monthly based on the reconciled sales revenue generated.   F-10 Table of Contents   Revenue was comprised of the following for the periods presented:       2022     2021   Advertising and sponsorships   $ 13,957,000     $ 8,005,000   Content sales     3,911,000       2,264,000   Direct to consumer     1,809,000       1,403,000       $ 19,677,000     $ 11,672,000     For the fiscal years ended December 31, 2022 and 2021, 32 % and 19 % of revenues were recognized at a single point in time, and 68 % and 81 % of revenues were recognized over time, respectively.   Cost of Revenues   Cost of revenue includes direct costs incurred in connection with the satisfaction of performance obligations under our revenue arrangements including internal and third-party engineering, creative, content, broadcast and other personnel, talent and influencers, developers, content capture and production services, direct marketing, cloud services, software, prizing, and revenue sharing fees.   Advertising   Gaming experience and Super League brand related advertising costs include the cost of ad production, social media, print media, marketing, promotions, and merchandising. The Company expenses advertising costs as incurred. Advertising costs are included in selling, marketing and advertising expense in the accompanying statements of operations. Advertising expense for the fiscal years ended December 31, 2022 and 2021 were $ 507,000 and $ 568,000 , respectively.   Engineering, Technology and Development Costs   Components of our platform are available on a “free to use,” “always on basis,” and are utilized and offered as an audience acquisition tool, as a means of growing our audience, engagement, viewership, players and community. Engineering, technology and development related operating expense includes the costs described below, incurred in connection with our audience acquisition and viewership expansion activities. Engineering, technology and development related operating expense includes (i) allocated internal engineering personnel expense, including salaries, noncash stock compensation, taxes and benefits, (ii) third-party contract software development and engineering expense, (iii) internal use software cost amortization expense, and (iv) technology platform related cloud services, broadband and other platform expense, incurred in connection with our audience acquisition and viewership expansion activities, including tools and product offering development, testing, minor upgrades and features, free to use services, corporate information technology and general platform maintenance and support.   Cash and Cash Equivalents   The Company considers all highly-liquid, short-term investments with original maturities of three months or less when purchased to be cash equivalents. The Company’s cash equivalents consisted of investments in AAA-rated money market funds for the periods presented.   Accounts Receivable   Accounts receivable are recorded at the original invoice amount, less an estimate made for doubtful accounts, if any. The Company provides an allowance for doubtful accounts for potential credit losses based on its evaluation of the collectability and the customers’ creditworthiness. Accounts receivable are written off when they are determined to be uncollectible. As of December 31, 2022 and 2021, no allowance for doubtful accounts was deemed necessary.   Fair Value Measurements   Fair value is defined as the exchange price that would be received from selling an asset or paid to transfer a liability in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. The Company measures financial assets and liabilities at fair value at each reporting period using a fair value hierarchy which requires the Company to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. A financial instrument’s classification within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. Three levels of inputs may be used to measure fair value:   Level 1. Quoted prices in active markets for identical assets or liabilities.   F-11 Table of Contents   Level 2 . Quoted prices for similar assets and liabilities in active markets or inputs other than quoted prices which are observable for the assets or liabilities, either directly or indirectly through market corroboration, for substantially the full term of the financial instruments.   Level 3. Unobservable inputs which are supported by little or no market activity and which are significant to the fair value of the assets or liabilities.   Certain assets and liabilities are required to be recorded at fair value on a recurring basis, including derivative financial instruments and convertible notes payable recorded at fair value (Note 6). The convertible notes outstanding at December 31, 2022 are recorded at fair value, using Level 3 inputs. Certain long-lived assets may be periodically required to be measured at fair value on a nonrecurring basis, including long-lived assets that are impaired. The fair value for other assets and liabilities such as cash, restricted cash, accounts receivable, receivables reserved for users, other receivables, prepaid expense and other current assets, accounts payable and accrued expense, and liabilities to customers have been determined to approximate carrying amounts due to the short maturities of these instruments.   Derivative Financial Instruments   The Company evaluates its financial instruments to determine if such instruments are derivatives or contain features that qualify as embedded derivatives. For derivative financial instruments that are accounted for as liabilities, the derivative instrument is initially recorded at its fair value and is then re-valued at each reporting date, with changes in the fair value reported in the consolidated statements of operations. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is reassessed at the end of each reporting period. Equity instruments that are initially classified as equity that become subject to reclassification are reclassified to a liability at the fair value of the instrument on the reclassification date. Derivative instrument liabilities are classified in the balance sheet as current or non-current based on whether or not net-cash settlement of the derivative instrument could be required within 12 months of the balance sheet date. In circumstances where the embedded conversion option in a convertible instrument is required to be bifurcated and there are also other embedded derivative instruments in the convertible instrument that are required to be bifurcated, the bifurcated derivative instruments are accounted for as a single, compound derivative instrument.   Derivative liabilities are adjusted to reflect fair value at each period end, with any increase or decrease in the fair value being recorded in the statement of operations.   Property and Equipment   Property and equipment are recorded at cost. Major additions and improvements that materially extend useful lives of property and equipment are capitalized. Maintenance and repairs are charged against the results of operations as incurred. When these assets are sold or otherwise disposed of, the asset and related depreciation are relieved, and any gain or loss is included in the statements of operations for the period of sale or disposal. Depreciation and amortization are computed on a straight-line basis over the estimated useful lives of the assets, typically over a three to five-year period.   Acquisitions   Acquisition Method . Acquisitions that meet the definition of a business under ASC 805 are accounted for using the acquisition method of accounting. Under the acquisition method of accounting, assets acquired, liabilities assumed, contractual contingencies, and contingent consideration, when applicable, are recorded at fair value at the acquisition date. Any excess of the purchase price over the fair value of the net assets acquired is recorded as goodwill. The application of the acquisition method of accounting requires management to make significant estimates and assumptions in the determination of the fair value of assets acquired and liabilities assumed in connection with the allocation of the purchase price consideration to the assets acquired and liabilities assumed. Transaction costs associated with business combinations are expensed as incurred and are included in general and administrative expense in the consolidated statements of operations. Contingent consideration, if any, is recognized and measured at fair value as of the acquisition date.   Cost Accumulation Model. Acquisitions that do not meet the definition of a business under ASC 805 are accounted for as an asset acquisition, utilizing a cost accumulation model. Assets acquired and liabilities assumed are recognized at cost, which is the consideration the acquirer transfers to the seller, including direct transaction costs, on the acquisition date. The cost of the acquisition is then allocated to the assets acquired based on their relative fair values. Goodwill is not recognized in an asset acquisition. Direct transaction costs include those third-party costs that can be directly attributable to the asset acquisition and would not have been incurred absent the acquisition transaction.   Contingent consideration, representing an obligation of the acquirer to transfer additional assets or equity interests to the seller if future events occur or conditions are met, is recognized when probable and reasonably estimable. Contingent consideration recognized is included in the initial cost of the assets acquired, with subsequent changes in the recorded amount of contingent consideration recognized as an adjustment to the cost basis of the acquired assets. Subsequent changes are allocated to the acquired assets based on their relative fair value. Depreciation and/or amortization of adjusted assets are recognized as a cumulative catch-up adjustment, as if the additional amount of consideration that is no longer contingent had been accrued from the outset of the arrangement.   F-12 Table of Contents   Contingent consideration that is paid to sellers that remain employed by the acquirer and linked to future services is generally considered compensation cost and recorded in the statement of operations in the post-combination period.   Intangible Assets   Intangible assets primarily consist of (i) internal-use software development costs, (ii) domain name, copyright and patent registration costs, (iii) commercial licenses and branding rights, (iv) developed technology acquired, (v) partner, customer, creator and influencer related intangible assets acquired and (vi) other intangible assets, which are recorded at cost (or in accordance with the acquisition method or cost accumulation methods described above) and amortized using the straight-line method over the estimated useful lives of the assets, ranging from three to 10 years.   Software development costs incurred to develop internal-use software during the application development stage are capitalized and amortized on a straight-line basis over the software’s estimated useful life, which is generally three years. Software development costs incurred during the preliminary stages of development are charged to expense as incurred. Maintenance and training costs are charged to expense as incurred. Upgrades or enhancements to existing internal-use software that result in additional functionality are capitalized and amortized on a straight-line basis over the applicable estimated useful life.   Impairment of Long-Lived Assets   The Company assesses the recoverability of long-lived assets whenever events or changes in circumstances indicate that their carrying value may not be recoverable. Factors we consider important, which could trigger an impairment review, include the following: significant underperformance relative to expected historical or projected future operating results; significant changes in the manner of our use of the acquired assets or the strategy for our overall business; significant negative industry or economic trends; significant adverse changes in legal factors or in the business climate, including adverse regulatory actions or assessments; and significant decline in our stock price for a sustained period. In the event the sum of the expected undiscounted future cash flows resulting from the use of the asset is less than the carrying amount of the asset, an impairment loss equal to the excess of the asset’s carrying value over its fair value is recorded.   Other assets of a reporting unit that are held and used may be required to be tested for impairment when certain events trigger interim goodwill impairment tests. In such situations, other assets, or asset groups, are tested for impairment under their respective standards and the other assets’ or asset groups’ carrying amounts are adjusted for impairment before testing goodwill for impairment as described below. For the periods presented herein, management believes that there was no impairment of long-lived assets. There can be no assurance, however, that market conditions or demand for the Company’s products or services will not change, which could result in long-lived asset impairment charges in the future.   Goodwill   The Company currently has one reporting unit. The following table presents the changes in the carrying amount of goodwill for the periods presented.       2022     2021   Beginning Balance   $ 50,263,000     $ 2,565,000   Acquisitions (See Note 5)     -       47,698,000   Impairment charges     ( 50,263,000 )     -   Ending Balance   $ -     $ 50,263,000     Goodwill represents the excess of the purchase price of the acquired business over the acquisition date fair value of the net assets acquired. Goodwill is tested for impairment at the reporting unit level (operating segment or one level below an operating segment) on an annual basis (December 31) and between annual tests if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying value. We consider our market capitalization and the carrying value of our assets and liabilities, including goodwill, when performing our goodwill impairment tests. We operate in one reporting segment.   If a potential impairment exists, a calculation is performed to determine the fair value of existing goodwill. This calculation can be based on quoted market prices and / or valuation models, which consider the estimated future undiscounted cash flows resulting from the reporting unit, and a discount rate commensurate with the risks involved. Third-party appraised values may also be used in determining whether impairment potentially exists. In assessing goodwill impairment, significant judgment is required in connection with estimates of market values, estimates of the amount and timing of future cash flows, and estimates of other factors that are used to determine the fair value of our reporting unit. If these estimates or related projections change in future periods, future goodwill impairment tests may result in charges to earnings.   F-13 Table of Contents   When conducting the Company’s annual or interim goodwill impairment assessment, we initially perform a qualitative evaluation of whether it is more likely than not that goodwill is impaired. In evaluating whether it is more likely than not that the fair value of our reporting unit is less than its carrying amount, we consider the guidance set forth in ASC 350, which requires an entity to assess relevant events and circumstances, including macroeconomic conditions, industry and market considerations, cost factors, financial performance and other relevant events or circumstances.   September 30, 2022 Goodwill Impairment Testing   At September 30, 2022, prior to the completion of our goodwill impairment testing, the goodwill balance totaled $ 50.3 million.   At September 30, 2022, from a qualitative standpoint, we considered the Company’s history of reported losses and negative cash flows from operating activities, and also considered the sustained downturn in industry and macroeconomic conditions, including inflationary pressures and potential reductions in advertising spending and the sustained downturn of the broader mid-cap and micro-cap equity markets in the third quarter of 2022. We also considered that the Company experienced significant inorganic and organic growth in fiscal 2021, including the impact of the acquisitions of Mobcrush, Bannerfy and Super Biz on our premium advertising inventory, product offerings to advertisers, current period revenue recognized and future revenue generating opportunities.   However, the Company’s stock price has been volatile, and the volatility continued during the three months ended September 30, 2022, declining 34 % to $ 0.68 as of September 30, 2022, reflecting a market capitalization that was approximately 38 % of the Company’s September 30, 2022 net book value. To assess whether the decline in our market capitalization was an indicator requiring an interim goodwill impairment test, we considered the significance of the decline and the length of time our common stock has been trading at a depressed value along with the macro factors described above. The significance of the decline is consistent with the broader microcap market. As of September 30, 2022 the decline in our stock price and other factors were deemed to be sustained, and therefore a triggering event requiring a goodwill impairment test as of September 30, 2022 was deemed to have occurred.   We utilized the market capitalization of the Company as of September 30, 2022, a Level 1 input as described above, to estimate the fair value of the Company’s single reporting unit. The estimated market capitalization was determined by multiplying our September 30, 2022 stock price and the common shares outstanding as of September 30, 2022. The market capitalization approach was utilized to estimate the fair value of our single reporting unit as of September 30, 2022, due to the significance of the decline in stock price as of September 30, 2022, resulting in a market capitalization that was 38 % of the net book value of our single reporting unit. Based on the analysis, the estimated fair value of our reporting unit was $ 25.2 million, compared to a carrying value of our single reporting unit of $ 67.3 million as of September 30, 2022. As such, the fair value of our single reporting unit was deemed to be below its carrying value as of September 30, 2022, resulting in a goodwill impairment charge of $ 42.0 million, which was reflected in the consolidated statement of operations for the nine months ended September 30, 2022.   December 31, 2022 Goodwill Impairment Testing   At December 31, 2022, prior to the completion of our goodwill impairment testing, the goodwill balance totaled $ 8.3 million.   At December 31, 2022, from a qualitative standpoint, we considered the factors described above under “September 30, 2022 Goodwill Impairment Testing,” including the current period reported loss and negative cash flows from operating activities, and the sustained downturn in industry and macroeconomic conditions, including inflationary pressures and potential reductions in advertising spending and the sustained downturn of the broader mid-cap and micro-cap equity markets in the fourth quarter of 2022. Similarly, given the Company’s recent significant growth, management does not believe that the current market capitalization of the Company is indicative of any material fundamental change in the Company’s underlying business or future prospects as of the December 31, 2022 measurement date.   The Company's stock price has been volatile, and the volatility continued during the three months ended December 31, 2022, declining approximately 50 % from the September 30, 2022 closing price to $ 0.336 as of December 31, 2022, reflecting a market capitalization that was approximately 46 % of the Company’s December 31, 2022 net book value. As of December 31, 2022 the decline in our stock price and other factors were deemed to be sustained, and therefore a triggering event requiring a goodwill impairment test as of December 30, 2022 was deemed to have occurred.   We utilized the market capitalization of the Company as of December 31, 2022, a Level 1 input as described above, to estimate the fair value of the Company’s single reporting unit. Based on the analysis, the estimated fair value of our reporting unit was $ 12.6 million, compared to a carrying value of our single reporting unit of $ 27.5 million as of December 31, 2022. As such, the fair value of our single reporting unit was deemed to be below its carrying value as of December 31, 2022, resulting in an additional goodwill impairment charge of $ 8.3 million in the fourth quarter of 2022, reflecting the write down of the remaining balance of goodwill for our single reporting unit.   F-14 Table of Contents   Stock-Based Compensation   Compensation expense for stock-based awards is measured at the grant date, based on the estimated fair value of the award, and is recognized as an expense, typically on a straight-line basis over the employee’s requisite service period (generally the vesting period of the equity award) which is generally two to four years. Compensation expense for awards with performance conditions that affect vesting is recorded only for those awards expected to vest or when the performance criteria are met. The fair value of restricted stock and restricted stock unit awards is determined by the product of the number of shares or units granted and the grant date market price of the underlying common stock. The fair value of stock option and common stock purchase warrant awards is estimated on the date of grant utilizing the Black-Scholes-Merton option pricing model. The Company utilizes the simplified method for estimating the expected term for options granted to employees due to the lack of available or sufficient historical exercise data for the Company for the applicable options terms. The Company accounts for forfeitures of awards as they occur. Estimates of expected volatility of the underlying common stock for the expected term of the stock option used in the Black-Scholes-Merton option pricing model are determined by reference to historical volatilities of the Company’s common stock and historical volatilities of similar companies.   Grants of equity-based awards (including warrants) to non-employees in exchange for consulting or other services are accounted for using the grant date fair value of the equity instruments issued.   On January 1, 2022, the Company issued 1,350,000 performance stock units (“PSUs”) under the Company’s 2014 Amended and Restated Stock Option and Incentive Plan, which vest in five equal increments of 270,000 PSUs, based on the Company’s stock price reaching certain predetermined levels, as described at Note 8. A condition affecting the exercisability or other pertinent factors used in determining the fair value of an award that is based on an entity achieving a specified share price constitutes a market condition pursuant to ASC 718, “Stock based Compensation” (“ASC 718”). A market condition is reflected in the grant-date fair value of an award, and therefore, a Monte Carlo simulation model is utilized to determine the estimated fair value of the equity-based award. Compensation cost is recognized for awards with a market condition, provided the requisite service period is satisfied, regardless of whether the market condition is ever satisfied.   Equity Financing Costs   Specific incremental costs directly attributable to a proposed or actual offering of securities are deferred and charged against the gross proceeds of the equity financing. In the event that the proposed or actual equity financing is not completed, or is deemed not likely to be completed, such costs are expensed in the period that such determination is made. Deferred equity financing costs, if any, are included in other current assets in the accompanying consolidated balance sheet. For the years ended December 31, 2022 and 2021, financing costs charged against gross proceeds in connection with equity financings totaled $ 1,397,000 and $ 434,000 , respectively. Deferred financing cost, included in prepaid expense and other current assets, at December 31, 2022 and 2021, totaled $ 374,000 and $ 144,000 , respectively.   Specific incremental costs directly attributable to a proposed or actual debt offering are reported in the balance sheet as a direct deduction from the face amount of the debt instrument. In the event that the proposed or actual debt financing is not completed, or is deemed not likely to be completed, such costs are expensed in the period that such determination is made. In the event that the Company elects to use the fair value option to account for debt instruments, all costs directly attributable to the debt offering are expensed as incurred in the statement of operations. For the years ended December 31, 2022 and 2021, debt financing costs expensed as incurred in connection with debt financings totaled $ 123,000 and $ 0 , respectively.   Convertible Debt   The Company evaluates its convertible notes to determine if those contracts or embedded components of those contracts qualify as derivatives under ASC 815, “Derivatives and Hedging” (“ASC 815”). ASC 815 requires conversion, redemption options, call options and other features (hereinafter, “Embedded Instruments”) contained in the Company’s convertible debt instruments that meet certain criteria to be bifurcated and separately accounted for as an embedded derivative. In circumstances where the embedded conversion option in a convertible instrument is required to be bifurcated and there are also other embedded derivative instruments in the convertible instrument that are required to be bifurcated, the bifurcated derivative instruments are accounted for as a single, compound derivative instrument.   In the event that the fair value option election is not made, as described below, the Company evaluates the balance sheet classification for convertible debt instruments issued to determine whether the instrument should be classified as debt or equity, and whether the Embedded Instruments should be accounted for separately from the host instrument. Embedded Instruments of a convertible debt instrument would be separated from the convertible instrument and classified as a derivative liability if the feature, were it a standalone instrument, meets the definition of an “embedded derivative.” Generally, characteristics that require derivative treatment include, among others, when the conversion feature is not indexed to the Company’s equity, or when it must be settled either in cash or by issuing stock that is readily convertible to cash. When a conversion feature meets the definition of an embedded derivative, it is required to be separated from the host instrument and classified as a derivative liability carried on the balance sheet at fair value, with any changes in its fair value recognized currently in the consolidated statements of operations.   F-15 Table of Contents   Fair Value Option ( “ FVO ” ) Election. The Company accounts for convertible notes issued, as described at Note 6 under the fair value option election pursuant to ASC 825, “Financial Instruments” (“ASC 825”), as discussed below. The convertible notes accounted for under the FVO election are each debt host financial instruments containing embedded features which would otherwise be required to be bifurcated from the debt-host and recognized as separate derivative liabilities subject to initial and subsequent periodic estimated fair value measurements under ASC 815. Notwithstanding, ASC 825 provides for the “fair value option” election, to the extent not otherwise prohibited by ASC 825, to be afforded to financial instruments, wherein bifurcation of an embedded derivative is not necessary, and the financial instrument is initially measured at its issue-date estimated fair value and then subsequently remeasured at estimated fair value on a recurring basis at each reporting period date. The estimated fair value adjustment, as required by ASC 825, is recognized as a component of other comprehensive income (“OCI”) with respect to the portion of the fair value adjustment attributed to a change in the instrument-specific credit risk, with the remaining amount of the fair value adjustment recognized as other income (expense) in the accompanying consolidated statement of operations. With respect to the note described at Note 6, as provided for by ASC 825, the estimated fair value adjustment is presented in a respective single line item within other income (expense) in the accompanying consolidated statements of operations, since the change in fair value of the convertible notes payable was not attributable to instrument specific credit risk. The estimated fair value adjustment is included in other income (expense) in the accompanying consolidated statement of operations.   Reportable Segments   The Company utilizes the management approach to identify the Company’s operating segments and measure the financial information disclosed, based on information reported internally to the Chief Operating Decision Maker (“CODM”) to make resource allocation and performance assessment decisions. An operating segment of a public entity has all the following characteristics: (1) it engages in business activities from which it may earn revenues and incur expense; (2) its operating results are regularly reviewed by the public entity’s CODM to make decisions about resources to be allocated to the segment and assess its performance: and (3) its discrete financial information is available. Based on the applicable criteria under the standard, the components of the Company’s operations are its: (1) advertising and sponsorship component, including content sales component; and (2) the Company’s direct-to-consumer component.   A reportable segment is an identified operating segment that also exceeds the quantitative thresholds described in the applicable standard. Based on the applicable criteria under the standard, including quantitative thresholds, management has determined that the Company has one reportable segment that operated primarily in domestic markets during the periods presented herein.   Concentration of Credit Risks   Financial instruments that potentially subject the Company to concentrations of credit risk are cash equivalents, investments and accounts receivable. The Company places its cash equivalents and investments primarily in highly rated money market funds. Cash equivalents are also invested in deposits with certain financial institutions and may, at times, exceed federally insured limits. The Company has not experienced any significant losses on its deposits of cash and cash equivalents.   Risks and Uncertainties   Concentrations . The Company had certain customers whose revenue individually represented 10% or more of the Company’s total revenue, or whose accounts receivable balances individually represented 10% or more of the Company’s total accounts receivable, and vendors whose accounts payable balances individually represented 10% or more of the Company’s total accounts payable, as follows:       Year Ended December 31,       2022     2021   Number of customers > 10% of revenues / percent of revenues   - / -      One / 12 %    Revenue concentrations were comprised of the following revenue categories:       Year Ended December 31,       2022     2021   Advertising and sponsorships     -       12 %       -       12 %       December 31, 2022     December 31, 2021   Number of customers > 10% of accounts receivable / percent of accounts receivable     Two / 25 %    Three / 35 % Number of vendors > 10% of accounts payable / percent of accounts payable     One / 10 %   One  / 21 %   F-16 Table of Contents   Earnings (Loss) Per Share   Basic earnings (loss) per share is computed by dividing the income or loss by the weighted-average number of outstanding shares of common stock for the applicable period. Diluted earnings per share is computed by dividing the income or loss by the weighted-average number of outstanding shares of common stock for the applicable period, including the dilutive effect of common stock equivalents. Potentially dilutive common stock equivalents primarily consist of common stock potentially issuable in connection with the conversion of outstanding preferred stock, convertible notes payable, employee stock options, unvested restricted stock units, common stock purchase warrants (“warrants”) issued to employees and non-employees in exchange for services and warrants issued in connection with financings.   Common stock underlying all outstanding stock options, restricted stock units and warrants, totaling 7,174,000 and 5,060,000 at December 31, 2022 and 2021, respectively, have been excluded from the computation of diluted loss per share because the effect of inclusion would have been anti-dilutive. Common stock potentially issuable in connection with the conversion of outstanding preferred stock totaling 18,269,000 and zero at December 31, 2022 and 2021, respectively, have been excluded from the computation of diluted loss per share because the effect of inclusion would have been anti-dilutive. Common stock potentially issuable in connection with the conversion of outstanding convertible notes payable totaling 143,000 and zero at December 31, 2022 and 2021, respectively, have been excluded from the computation of diluted loss per share because the effect of inclusion would have been anti-dilutive.   Income Taxes   Income taxes are accounted for using an asset and liability approach that requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been recognized in the Company’s consolidated financial statements or income tax returns. A valuation allowance is established to reduce deferred tax assets if all, or some portion, of such assets will more than likely not be realized, or if it is determined that there is uncertainty regarding future realization of such assets.   Under U.S. GAAP, a tax position is a position in a previously filed tax return, or a position expected to be taken in a future tax filing that is reflected in measuring current or deferred income tax assets and liabilities. Tax positions are recognized only when it is more likely than not, based on technical merits, that the position will be sustained upon examination. Tax positions that meet the more likely than not thresholds are measured using a probability weighted approach as the largest amount of tax benefit being realized upon settlement. The Company considers many factors when evaluating and estimating its tax positions and tax benefits, which may require periodic adjustments, and which may not accurately forecast actual outcomes. Management believes the Company has no uncertain tax positions for the years ended December 31, 2022 and 2021.   The Company has elected to include interest and penalties related to its tax contingences as a component of income tax expense. There were no accruals for interest and penalties related to uncertain tax positions for the periods presented. Income tax returns remain open for examination by applicable authorities, generally three years from filing for federal and four years for state. The Company is not currently under examination by any taxing authority nor has it been notified of an impending examination.   Recent Accounting Guidance   Recent Accounting Pronouncements – Not Yet Adopted. In October 2021, the FASB issued ASU No. 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers , which requires entities to recognize and measure contract assets and contract liabilities acquired in a business combination in accordance with ASC Topic 606, Revenue from Contracts with Customers , in order to align the recognition of a contract liability with the definition of a performance obligation. This standard will be effective for the Company beginning in the first quarter of fiscal year 2023, and early adoption is permitted. The Company is currently evaluating the impact that this standard will have on its financial statements and related disclosures.   Recent Accounting Pronouncements – Adopted. On August 5, 2020, the FASB issued ASU No. 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) . The guidance in this update eliminates the beneficial conversion and cash conversion accounting models for convertible instruments. It also amends the accounting for certain contracts in an entity’s own equity that are currently accounted for as derivatives because of specific settlement provisions. In addition, the new guidance modifies how particular convertible instruments and certain contracts that may be settled in cash or shares impact the diluted EPS computation. The guidance was required to be applied retrospectively with the cumulative effect recognized as of the date of adoption. The guidance became effective at the beginning of the Company’s first quarter of the fiscal year ending December 31, 2022. The adoption of this standard did not have a material impact on the Company's consolidated financial statements and related disclosures.   In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842) . The guidance requires lessees to present right-of-use assets and lease liabilities on the balance sheet. The guidance became effective at the beginning of the Company’s first quarter of the fiscal year ending December 31, 2022. The adoption of this standard did not have a material impact on the Company's consolidated financial statements and related disclosures.   F-17 Table of Contents     3. PROPERTY AND EQUIPMENT   Property and equipment consisted of the following at December 31, 2022 and 2021:       2022     2021                     Computer hardware   $ 3,314,000     $ 3,165,000   Furniture and fixtures     356,000       356,000         3,670,000       3,521,000   Less: accumulated depreciation and amortization     ( 3,523,000 )     ( 3,417,000 )     $ 147,000     $ 104,000     Depreciation and amortization expense for property and equipment was $ 106,000 and $ 73,000 for the years ended December 31, 2022 and 2021, respectively.     4. INTANGIBLE AND OTHER ASSETS   Intangible and other assets consisted of the following for the periods presented:       December 31,     December 31,     Useful       2022     2021     Life (Years)                               Partner and customer relationships   $ 13,376,000     $ 13,376,000     3 - 7   Capitalized software development costs     5,262,000       4,339,000       3     Capitalized third-party game property costs     500,000       -       5     Developed technology     7,880,000       7,880,000     5 - 7   Influencers/content creators     2,559,000       2,559,000     3 - 5   Trade name     189,000       189,000       7     Domain     68,000       68,000     5 - 10   Copyrights and other     760,000       1,141,000     5 - 10         30,594,000       29,552,000             Less: accumulated amortization     ( 10,528,000 )     ( 5,309,000 )           Intangible and other assets, net   $ 20,066,000     $ 24,243,000               Total amortization expense for the fiscal years ended December 31, 2022 and 2021 totaled $ 5,629,000 and $ 3,187,000 , respectively. Amortization expense included in cost of revenues for the fiscal years ended December 31, 2022 and 2021 totaled $ 90,000 and $ 63,000 , respectively.   In June 2022, we purchased “Anime Battlegrounds X ”, a highly rated game on Roblox, from a third-party game developer. The total purchase price of $ 500,000 was capitalized and is being amortized to cost of revenue over the estimated useful life of 5 years.   During the third quarter of 2022 , the Company rebranded certain products acquired in connection with the acquisition of Mobcrush. As a result, the Company recorded a write down of trademark related intangible assets acquired in connection with the acquisition of Mobcrush totaling $ 423,000 , which is included as a component of amortization expense in general and administrative expense in the accompanying consolidated statement of operations for the year ended December 31, 2022.   The Company expects to record aggregate amortization expense for each of the five succeeding fiscal years as follows:   For the years ending December 31,         2023   $ 5,108,000   2024     4,706,000   2025     4,100,000   2026     2,951,000   2027     2,161,000   Thereafter     1,040,000       $ 20,066,000     F-18 Table of Contents     5. ACQUISITIONS   Acquisition of Mobcrush   On March 9, 2021, we entered into an Agreement and Plan of Merger, as amended on April 20, 2021 (the “Mobcrush Merger Agreement”), by and among Mobcrush, the Company, and SLG Merger Sub II, Inc., a wholly-owned subsidiary of the Company (“Merger Co”), which provided for the acquisition of Mobcrush by Super League pursuant to the merger of Merger Co with and into Mobcrush, with Mobcrush as the surviving corporation (the “Mobcrush Acquisition”).   On June 1, 2021 (“Mobcrush Closing Date”), the Company completed the Mobcrush Acquisition pursuant to which the Company acquired all of the issued and outstanding shares of Mobcrush. In accordance with the terms and subject to the conditions of the Mobcrush Merger Agreement each outstanding share of Mobcrush common stock, par value $ 0.001 per share (“Mobcrush Common Stock”), and Mobcrush preferred stock, par value $ 0.001 , was canceled and converted into the right to receive (i) 0.528 shares of the Company’s common stock, as determined in the Mobcrush Merger Agreement, and (ii) any cash in lieu of fractional shares of common stock otherwise issuable under the Mobcrush Merger Agreement (the “Mobcrush Merger Consideration”). At closing, the Company issued to the former stockholders of Mobcrush an aggregate total of 12,067,571 shares of the Company’s common stock and reserved an aggregate total of 514,633 shares of common stock for future stock option grants, under the Super League 2014 Stock Option and Incentive Plan, to the former Mobcrush employees retained by the Company in connection with the Mobcrush Acquisition, resulting in a total of 12,582,204 shares of common stock issued and reserved as consideration for the Mobcrush Acquisition. Upon completion of the Mobcrush Acquisition, Mobcrush became a wholly-owned subsidiary of the Company.   The Mobcrush Acquisition was approved by the board of directors of each of the Company and Mobcrush, and was approved by the stockholders of Mobcrush. For purposes of complying with Nasdaq Listing Rule 5635, Super League’s stockholders approved the issuance of an aggregate of 12,582,204 shares of common stock to be issued in connection with the Mobcrush Acquisition.   Transaction costs incurred by the Company relating to the Mobcrush Acquisition totaled $ 636,000 and were expensed as incurred in accordance with the acquisition method of accounting.   In accordance with the acquisition method of accounting, the financial results of Super League presented herein include the financial results of Mobcrush subsequent to the Mobcrush Closing Date. Disclosure of revenue and net loss for Mobcrush on a stand-alone basis for the periods presented herein is not practical due to the integration of Mobcrush operations, including sales, products, advertising inventory, resource allocation and related operating expense, with those of the consolidated Company upon acquisition, consistent with Super League operating in one reporting segment.   The Company determined that the Mobcrush Acquisition constituted a business acquisition as defined by ASC 805 . Accordingly, the assets acquired and liabilities assumed in the transaction were recorded at their estimated acquisition date fair values, while transaction costs associated with the acquisition were expensed as incurred pursuant to the acquisition method of accounting in accordance with ASC 805. Super League’s purchase price allocation was based on an evaluation of the appropriate fair values of the assets acquired and liabilities assumed and represents management’s best estimate based on available data. Fair values were determined based on the requirements of ASC 820, “Fair Value Measurements and Disclosures” (“ASC 820”).   The following table summarizes the determination of the fair value of the purchase price consideration paid in connection with the Mobcrush Acquisition:   Equity Consideration at closing – shares of common stock   $ 12,067,571   Super League closing stock price per share on the Mobcrush Closing Date   $ 4.96   Fair value of common stock issued   $ 59,855,000     The fair value of the Company common stock used in determining the estimated fair value of the Mobcrush Merger Consideration was $ 4.96 per share based on the closing price of Company common stock on June 1, 2021, as quoted on the Nasdaq Capital Market.   The purchase price allocation was based upon an estimate of the fair value of the assets acquired and the liabilities assumed by the Company in connection with the Mobcrush Acquisition, as follows:       Amount   Assets Acquired and Liabilities Assumed:         Cash   $ 586,000   Accounts receivable     1,266,000   Prepaids     141,000   Property and equipment     13,000   Identifiable intangible assets     19,500,000   Accounts payable and accrued expense     ( 2,017,000 ) Deferred revenue     ( 130,000 ) Net deferred income tax liability     ( 3,073,000 ) Identifiable net assets acquired     16,286,000   Goodwill     43,569,000   Total purchase price   $ 59,855,000     F-19 Table of Contents   The following table presents details of the fair values of the acquired intangible assets of Mobcrush:       Estimated Useful Life (in years)     Amount   Preferred partner relationship     7       10,700,000   Developed technology     5       3,900,000   Influencers/content creators     5       2,000,000   Advertiser and agency relationships     5       1,900,000   Trademarks (see Note 4)     7       500,000   Customer relationships     5       500,000   Total intangible assets acquired           $ 19,500,000     Aggregated amortization expense for intangible assets acquired in connection with the Mobcrush Acquisition (including the write down of trademark related intangible assets described above) for the fiscal years ended December 31, 2022 and 2021, totaled $ 3,651,000 and $ 1,883,000 , respectively. Goodwill represents the excess of the purchase price of the acquired business over the acquisition date fair value of the net assets acquired. Goodwill recorded in connection with the Mobcrush Acquisition was primarily attributable to expected synergies from combining the operations of Super League and Mobcrush, and also included residual value attributable to the assembled and trained workforce acquired in the Mobcrush Acquisition. Refer to Note 2 “Goodwill” above for additional information.   Pursuant to the terms of the Mobcrush Merger Agreement, immediately prior to the effective time of the Mobcrush Acquisition, each vested option to acquire shares of Mobcrush common stock held by former Mobcrush employees was exercised so that, at the effective time of the Mobcrush Acquisition, shares of Mobcrush common stock issued upon exercise of these vested options received shares of Company common stock issuable as Mobcrush Merger Consideration. Unvested options to acquire shares of Mobcrush common stock that were outstanding immediately prior to the Mobcrush Closing Date were canceled, and a number of options to purchase shares of Company common stock were issued to replace the cancelled unvested Mobcrush options in a manner consistent with options historically granted by Super League under the Super League 2014 Stock Option and Incentive Plan (the “Replacement Options”).   Pursuant to the terms of the Mobcrush Merger Agreement, 514,633 shares of the Company’s common stock were reserved for Replacement Option grants to the former Mobcrush employees retained by the Company in connection with the Mobcrush Acquisition. As of December 31, 2022, 415,000 Replacement Options have been granted to former Mobcrush employees retained by the Company, with continued employment required to vest and retain the Replacement Options granted. Under ASC 805, consideration arrangements in which the payments are automatically forfeited if employment terminates is considered to be compensation for post-combination services, and not acquisition consideration. As such, the 514,633 shares of the Company’s common stock reserved at closing for future stock option grants to former Mobcrush employees retained by the Company are not included as a component of the consideration paid in connection with the Mobcrush Acquisition, and will be accounted for pursuant to ASC 718 upon grant.   Management is primarily responsible for determining the fair value of the tangible and identifiable intangible assets acquired and liabilities assumed as of the Mobcrush Closing Date. Management considered a number of factors, including reference to an independent analysis of estimated fair values solely for the purpose of allocating the purchase price to the assets acquired and liabilities assumed. The analysis included a discounted cash flow analysis which estimated the future net cash flows expected to result from the respective assets acquired as of the Mobcrush Closing Date. A discount rate consistent with the risks associated with achieving the estimated net cash flows was used to estimate the present value of future estimated net cash flows.   F-20 Table of Contents   The fair values of the acquired intangible assets, as described above, was determined using the following methods:   Description   Valuation Method Applied Valuation Method Description   Assumptions               Preferred partner relationship / Advertiser and agency relationships   Multi-Period Excess Earnings Method “MPEE”) under the Income Approach   MPEEM is an application of the DCF Method, whereby revenue derived from the intangible asset is estimated using the overall business revenue, adjusted for attrition, obsolescence, cost of goods sold, operating expense, and taxes. Required returns attributable to other assets employed in the business are subtracted. The “excess” earnings are attributable to the intangible asset, and are discounted to present value at a rate of return to estimate the fair value of the intangible asset.   Discount rate 13 % - 14 %; Forecast period 6 – 10 yrs.;               Developed technology and Trademarks   Relief-from-Royalty Method under the Income Approach   Under the Relief-from-Royalty method, the royalty savings is calculated by estimating a reasonable royalty rate that a third-party would negotiate in a licensing agreement. Such royalties are most commonly expressed as a percentage of total revenue involving the technology.   Forecast period: 4 – 5 yrs.; Royalty Rate: Developed Technology 5 % - 3 %; Discount Rate: 14 %;               Influencers/content creators   With-and-Without Method under the Income Approach   The With-and-Without Method compares the present value of the after-tax cash flows of the business assuming that the subject intangible asset is in place with the present value of the after-tax cash flows of the business assuming the subject asset is not in place. The difference between the present value of the two scenarios isolates the impact of the subject intangible asset and provides an estimation of fair value.   Forecast period: 4 years; Recreate Period 20 months; Discount Rate: 13 %;               Customer relationships   Replacement Cost Method   In the Replacement Cost Method, value is estimated by determining the current cost of replacing an asset with one of equivalent economic utility. The premise of the approach is that a prudent investor would pay no more for an asset than the amount for which the utility of the asset could be replaced.   Rate of Return 14 %; Discount rate 13 %; Discount period .5 ; Risk Adjusted Return Factor 1.1   The Mobcrush Acquisition was treated for tax purposes as a nontaxable transaction and, as such, the historical tax bases of the acquired assets and assumed liabilities, net operating losses, and other tax attributes of Mobcrush will carryover. As a result, no new tax goodwill was created in connection with the Mobcrush Acquisition as there is no step-up to fair value of the underlying tax bases of the acquired net assets. The acquisition method of accounting includes the establishment of a net deferred tax asset or liability resulting from book tax basis differences related to assets acquired and liabilities assumed on the date of acquisition. Acquisition date deferred tax assets primarily relate to certain net operating loss carryforwards of Mobcrush. Acquisition date deferred tax liabilities relate to specifically identified non-goodwill intangibles acquired. The estimated net deferred tax liability was determined as follows:       Book Basis     Tax Basis     Difference   Intangible assets acquired   $ 19,500,000     $ 2,635,000     $ ( 16,865,000 ) Tangible assets acquired     13,000               ( 13,000 ) Estimated net operating loss carryforwards – Mobcrush     -       5,895,000       5,895,000   Net deferred tax liability – pretax                     ( 10,983,000 ) Estimated tax rate                     27.98 % Estimated net deferred tax liability                   $ ( 3,073,000 )   Release of Valuation Allowance . Since inception, the Company has maintained a full valuation allowance against its net deferred tax assets. The net deferred tax liability resulting from the Mobcrush Acquisition created a source of income to utilize against the Company’s existing net deferred tax assets. Under the acquisition method of accounting, the impact on the acquiring company’s deferred tax assets is recorded outside of acquisition accounting. Accordingly, the valuation allowance on a portion of the Company’s net deferred tax assets was released, resulting in an income tax benefit of approximately $ 3,073,000 , recorded as a credit to income tax expense for the year ended December 31, 2021. The offsetting amounts reduced net deferred tax liabilities, $ 3,073,000 , of which reduced the net deferred tax liability established in connection with the application of the acquisition method of accounting for the Mobcrush Acquisition.   F-21 Table of Contents   The following unaudited pro forma combined results of operations for the period presented are provided for illustrative purposes only. The unaudited pro forma combined statements of operations for the year ended December 31, 2021, assumes the acquisition occurred as of January 1, 2020. The unaudited pro forma combined financial results do not purport to be indicative of the results of operations for future periods or the results that actually would have been realized had the entities been a single entity during the period.       2021             Revenue   $ 14,976 ,000   Net Loss     ( 26,363,000 )   Pro forma adjustments primarily relate to the amortization of identifiable intangible assets acquired over the estimated economic useful life as described above, the expensing of stock options issued to former Mobcrush employees acquired in connection with the Merger, the exclusion of interest expense related to convertible debt of Mobcrush not assumed by Super League in connection with the Merger, the exclusion of nonrecurring transaction costs, and the exclusion of amortization and depreciation related to tangible and intangible assets of Mobcrush existing immediately prior to the Merger. The unaudited pro forma combined statement of operations for the period presented herein have been adjusted to give effect to pro forma events that are expected to have a continuing impact on the combined results. As such, the income tax benefit related to the release of valuation allowance reflected in the statement of income for the year ended December 31, 2021, as described above, totaling $ 3,073,000 , is not reflected in the accompanying unaudited pro forma combined statement of operations for the period presented.   Acquisition of Bannerfy, LTD   On August 11, 2021, the Company entered into a Share Purchase Agreement (the “Bannerfy Purchase Agreement”) with William Roberts, Colin Gillespie, and Robert Pierre (collectively, “Sellers”), pursuant to which the Company agreed to purchase, and Sellers agreed to sell, all of the issued and outstanding common shares of Bannerfy, a company organized under the laws of England and Wales for a total purchase price of $ 7.0 million (the “Bannerfy Purchase Price”) (the “Bannerfy Acquisition”). On August 24, 2021 (the “Bannerfy Closing Date”), the Company completed the acquisition of Bannerfy.   Pursuant to the Bannerfy Purchase Agreement, upon the consummation of the Bannerfy Acquisition (the “Bannerfy Closing”), the Company paid an initial payment (subject to a holdback as described below) of $ 2.45 million (the “Bannerfy Closing Consideration”), paid or to be paid as follows (i) $ 525,000 in the form of a cash payment, and (ii) $ 1.92 million in the form of shares of the Company’s common stock, at a price per share of $ 4.10 , the closing price of the Company’s common stock on the effective date of the Bannerfy Purchase Agreement, as reported on the Nasdaq Capital Market. Pursuant to the terms of the Bannerfy Purchase Agreement, $ 275,000 of the Bannerfy Closing Consideration (“Holdback Amount”), was withheld from the Bannerfy Closing Consideration to satisfy any indemnifiable losses incurred by the Company (as defined in the Bannerfy Purchase Agreement) prior to the first anniversary of the Bannerfy Closing Date. The Company incurred no indemnifiable losses prior to the first anniversary of the Bannerfy Closing Date, and therefore during the three months ended September 30, 2022, the Company released to the Sellers the Holdback Amount as follows: (i) $ 55,000 payable in the form of cash, and (ii) approximately $ 220,000 in the form of shares of the Company’s common stock, at a price per share of $4.10.   In accordance with the Bannerfy Purchase Agreement, all remaining portions of the Bannerfy Purchase Price subsequent to the payment of the Bannerfy Closing Consideration, up to approximately $ 4.55 million (the “Contingent Consideration”), was payable upon the achievement of certain revenue and gross profit thresholds for the remainder of the 2021 fiscal year, and each of the fiscal years ending December 31, 2022, and December 31, 2023 (“Earnout Periods”). For the 2021, 2022 and 2023 Earnout Periods, 8 %, 38 % and 54 %, respectively of the Contingent Consideration is potentially payable. The Contingent Consideration is payable in the form of both cash and shares of the Company’s common stock, 21 % in cash and 79 % in Company common stock, based on a conversion price of $ 4.10 per share. No Contingent Consideration was accrued or paid during the periods presented.   The Bannerfy Acquisition was accounted for in accordance with ASC 805. In accordance with ASC 805, if substantially all of the fair value of the gross assets acquired is concentrated in a single identifiable asset or group of similar identifiable assets, the set is not considered a business. Gross assets acquired excludes cash and cash equivalents, deferred tax assets, and goodwill resulting from the effects of deferred tax liabilities. A single identifiable asset includes any individual asset or group of assets that could be recognized and measured as a single identifiable asset in a business combination. When evaluating whether assets are similar, we considered the nature of each single identifiable asset and the risks associated with managing and creating outputs from the assets. Management determined that the Bannerfy Acquisition involved the acquisition of developed technology, which accounted for substantially all of the fair value of the gross assets acquired, and therefore, the Bannerfy Acquisition was determined not to be the acquisition of a business under ASC 805, and is therefore accounted for as an asset acquisition utilizing a cost accumulation model in accordance with the applicable guidance.   F-22 Table of Contents   Transaction costs incurred in connection with the Bannerfy Acquisition totaled $ 62,000 , which are included as a component of the purchase price paid in connection with the Bannerfy Acquisition.   The Bannerfy Purchase Price paid, comprised of the Bannerfy Closing Consideration of $ 2.45 million and $ 62,000 of related transaction costs, was allocated to the developed technology acquired, with an estimated useful life of seven years. In addition, the carrying value of the developed technology acquired in connection with the Bannerfy Acquisition includes an adjustment related to deferred taxes, totaling $ 556,000 , as described below. Net working capital assets acquired were not material.   Aggregated amortization expense for the developed technology intangible asset acquired in connection with the Bannerfy Acquisition for the fiscal years ended December 31, 2022 and 2021, totaled $ 438,000 and $ 146,000 , respectively.   The Company hired the former director of Bannerfy (“Bannerfy Executive”), who was also a selling shareholder of Bannerfy. Pursuant to the provisions of the Bannerfy Purchase Agreement, in the event that the Bannerfy Executive ceases to be an employee, during any of the Earnout Periods, as a consequence of his resignation or termination for cause, as defined in the Bannerfy Purchase Agreement, the Bannerfy Executive shall only be entitled to such percentage of any Contingent Consideration payment which would otherwise be payable to him on a prorated basis based on the number of months employed during the applicable Earnout Period. Under ASC 805, a contingent consideration arrangement in which the payments are automatically forfeited if employment terminates is considered to be compensation for post-combination services, and not acquisition consideration. As such, the Contingent Consideration, if any, will be accounted for as post-combination services and expensed in the period that payment of any amounts of Contingent Consideration becomes probable and reasonably estimable.   The Bannerfy Acquisition was treated for tax purposes as a nontaxable transaction and, as such, the historical tax bases of the acquired assets and assumed liabilities, net operating losses, and other tax attributes of Bannerfy will carryover. As a result, there is no step-up to fair value of the underlying tax bases of the acquired net assets in connection with the Bannerfy Acquisition. The acquisition method of accounting includes the establishment of a net deferred tax asset or liability resulting from book tax basis differences related to assets acquired and liabilities assumed on the date of acquisition. When an acquisition of a group of assets is purchased in a transaction that is not accounted for as a business combination under ASC 805, a difference between the book and tax bases of the assets arises. ASC 740, “Income Taxes” (“ASC 740”) requires the use of simultaneous equations to determine the assigned value of the asset and the related deferred tax asset or liability. As neither goodwill nor a bargain purchase gain is recognized in an asset acquisition, recognizing deferred tax assets or liabilities for temporary differences in an asset acquisition results in adjusting the carrying amount of the related assets and liabilities. The deferred tax liability and resulting adjustment to the carrying amount of the assets acquired in connection with the Bannerfy Acquisition was determined as follows:       Book Basis     Tax Basis     Difference   Intangible assets acquired   $ 2,512,000     $ -     $ ( 2,512,000 ) Estimated net operating loss carryforwards – Bannerfy             144,000       144,000   Net deferred tax liability – pretax                     ( 2,368,000 ) Estimated tax rate                     23.48 % Estimated net deferred tax liability – Pursuant to ASC 740(1)                   $ ( 556,000 )   (1) Pursuant to ASC 740, the deferred tax liability is estimated using the following formula: (a) Applicable tax rate divided by (b) one minus the applicable tax rate, multiplied by (c) the tax basis of the net assets acquired less the initial book basis of the net assets acquired.   Bannerfy commenced operations in September 2020. As such, the historical balance sheets and statements of operations of Bannerfy were not material, and therefore unaudited pro forma combined results of operations for the periods presented are not provided for illustrative purposes. Disclosure of revenue and net loss for Bannerfy on a stand-alone basis for the periods presented herein is not practical due to the integration of Bannerfy operations, including sales, products, advertising inventory, resource allocation and related operating expense, with those of the consolidated Company upon acquisition, consistent with Super League operating in one reporting segment.   Acquisition of Super Biz Co.   On October 4, 2021 (“Super Biz Closing Date”), the Company entered into an Asset Purchase Agreement (the “Super Biz Purchase Agreement”) with Super Biz Co. and the founders of Super Biz (the “Founders”), pursuant to which the Company acquired (i) substantially all of the assets of Super Biz (the “Super Biz Assets”), and (ii) the personal goodwill of the Founders regarding Super Biz’s business, (the “Super Biz Acquisition”). The consummation of the Super Biz Acquisition (the “Super Biz Closing”) occurred simultaneously with the execution of the Super Biz Purchase Agreement on the Super Biz Closing Date.   At closing, the Company paid an aggregate total of $ 6.0 million to Super Biz and the Founders (the “Super Biz Closing Consideration”), of which $ 3.0 million was paid in the form of cash (the “Super Biz Closing Cash Consideration”) and $ 3.0 million was paid in the form of shares of the Company’s common stock, at a per share price of $ 2.91 , the closing price of the Company’s common stock on the Super Biz Closing Date, as reported on the Nasdaq Capital Market (the “Super Biz Stock Consideration”).   F-23 Table of Contents   Pursuant to the terms and subject to the conditions of the Super Biz Purchase Agreement, up to an aggregate amount $ 11.5 million will be payable to Super Biz and the Founders in connection with the achievement of certain revenue milestones for the period from the Super Biz Closing Date until December 31, 2022 (“Initial Earn Out Period”) and for the fiscal year ending December 31, 2023 (the “Super Biz Contingent Consideration”) (“Super Biz Earn Out Periods”). The Super Biz Contingent Consideration is payable in the form of both cash and shares of the Company’s common stock, in equal amounts, as more specifically set forth in the Super Biz Purchase Agreement.   The Super Biz Acquisition was approved by the board of directors of each of the Company and Super Biz and was approved by the stockholders of Super Biz.   In accordance with the acquisition method of accounting, the financial results of Super League presented herein include the financial results of Super Biz subsequent to the Super Biz Closing Date. Disclosure of revenue and net loss for Super Biz on a stand-alone basis for the year ended December 31, 2022 is not practical due to the integration of Super Biz activities, including sales, products, advertising inventory, resource allocation and related operating expense, with those of the consolidated Company upon acquisition, consistent with Super League operating in one reporting segment.   The Company determined that the Super Biz Acquisition constitutes a business acquisition as defined by ASC 805. Accordingly, the assets acquired and liabilities assumed in the transaction were recorded at their estimated acquisition date fair values, while transaction costs associated with the acquisition were expensed as incurred pursuant to the acquisition method of accounting in accordance with ASC 805. Super League’s purchase price allocation was based on an evaluation of the appropriate fair values of the assets acquired and liabilities assumed and represents management’s best estimate based on available data. Fair values were determined based on the requirements of ASC 820.   Transaction costs incurred by the Company relating to the Super Biz Acquisition totaled $ 47,000 and were expensed as incurred in accordance with the acquisition method of accounting.   The following table summarizes the determination of the fair value of the purchase price consideration paid in connection with the Super Biz Acquisition:   Cash consideration at closing           $ 3,000,000   Equity consideration at closing – shares of common stock     1,031,928           Super League closing stock price per share on the Super Biz Closing Date   $ 2.91           Fair value of equity consideration issued at closing   $ 3,000,000       3,000,000   Fair value of total consideration issued at closing           $ 6,000,000     The fair value of the Company common stock used in determining the estimated fair value of the Super Biz Closing Consideration was $ 2.91 per share based on the closing price of Company common stock on October 4, 2021, as quoted on the Nasdaq Capital Market.   The purchase price allocation was based upon an estimate of the fair value of the assets acquired and the liabilities assumed by the Company in connection with the Super Biz Acquisition, as follows:       Amount   Assets Acquired and Liabilities Assumed:         Accounts receivable   $ 124,000   Identifiable intangible assets     1,747,000   Identifiable net assets acquired     1,871,000   Goodwill     4,129,000   Total purchase price   $ 6,000,000     The following table presents details of the fair values of the acquired intangible assets of Super Biz:       Estimated Useful Life (in years)     Amount   Developed technology     7     $ 912,000   Developer relationships     3       559,000   Customer relationships     3       276,000   Total intangible assets acquired           $ 1,747,000     F-24 Table of Contents   Aggregated amortization expense for the intangible assets acquired in connection with the Super Biz Acquisition for the fiscal years ended December 31, 2022 and 2021, totaled $ 409,000 and $ 99,000 , respectively. Goodwill represents the excess of the purchase price of the acquired business over the acquisition date fair value of the net assets acquired. Goodwill recorded in connection with the Super Biz Acquisition was primarily attributable to expected synergies from combining the operations and assets of Super League and Super Biz, and also includes residual value attributable to the assembled and trained workforce acquired in the acquisition. Refer to Note 2 “Goodwill” above for additional information.   Management is primarily responsible for determining the fair value of the tangible and identifiable intangible assets acquired and liabilities assumed as of the Super Biz Closing Date. Management considered a number of factors, including reference to an independent analysis of estimated fair values solely for the purpose of allocating the purchase price to the assets acquired and liabilities assumed. The analysis included a discounted cash flow analysis which estimated the future net cash flows expected to result from the respective assets acquired as of the Super Biz Closing Date. A discount rate consistent with the risks associated with achieving the estimated net cash flows was used to estimate the present value of future estimated net cash flows. The fair values of the intangible assets acquired in connection with the Super Biz acquisition were determined using the cost method. Under the cost method, value is estimated by determining the current cost of replacing an asset with one of equivalent economic utility. The premise of the approach is that a prudent investor would pay no more for an asset than the amount for which the utility of the asset could be replaced. Valuation assumptions utilized included rates of return of 30 %, discount periods of 0.5 to 1, risk adjusted return factors of 1.1 to 1.3 and weighted average costs of capital of 30 %.   The Company hired the Founders of Super Biz in connection with the Super Biz Acquisition. Pursuant to the provisions of the Super Biz Purchase Agreement, in the event that a Founder ceases to be an employee during any of the Super Biz Earn Out Periods, as a consequence of his resignation without good cause, or termination for cause, the Super Biz Contingent Consideration will be reduced by one-half (50%) for the respective Super Biz Earn Out Periods, if and when earned. Under ASC 805, a contingent consideration arrangement in which the payments are automatically forfeited if employment terminates is considered to be compensation for post-combination services, and not acquisition consideration. As such, the Contingent Consideration, is accounted for as post-combination services and expensed in the period that payment of any amounts of Contingent Consideration is determined to be probable and reasonably estimable. As of December 31, 2022, the Company determined that it was probable that the contingency for the Initial Earn Out Period would be met in accordance with the terms of the Super Biz Purchase Agreement, and the applicable amounts were reasonably estimable, resulting in a charge to compensation expense totaling $ 3,206,000 (including approximately 988,000 shares of common stock valued at $ 0.336 , the closing price of our common stock as of December 31, 2022), which is reflected as a component of operating expense in the consolidated statement of operations for the year ended December 31, 2022. The Contingent Consideration is recorded as a liability in the accompanying consolidated balance sheet in accordance with ASC 480, “Distinguishing liabilities from equity” (“ASC 480”), which requires freestanding financial instruments where the company must or could settle the obligation by issuing a variable number of its shares, and the obligation's monetary value is based solely or predominantly on variations in something other than the fair value of the company's shares, to be recorded as a liability.   For tax purposes, consistent with the accounting for book purposes, the Super Biz Closing Consideration was allocated to the assets acquired and liabilities assumed based on their estimated fair values as of the acquisition date, with the excess purchase price allocated to goodwill. As a result, no deferred tax assets or liabilities were recorded with the acquisition and all of the goodwill is expected to be deductible for tax purposes.   Super Biz operations commenced in December 2020. As such, the historical balance sheets and statements of operations of Super Biz were not material, and therefore unaudited pro forma combined results of operations for the periods presented are not provided for illustrative purposes.     6. DEBT   Convertible Notes Payable at Fair Value   On May 16, 2022, the Company entered into a Securities Purchase Agreement (the “SPA”) with three institutional investors (collectively, the “Note Holders”) providing for the sale and issuance of a series of senior convertible notes in the aggregate original principal amount of $ 4,320,000 , of which 8 % is an original issue discount (“OID”) (each, a “Note,” and, collectively, the “Notes,” and such financing, the “Note Offering”). The Notes accrue interest at a guaranteed annual rate of 9 % per annum, mature 12 months from the date of issuance, and are convertible at the option of the Note Holders into that number of shares of the Company’s common stock, equal to the sum of the outstanding principal balance, accrued and unpaid interest, and accrued and unpaid late charges (the “Conversion Amount”), divided by $ 4.00 (the “Conversion Price”), subject to adjustment upon the occurrence of certain events as more specifically set forth in the Note, as amended; provided, however, in no event will the Company be permitted to issue more than 19.99 % of the shares of common stock issued and outstanding immediately prior to the Note Offering, which number of shares shall be reduced, on a share-for-share basis, by the number of shares of common stock issued or issuable pursuant to any transaction or series of transactions that may be aggregated with the Note Offering. In the event of the occurrence of an event of default, the Note Holders may, at the Note Holder’s option, convert all, or any part of, the Conversion Amount into shares of common stock at 90% of the lowest volume weighted average price of the ten trading days preceding the date for which the price is being calculated.   F-25 Table of Contents   In addition, the Company may be required to redeem all or a portion of the Notes under certain circumstances, and, in the event (A) the Company sells Company common stock pursuant to the March 25, 2022 Purchase Agreement, described below, or (B) consummates a subsequent equity financing, then the Note Holders will have the right, but not the obligation, to require the Company to use 50 % of the gross proceeds raised from such sale to redeem all or any portion of the Conversion Amount then remaining under the Notes, in cash, at a price equal to the Conversion Amount being redeemed. The Company may, at its option, redeem all or a portion of the Notes at a price equal to 110 % of the Conversion Amount being redeemed.   In the event of a change of control, the Note Holders may require the Company to redeem all or any portion of this Note in cash at a price equal to the greatest of (i) the product of (x) 110 % multiplied by (y) the Conversion Amount being redeemed, (ii) the product of (x) 110 % multiplied by (y) the product of (A) the Conversion Amount being redeemed multiplied by (B) the quotient determined by dividing (I) the greatest closing sale price of the shares of common stock during the period beginning on the date immediately preceding the earlier to occur of (1) the consummation of the applicable change of control and (2) the public announcement of such change of control and ending on the date the Note Holder delivers the change of control redemption notice by (II) the Conversion Price then in effect, and (iii) the product of (x) 110 % multiplied by (y) the product of (A) the Conversion Amount being redeemed multiplied by (B) the quotient of (I) the aggregate cash consideration and the aggregate cash value of any non-cash consideration per share of common stock to be paid to the holders of the shares of common stock upon consummation of such change of control divided by (II) the Conversion Price then in effect.   In the event of the occurrence of an event of default, the Note Holders may require the Company to redeem (regardless of whether such Event of Default has been cured) all or any portion of the Notes. Each portion of the Notes subject to redemption by the Company pursuant to an event of default shall be redeemed by the Company at a price equal to the greater of (i) the product of (A) the Conversion Amount to be redeemed multiplied by (B) 110 % and (ii) the product of (X) the conversion rate with respect to the Conversion Amount in effect at such time as the Holder delivers an event of default redemption notice multiplied by (Y) the product of (1) 110 % multiplied by (2) the greatest closing sale price of the common stock on any trading day during the period commencing on the date immediately preceding such event of default and ending on the date the Company makes the entire payment required to be made under the Notes. Upon any bankruptcy the Company would be required to pay to the Note Holders an amount in cash representing (i) all outstanding principal, accrued and unpaid interest and accrued and unpaid late charges on such principal and interest, multiplied by (ii) 110 %, in addition to any and all other amounts due under the Notes, provided that any Note Holder may, in its sole discretion, waive such right to receive payment upon a bankruptcy event of default, in whole or in part.   Under the Notes, the Company is subject to certain customary affirmative and negative covenants regarding the incurrence of indebtedness, the existence of liens, the repayment of indebtedness, the payment of cash in respect of dividends, distributions or redemptions, and the transfer of assets, among other matters.   The Notes are subject to a most favored nation provision and standard adjustments in the event of any stock split, stock dividend, stock combination, recapitalization or other similar transaction. If the Company issues or sells, or enters into any agreement to issue or sell, any variable rate securities, including by way of one or more reset(s) to a fixed price, the Note Holders have the right, but not the obligation, in any Note Holder’s sole discretion, to substitute the applicable variable price for the Conversion Price upon conversion of the Notes.   Concurrently with the SPA, the Company and the Note Holders entered into a registration rights agreement, pursuant to which the Company agreed to file a Registration Statement on Form S-3 within 30 days after the closing of the Note Offering.   During the year ended December 31, 2022, the Company recorded interest expense related to the Notes totaling $ 389,000 , and made cash interest payments totaling $ 209,000 . Accrued interest totaled $ 180,000 at December 31, 2022.   The Notes were issued with an original issue discount of $ 320,000 , or 8 %, which is recorded as an adjustment to the carrying amount of the Notes. The original issue discount is amortized using the interest method over the contractual term of the Notes and reflected as interest expense in the statement of operations. Total amortization of original issue discount for the year ended December 31, 2022 was $ 280,000 . At December 31, 2022, the balance of the original issue discount was $ 40,000 , which is included in “Convertible note payable and accrued interest” in the accompanying consolidated balance sheet.   The Company elected to utilize the FVO to account for the Notes, which is included in current liabilities. Principal payments on the Notes during the year ended December 31, 2022 totaled $ 3,781,000 . The change in fair value of the Notes at each balance sheet date, if any, is included in other income (expense) in the accompanying consolidated statement of operations for the year ended December 31, 2022. The Notes were valued based on a binomial lattice model utilizing the following assumptions and results for fiscal year 2022:       May 16, 2022     June 30, 2022     September 30, 2022   Stock price   $ 1.27     $ 1.02     $ 0.68   Volatility     82 %     83 %     82 % Risk free rate     2.1 %     2.7 %     3.1 % Dividend rate     -       -       -   Implied yield     20.7 %     23.9 %     23.4 % Estimated Fair value of Notes, including OID, excluding accrued interest     4,000,000       3,986,000       4,245,000   Change in fair value   NA       ( 49,000 )     334,000     F-26 Table of Contents   At December 31, 2022, the remaining principal balance of the Notes totaled $ 539,000 , and accrued interest totaled $ 180,000 , both of which were paid in full in the first quarter of 2023. The carrying value of the Notes approximated their fair values as of December 31, 2022. The decrease in fair value during the three months ended December 31, 2022 was $ 285,000 , resulting in a net impact of the change in fair value of the Notes of $ 0 for the year ended December 31, 2022.   PPP Loan   On May 4, 2020, the Company entered into a forgivable loan from the U.S. Small Business Administration (“SBA”) resulting in net proceeds of $ 1,200,047 pursuant to the Paycheck Protection Program (“PPP”) enacted by Congress under the CARES Act administered by the SBA (the “PPP Loan”). To facilitate the PPP Loan, the Company entered into a Note Payable Agreement with a bank (the “Lender”) (the “PPP Loan Agreement”). The PPP Loan had an original maturity date of May 4, 2022, and accrued interest at a rate of 1.00 % per annum, with interest accruing throughout the period the PPP Loan was outstanding, or until forgiven.   The PPP Loan was accounted for as a financial liability in accordance with ASC 470, “Debt” (“ASC 470”) Accordingly, the proceeds from the PPP Loan were recorded as a long-term liability on the balance sheet until either (1) the loan is, in part or wholly, forgiven and the company had been “legally released” or (2) the Company paid off the loan to the Lender. Interest was accrued in accordance with the interest method.   In May 2021, the PPP loan was forgiven pursuant to the terms and conditions of the PPP Loan Agreement and the provision of the Cares Act. Upon forgiveness, and legal release, the Company reduced the liability by the amount forgiven, totaling $ 1,213,000 and recorded a gain on extinguishment in the consolidated statement of operations for the year ended December 31, 2021.     7. STOCKHOLDERS ’ EQUITY   Preferred Stock   The Company’s initial certificate of incorporation authorized 5,000,000 shares of preferred stock, par value $ 0.001 per share. No preferred stock had been issued and outstanding since inception of the Company. In October 2016, the Company’s Board of Directors (the “Board of Directors”) and a majority of the holders of the Company’s common stock approved an amendment and restatement of the certificate of incorporation which, in part, eliminated the authorized preferred stock. In August 2018, the Board of Directors approved a second amendment and restatement of the Company’s amended and restated certificate of incorporation (the “Amended and Restated Charter”) to, in part, increase the Company’s authorized capital to a total of 110.0 million shares, including 10.0 million shares of newly created preferred stock, par value $ 0.001 per share (“Preferred Stock”), authorize the Board of Directors to fix the designation and number of each series of Preferred Stock, and to determine or change the designation, relative rights, preferences, and limitations of any series of Preferred Stock. The Amended and Restated Charter was approved by a majority of the Company’s stockholders in September 2018, and was filed with the State of Delaware in November 2018. All references in the accompanying consolidated financial statements to Preferred Stock have been restated to reflect the Amended and Restated Charter.   Common Stock   The Amended and Restated Charter also increased the Company’s authorized capital to include 100.0 million shares of common stock, par value $ 0.001 , and removed the deemed liquidation provision, as such term is defined in the Amended and Restated Charter. Each holder of common stock is entitled to one vote for each share of common stock held at all meetings of stockholders.   Equity Financings   Fiscal year ended December 31, 2022:   Preferred Stock Issuances   During the fourth quarter of 2022, we entered into subscription agreements with accredited investors in connection with the sale of an aggregate of 10,323 shares of newly designated Series A, A-2, A-3 and A-4 Convertible Preferred Stock, each series having a $ 0.001 par value and a $ 1,000 purchase price, hereinafter collectively referred to as “Series A Preferred,” and the individual offerings of Series A Preferred stock hereinafter collectively referred to as the Series A Offerings, as follows:   Date Series Design-ation   Conversion Price     Shares     Gross Proceeds     Fees     Net Proceeds     Conversion Shares     Placement Agent Warrants (1)                                                               November 22, 2022 Series A   $ 0.6200       5,359     $ 5,359,000     $ 752,000     $ 4,607,000       8,644,000       1,253,000   November 28, 2022 Series A-2   $ 0.6646       1,297       1,297,000       169,000       1,128,000       1,952,000       283,000   November 30, 2022 Series A-3   $ 0.6704       1,733       1,733,000       225,000       1,508,000       2,585,000       375,000   December 22, 2022 Series A-4   $ 0.3801       1,934       1,934,000       251,000       1,683,000       5,088,000       738,000   Total             10,323     $ 10,323,000     $ 1,397,000     $ 8,926,000       18,269,000       2,649,000   _________ (1) – To be issued upon final closing of the Series A Preferred Stock offering   F-27 Table of Contents   Use of net proceeds from the Series A Offerings include the repayment of certain indebtedness and working capital and general corporate purposes, including sales and marketing activities and product development. As disclosed at Note 6, in the event the Company consummated a subsequent equity financing during the term of the Notes, the Company is required, at the option of the Note Holders, to use 50 % of the gross proceeds raised from such sale to redeem all or any portion of the Notes outstanding upon closing of such equity financing. For the year ended December 31, 2022, $ 3,621,000 of the net proceeds from the Series A Offerings were utilized in connection with the partial redemption of the Notes.   On the respective effective dates, the Company filed certificates of designation of preferences, rights and limitations of the Series A Preferred with the State of Delaware, respectively.   Each share of Series A Preferred is convertible at the option of the holder, subject to certain beneficial ownership limitations and primary market limitations as set forth in each Series A Certificate of Designation, into such number of shares of the Company’s common stock, equal to the number of Series A Preferred to be converted, multiplied by the stated value of $ 1,000 (the “Stated Value”), divided by the conversion price in effect at the time of the conversion, as described above. In addition, subject to beneficial ownership and primary market limitations: (1) the Series A Preferred will automatically convert into shares of Common Stock at the Conversion Price upon the earlier of (a) the 24-month anniversary of the Effective Date or (b) the consent to conversion by holders of at least 51 % of the outstanding shares of Series A Preferred; and (2) on the one year anniversary of the Effective Date, the Company may, in its discretion, convert (y) 50 % of the outstanding shares of Series A Preferred if the volume-weighted average price of the Company’s Common Stock over the previous 10 days as reported on the NASDAQ Capital Market (the “VWAP”), equals at least 250% of the Conversion Price, or (z) 100 % of the outstanding shares of Series A Preferred if and only if the VWAP equals at least 300% of the Conversion Price.   The Series A Preferred shall vote together with the common stock on an as-converted basis, and not as a separate class, subject to the primary market limitations, except that holders of Series A Preferred shall vote as a separate class with respect to (a) amending, altering, or repealing any provision of the Series A Certificate of Designation in a manner that adversely affects the powers, preferences or rights of the Series A Preferred, (b) increasing the number of authorized shares of Series A Preferred, (c) authorizing or issuing an additional class or series of capital stock that ranks senior to or pari passu with the Series A Preferred with respect to the distribution of assets on liquidation, (d) authorizing, creating, incurring, assuming, guaranteeing or suffering to exist any indebtedness for borrowed money of any kind in excess of $ 5 million, or I entering into any agreement with respect to the foregoing. In addition, no holder of Series A Preferred shall be entitled to vote on any matter presented to the Company’s stockholders relating to approving the conversion of such holder’s Series A Preferred into an amount in excess of the primary market limitations. Upon any dissolution, liquidation or winding up, whether voluntary or involuntary, holders of Series A Preferred will be entitled to first receive distributions out of the Company’s assets in an amount per share equal to the Stated Value plus all accrued and unpaid dividends, whether capital or surplus before any distributions shall be made on any shares of Common Stock (after the payment to any senior security, if any).   Holders of the Series A Preferred will be entitled to receive dividends, subject to the beneficial ownership and primary market limitations, payable in the form of that number of shares of Common Stock equal to 20 % of the shares of Common Stock underlying the Series A Preferred then held by such holder on the 12 and 24-month anniversaries of the respective filing date. In addition, subject to the beneficial ownership and primary market limitations, holders of Series A Preferred will be entitled to receive dividends equal, on an as-if-converted to shares of Common Stock basis, and in the same form as dividends actually paid on shares of the common stock when, as, and if such dividends are paid on shares of the common stock. Notwithstanding the foregoing, to the extent that a holder’s right to participate in any dividend in shares of common stock to which such holder is entitled would result in such holder exceeding the beneficial ownership and primary market limitations, then such holder shall not be entitled to participate in any such dividend to such extent and the portion of such shares that would cause such holder to exceed the beneficial ownership and primary market limitations shall be held in abeyance for the benefit of such holder until such time, if ever, as such holder’s beneficial ownership thereof would not result in such holder exceeding the beneficial ownership and primary market limitations.   The Company and the investors in the Series A Offerings also executed a registration rights agreement (the “Registration Rights Agreement”), pursuant to which the Company agreed to file a registration statement covering the resale of the shares of Common Stock issuable upon conversion of the Series A Preferred within sixty days following the final closing of Series A Offerings and to use its best efforts to cause such registration statement to become effective within 90 days of the filing date.   The Company sold the shares of Series A Preferred pursuant to a Placement Agency Agreement (the “Placement Agency Agreement”) with a registered broker dealer, which acted as the Company’s exclusive placement agent (the “Placement Agent”) for Series A Offerings.   F-28 Table of Contents   Pursuant to the terms of the Placement Agency Agreement, we agreed to pay to the Placement Agent at each Closing a cash fee equal to 10 % of the gross proceeds raised in the Series A Offerings and (ii) a non-accountable expense allowance equal to 3 % of the gross proceeds of the Series A Offerings. In addition, we have agreed to issue to the Placement Agent or its designees for nominal consideration and following the final closing under the Series A Offerings, five-year warrants to purchase 14.5 % of the shares of common stock issuable upon conversion of the Series A Preferred shares sold in the Series A Offerings, at an exercise price equal to the applicable conversion price. The Placement Agent Warrants provide for a cashless exercise feature and are exercisable for a period of five years from the Effective Date. In addition, the Company agreed to grant the Placement Agent the right to appoint, subject to the Company’s approval, one representative to serve as a member of the Company’s Board of Directors upon the closing of at least $ 10 million in aggregate in connection with the Series A Offerings.   The securities to be issued in the Series A Offerings are exempt from the registration requirements of the Securities Act of 1933, as amended (the “Securities Act”), pursuant to Section 4(a)(2) of the Securities Act and/or Rule 506(b) of Regulation D promulgated thereunder because, among other things, the transaction did not involve a public offering, the investors are accredited investors, the investors are purchasing the securities for investment and not for resale and the Company took appropriate measures to restrict the transfer of the securities. The securities have not been registered under the Securities Act and may not be sold in the United States absent registration or an exemption from registration. This Current Report on Form 8-K shall not constitute an offer to sell or the solicitation of an offer to buy nor shall there be any sale of these securities in any state or jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such state or jurisdiction.   The Subscription Agreements contains representations and warranties that the parties made to, and solely for the benefit of, the other signatories to the Subscription Agreements in the context of all of the terms and conditions thereof and in the context of the specific relationship between the parties to the Subscription Agreements. The provisions of such Subscription Agreements, including the representations and warranties contained therein, are not for the benefit of any party other than the party signatories thereto and are not intended for investors and the public to obtain factual information about the current state of affairs of the parties to such Subscription Agreements. Rather, investors and the public refer to other disclosures contained in the Company’s filings with the U.S. Securities and Exchange Commission.   Common Stock Purchase Agreement   On March 25, 2022, we entered into a common stock purchase agreement (the “Purchase Agreement”) with Tumim Stone Capital, LLC (“Tumim”). Pursuant to the Purchase Agreement, the Company has the right, but not the obligation, to sell to Tumim, and Tumim is obligated to purchase, up to $ 10,000,000 of newly issued shares (the “Total Commitment”) of the Company’s common stock from time to time during the term of the Purchase Agreement (the “Tumim Offering”), subject to certain limitations and conditions. As consideration for Tumim’s commitment to purchase shares of common stock under the Purchase Agreement, the Company issued to Tumim 50,000 shares of common stock, valued at $ 100,000 , following the execution of the Purchase Agreement (the “Commitment Shares”). During the year ended December 31, 2022, we issued 7,425 shares of common stock at an average price of $ 1.11 , raising net proceeds of approximately $ 8,000 , under the Purchase Agreement.   The Purchase Agreement initially precludes the Company from issuing and selling more than 7,361,833 shares of its common stock, including the Commitment Shares, which number equals 19.99 % of the common stock issued and outstanding as of March 25, 2022, unless the Company obtains stockholder approval to issue additional shares, or unless certain exceptions apply. In addition, a beneficial ownership limitation in the agreement initially limits the Company from directing Tumim to purchase shares of common stock if such purchases would result in Tumim beneficially owning more than 4.99 % of the then-outstanding shares of common stock (subject to an increase to 9.99 % at Tumim’s option upon at least 61 calendar days’ notice).   From and after the initial satisfaction of the conditions to the Company’s right to commence sales of common stock to Tumim (such event, the “Commencement,” and the date of initial satisfaction of all such conditions, the “Commencement Date”), the Company may direct Tumim to purchase shares of common stock at a purchase price per share equal to 95 % of the average daily dollar volume-weighted average price for the common stock during the three consecutive trading day period immediately following the date on which the Company delivers to Tumim a notice for such purchase. The Company will control the timing and amount of any such sales of common stock to Tumim. Actual sales of shares of common stock to Tumim will depend on a variety of factors to be determined by the Company from time to time, including, among other things, market conditions, the trading price of the common stock, and determinations by the Company as to the appropriate sources of funding for the Company and its operations.   The Commencement Date of the Tumim Offering was March 25, 2022. Unless earlier terminated, the Purchase Agreement will automatically terminate upon the earliest of (i) the expiration of the 18-month period following the Commencement Date, (ii) Tumim’s purchase or receipt of the Total Commitment worth of common stock, or (iii) the occurrence of certain other events set forth in the Purchase Agreement. The Company has the right to terminate the Purchase Agreement at any time after Commencement, at no cost or penalty, upon five trading days’ prior written notice to Tumim. Tumim has the right to terminate the Purchase Agreement upon five trading days’ prior written notice to the Company, but only upon the occurrence of certain events set forth in the Purchase Agreement.   F-29 Table of Contents   Use of proceeds from any Tumim Offerings includes working capital and general corporate purposes, including sales and marketing activities, product development and capital expenditures. The Company may also use a portion of the net proceeds to acquire or invest in complementary businesses, products and technologies. The Purchase Agreement contains customary representations, warranties and agreements by the Company, as well as customary indemnification obligations of the Company.   Fiscal year ended December 31, 2021:   In January 2021, the Company issued 3,076,924 shares of common stock at a price of $ 2.60 per share, raising aggregate net proceeds of approximately $ 8.0 million, after deducting offering costs totaling $ 73,000 .   In February 2021, the Company issued 2,926,830 shares of common stock at a price of $ 4.10 per share, raising aggregate net proceeds of approximately $ 12.0 million, after deducting offering costs totaling $ 70,000 .   In March 2021, the Company issued 1,512,499 shares of common stock at a price of $ 9.00 per share, raising aggregate net proceeds of approximately $ 13.6 million, after deducting offering costs totaling $ 72,000 .   The offerings described above were made pursuant to an effective shelf registration statement on Form S-3, which was originally filed with the Securities and Exchange Commission on April 10, 2020 (File No. 333-237626). The net proceeds from these offerings were used for working capital and other general corporate purposes, including sales and marketing activities, product development and capital expenditures. The Company also reserved the right to use a portion of the net proceeds for the acquisition of, or investment in, technologies, solutions or businesses.   Equity Distribution Agreement   On September 3, 2021, the Company entered into an Equity Distribution Agreement (the “Sales Agreement”) with two investment banks (the “Agents”), pursuant to which the Company could offer and sell, from time to time, through the Agents (the “ATM Offering”), up to $ 75 million of its shares of common stock (the “Shares”). Any Shares offered and sold in the Offering were issued pursuant to the Company’s Registration Statement on Form S-3 filed with the SEC on September 3, 2021 (the “Form S-3”) and the prospectus relating to the Offering that forms a part of the Form S-3, following such time as the Form S-3 is declared effective by the SEC. During the year ended December 31, 2022, the Company issued 323,639 shares of common stock, at an average price of $ 0.99 , raising net proceeds of $ 312,000 , under the Sales Agreement.   Subject to the terms and conditions of the Sales Agreement, the Agents used their commercially reasonable efforts to sell the Shares from time to time, based upon the Company’s instructions. Under the Sales Agreement, the Agents sold the Shares by any method permitted by law deemed to be an “at-the-market” offering as defined in Rule 415 promulgated under the Securities Act of 1933, as amended (the “Securities Act”), including, without limitation, sales made directly on the Nasdaq Capital Market, on any other existing trading market for the Company’s common stock or to or through a market maker.   The Company had no obligation to sell any of the Shares and could at any time suspend offers under the Sales Agreement. The Offering terminated upon the earlier of (a) the sale of all of the Shares, (b) the termination by the mutual written agreement of the managing agent and the Company, or (c) one year from the date that the Form S-3 is declared effective by the SEC, or November 16, 2022.   Under the terms of the Sales Agreement, the Agents were entitled to an aggregate commission at a fixed rate of 3.0 % of the gross sales price of Shares sold under the Sales Agreement.   Use of proceeds from “at-the-market” offerings included working capital and general corporate purposes, including sales and marketing activities, product development and capital and acquisition related expenditures.     8. STOCK-BASED INCENTIVE PLANS   The Super League 2014 Stock Option and Incentive Plan (the “Plan”) was approved by the Board of Directors and the stockholders of Super League in October 2014. The Plan was subsequently amended in May 2015, May 2016, July 2017 and October 2018. The Plan allows grants of stock options, stock awards and performance shares with respect to common stock of the Company to eligible individuals, which generally includes directors, officers, employees, advisors and consultants. The Plan provides for both the direct award and sale of shares of common stock and for the grant of options to purchase shares of common stock. Options granted under the Plan include non-statutory options as well as incentive options intended to qualify under Section 422 of the Internal Revenue Code of 1986, as amended.   F-30 Table of Contents   The Board of Directors administers the Plan and determines which eligible individuals are to receive option grants or stock issuances under the Plan, the times when the grants or issuances are to be made, the number of shares of common stock subject to each grant or issuance, the status of any granted option as either an incentive stock option or a non-statutory stock option under the federal tax laws, the vesting schedule to be in effect for the option grant or stock issuance and the maximum term for which any granted option is to remain outstanding. The exercise price of options is generally equal to the fair market value of common stock of the Company on the date of grant. Options generally begin to be exercisable six months to one year after grant and typically expire 10 years after grant. Stock options and restricted shares generally vest over two to four years (generally representing the requisite service period). The Plan terminates automatically on July 1, 2027. The Plan provides for the following programs:     ● Option Grants   Under the discretionary option grant program, the Company’s compensation committee of the Board of Directors may grant (1) non-statutory options to purchase shares of common stock to eligible individuals in the employ or service of Super League or its affiliates (including employees, non-employee members of the Board of Directors and consultants) at an exercise price not less than 85 % of the fair market value of such shares on the grant date, and (2) incentive stock options to purchase shares of common stock to eligible employees at an exercise price not less than 100 % of the fair market value of such shares on the grant date (not less than 110 % of fair market value if such employee actually or constructively owns more than 10% of Super League’s voting stock or the voting stock of any of its subsidiaries).     ● Stock Awards or Sales   Under the stock award or sales program, eligible individuals may be issued shares of common stock of the Company directly, upon the attainment of performance milestones or the completion of a specified period of service or as a bonus for past services. Under this program, the purchase price for the shares will not be less than 100 % of the fair market value of the shares on the date of issuance, and payment may be in the form of cash or past services rendered. Eligible individuals will have no stockholder rights with respect to any unvested restricted shares or restricted stock units issued to them under the stock award or sales program; however, eligible individuals will have the right to receive any regular cash dividends paid on such shares.   The initial reserve under the Plan was 583,334 shares of common stock, which reserve was subsequently increased to 1,000,000 shares upon stockholders’ approval in May 2016. In July 2017, the Company amended and restated the Plan to increase the number of shares of common stock reserved thereunder from 1,000,000 shares to 1,500,000 shares. In October 2018, the Company amended and restated the Plan to increase the number of shares of common stock reserved thereunder from 1,500,000 shares to 1,833,334 shares. In July 2020, the Company’s shareholders approved an amendment to the Plan to increase the number of shares authorized for issuance from 1,833,334 to 2,583,334 . In May 2021, the Company’s shareholders approved an amendment to the Plan to increase the number of shares authorized for issuance from 2,583,334 to 5,000,000 . In June 2022, the Company’s shareholders approved an amendment to the Plan to increase the number of shares authorized for issuance from 5,000,000 to 6,250,000 . As of December 31, 2022, 1,139,074 shares remained available for issuance under the Plan.   Super League issues new shares of common stock upon the exercise of stock options, the grant of restricted stock, or the delivery of shares pursuant to vested restricted stock units. The compensation committee of the Board of Directors may amend or modify the Plan at any time, subject to any required approval by the stockholders of the Company, pursuant to the terms therein. In the event that any outstanding option or other right for any reason expires or is canceled or otherwise terminated, the shares allocable to the unexercised portion of such option or other right is returned and available for the purposes of this Plan.   Stock Options   The fair value of stock options granted was estimated on their respective grant dates using the Black-Scholes-Merton option pricing model and the following weighted-average assumptions for the years ended December 31, 2022 and 2021:       2022     2021   Expected Volatility     95 %     95 % Risk–free interest rate     2.89 %     . 99 % Dividend yield     - %     - % Expected life of options (in years)     6.08       5.86     The expected volatility assumption for purposes of determining the fair value of stock options for the periods presented was estimated based on reference to the historical stock price volatility of the Company and a representative peer group for the applicable estimated term.   F-31 Table of Contents   A summary of stock option activity for the year ended December 31, 2022 is as follows:               Weighted-Average               Options (#)     Exercise Price Per Share ($)     Remaining Contractual Term (Years)     Aggregate Intrinsic Value ($)                                     Outstanding at December 31, 2021     2,433,000     $ 5.18             $ 246,000   Granted     239,000     $ 1.51                   Exercised     -     $ -                   Canceled / forfeited     ( 194,000 )   $ 4.23                   Outstanding at December 31, 2022     2,478,000     $ 4.90       6.87     $ 4,000   Vested and exercisable at December 31, 2022     1,569,000     $ 5.80       5.99     $ 4,000     The weighted-average grant date fair value of stock options granted during the years ended December 31, 2022 and 2021 was $ 1.17 and $ 3.40 , respectively. The aggregate fair value of stock options that vested during the years ended December 31, 2022 and 2021 was $ 1,726,000 and $ 720,000 , respectively. As of December 31, 2022, the total unrecognized compensation expense related to non-vested stock option awards was $ 2,204,000 , which is expected to be recognized over a weighted-average term of approximately 2.16 years.   Restricted Stock Units   The following table summarizes non-vested restricted stock unit activity for the year ended December 31, 2022:       2014 Plan Activity     Outside of the 2014 Plan Activity     Totals   Non-vested Restricted Stock   Restricted Stock Units (#)     Weighted Average Grant Date Fair Value ($)     Restricted Stock Units (#)     Weighted Average Grant Date Fair Value ($)     Restricted Stock Units (#)     Weighted Average Grant Date Fair Value ($)                                                                                                       At December 31, 2021     361,000     $ 4.92       -     $ -       361,000     $ 4.92   Granted     1,940,000     $ 1.57       140,000     $ 0.91       2,080,000     $ 1.52   Vested     ( 257,000 )   $ 4.50       ( 105,000 )   $ 0.91       ( 362,000 )   $ 3.46   Canceled     ( 32,000 )   $ 1.87       -     $ -       ( 32,000 )   $ 1.87   At December 31, 2022     2,012,000     $ 1.78       35,000     $ 0.91       2,047,000     $ 1.77     As of December 31, 2022, the total unrecognized compensation expense related to non-vested restricted stock units was $ 983,000 which will be recognized over a weighted-average term of approximately one year.   On January 1, 2022, the Company issued 1,350,000 performance stock units (“PSUs”) (included in the table above) under the Company’s 2014 Amended and Restated Stock Option and Incentive Plan, which vest in five equal increments of 270,000 PSUs, based on satisfaction of the following vesting conditions during the three-year period commencing on January 1, 2022:     (i) the Company’s stock price equaling $ 4.75 per share based on 60-day volume weighted average price (“VWAP”);   (ii) the Company’s stock price equaling $ 6.00 per share based on 60-day VWAP;   (iii) the Company’s stock price equaling $ 7.00 per share based on 60-day VWAP;   (iv) the Company’s stock price equaling $ 8.00 per share based on 60-day VWAP; and   (v) the Company’s stock price equaling $ 9.00 per share based on 60-day VWAP.   F-32 Table of Contents   A condition affecting the exercisability or other pertinent factors used in determining the fair value of an award that is based on an entity achieving a specified share price constitutes a market condition pursuant ASC 718. Noncash stock compensation expense related to the PSUs totaled $ 2,142,000 for the year ended December 31, 2022.   During the year ended December 31, 2022, the Company issued 170,000 restricted stock units (included in the table above) to nonemployees for services (“Nonemployee RSUs”). The weighted average grant date fair value of the Nonemployee RSUs granted during the year ended December 13, 2022 was $ 0.91 . Compensation expense for Nonemployee RSUs for the year ended December 31, 2022 totaled $ 131,000 . As of December 31, 2022, the total unrecognized compensation expense related to Nonemployee RSUs was $ 24,000 , which will be recognized in the first quarter of fiscal 2023.   Warrants Issued to Employees and Nonemployees for Services   A summary of employee and nonemployee warrant activity (outside of the Plan) for the year ended December 31, 2022 is as follows:               Weighted-Average               Warrants (#)     Exercise Price Per Share ($)     Remaining Contractual Term (Years)     Aggregate Intrinsic Value ($)                                     Outstanding at December 31, 2021     781,000     $ 10.26                   Granted     500,000     $ 0.67             $ -   Expired     ( 116,000 )   $ 10.80             $ -   Outstanding at December 31, 2022     1,165,000     $ 6.09       4.78     $ -   Vested and exercisable as of December 31, 2022     665,000     $ 10.16       4.78     $ -     The weighted-average grant date fair value of common stock purchase warrants (“Warrants”) granted during the year ended December 31, 2022 was $ 0.50 . No Warrants were granted to employees or non-employees in exchange for services performed during the year ended December 31, 2021. No Warrants vested during the years ended December 31, 2022 and 2021. As of December 31, 2022, the total unrecognized compensation expense related to Warrants was $ 228,000 .   On December 1, 2022, the Company issued 500,000 warrants (included in the table above) to a third-party for nonemployee investor relations services. The warrants have an exercise price of $ 0.67 , a grant date fair value of $ 0.50 , vest in twelve equal monthly installments commencing on the grant date and expire five years from the grant date. Compensation expense included in the statement of operations for the year ended December 31, 2022 totaled $ 20,000 .   Noncash Stock Compensation Expense   Noncash stock-based compensation expense for the periods presented was comprised of the following:       2022     2021   Stock options   $ 1,278,000     $ 1,148,000   Warrants     20,000       -   Restricted stock units     2,965,000       1,233,000   Total noncash stock compensation expense   $ 4,263,000     $ 2,381,000     Noncash stock-based compensation expense for the periods presented was included in the following financial statement line items:       2022     2021   Sales, marketing and advertising   $ 1,079,000     $ 934,000   Engineering, technology and development     389,000       288,000   General and administrative     2,795,000       1,159,000   Total noncash stock compensation expense   $ 4,263,000     $ 2,381,000     F-33 Table of Contents     9. INCOME TAXES   Super League’s provision for income taxes consisted of the following for the years ended December 31, 2022 and 2021:       2022     2021   Current:                 Federal taxes   $ -     $ -   State taxes     -       -   Total current   $ -     $ -                     Deferred:                 Federal taxes   $ ( 7,541,000 )   $ ( 4,654,000 ) State taxes     ( 1,664,000 )     ( 969,000 ) Foreign taxes     ( 205,000 )     ( 38,000 ) Subtotal     ( 9,410,000 )     ( 5,661,000 ) Change in valuation allowance     9,205,000       2,550,000   Total deferred     ( 205,000 )     ( 3,111,000 ) Provision for income taxes   $ ( 205,000 )   $ ( 3,111,000 )   The tax effects of temporary differences and carryforwards that give rise to significant portions of deferred tax assets and liabilities consist of the following as of December 31, 2022 and 2021.       2022     2021   Deferred tax assets (liabilities):                 Net operating loss and credits   $ 32,098,000     $ 27,963,000   Stock compensation     3,026,000       2,837,000   Accrued liabilities     504,000       11,000   Fixed assets and intangibles     ( 2,231,000 )     ( 4,812,000 ) State taxes     11,000       1,000   Capitalized research and development costs     2,002,000       -   Total net deferred tax assets (liabilities)     35,410,000       26,000,000   Valuation allowance     ( 35,723,000 )     ( 26,518,000 ) Total net deferred tax assets (liabilities), net of valuation allowance   $ ( 313,000 )   $ ( 518,000 )   A reconciliation of the federal statutory income tax rate and the effective income tax rate is as follows:       2022     2021                     Statutory federal tax rate - (benefit) expense     21 %     21 % State tax, net     6       -   Non-deductible permanent items     ( 15 )     ( 2 ) Change in tax rate     ( 1 )         Valuation allowance     ( 11 )     ( 6 )       - %     13 %   For the years ended December 31, 2022 and 2021, the Company recorded full valuation allowances against its domestic net deferred tax assets due to uncertainty regarding future realizability pursuant to guidance set forth in the FASB’s Accounting Standards Codification Topic No. 740, Income Taxes. In future periods, if the Company determines it will more likely than not be able to realize these amounts, the applicable portion of the benefit from the release of the valuation allowance will generally be recognized in the statements of operations in the period the determination is made. The Company does not maintain a valuation allowance on the activity in the UK from its recent acquisition of Bannerfy Ltd due to the deferred tax liability position. Components of net loss before income tax attributable to foreign entities totaled $ 1.1 million for the year ended December 31, 2022, and was not material for the year ended December 31, 2021.   At December 31, 2022, the Company had U.S. federal, state income tax, and foreign net operating loss carryforwards of approximately $ 118.3  million, $ 104.9  million and $ 985,000 , respectively, expiring through 2037. Utilization of the net operating loss carryforwards may be subject to a substantial annual limitation due to ownership change limitations that may have occurred or that could occur in the future, as required by Section 382 of the Internal Revenue Code of 1986, as amended, as well as similar state provisions. The Company has not completed a study to assess whether an ownership change has occurred or whether there have been multiple ownership changes since the Company’s formation due to the complexity and cost associated with such a study, and the fact that there may be additional such ownership changes in the future. Federal net operating loss carryforwards totaling approximately $ 94.1 million were generated in fiscal year 2018 or after, and therefore have no expiration date.   A provision enacted in the Tax Cuts and Jobs Act of 2017 related to the capitalization for tax purposes of research and experimental expenditures became effective January 1, 2022. This provision requires us to capitalize research and experimental expenditures and amortize them on the U.S. tax return over five or fifteen years, depending upon where the research is conducted. This provision did not have a material impact on our fiscal year 2022 effective tax rate on a net basis or our cash paid for taxes due to our net operating loss position.   F-34 Table of Contents     10. COMMITMENTS AND CONTINGENCIES   Operating Leases   As of December 31, 2022 we maintain approximately 3,200 square feet of office space, 1,650 square feet of which is on a month-to-month basis, and 1,550 square feet of which expires on August 1, 2023, at a combined rate of approximately $ 12,000 per month. The adoption of ASC 842, “Leases” (“ASC 842”), did not have a material impact on the Company's consolidated financial statements and related disclosures.   Rent expense for the years ended December 31, 2022 and 2021 was approximately $ 168,000 and $ 111,000 , respectively, and is included in general and administrative expense in the accompanying statements of operations. Rental payments are expensed in the statements of operations in the period to which they relate. Scheduled rent increases, if any, are amortized on a straight-line basis over the lease term.   Related Party Transactions   In May 2018, the Company entered into a consulting agreement with a member of the Board of Directors, pursuant to which the board member provides the Company with strategic advice and planning services for which he receives a cash payment of $ 7,500 per month from the Company. The consulting agreement had an initial term ending December 31, 2019, and was extended for successive one-year periods upon mutual agreement of the board member and the Company through to fiscal year 2023. Total consulting expense under the agreement totaled $ 90,000 for each of the years ended December 31, 2022 and 2021.     11. SUBSEQUENT EVENTS   The Company evaluated subsequent events for their potential impact on the consolidated financial statements and disclosures through the date the consolidated financial statements were available to be issued and determined that, except as set forth below, no subsequent events occurred that were reasonably expected to impact the consolidated financial statements presented herein.   On January 31, 2023, we entered into subscription agreements with accredited investors in connection with the sale of an aggregate of 2,299 shares of newly designated Series A-5 Convertible Preferred Stock, par value $ 0.001 per share, at a purchase price of $ 1,000 per share, raising net proceeds of $ 2,000,000 , after deducting placement agent costs of $ 299,000 . Refer to Note 7 for a description of the terms of the preferred stock issued.   F-35 Table of Contents     SIGNATURES   Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.     SUPER LEAGUE GAMING, INC.           Date: March 31, 2023 By:   /s/ Ann Hand       Ann Hand       President and Chief Executive Officer (Principal Executive Officer)       SUPER LEAGUE GAMING, INC.           Date: March 31, 2023 By:   /s/ Clayton Haynes       Clayton Haynes       Chief Financial Officer (Principal Financial and Accounting Officer)     Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.   Signature Title Date       /s/ Ann Hand Chief Executive Officer March 31, 2023 Ann Hand and Chair of the Board     (Principal Executive Officer)         /s/ Clayton Haynes Chief Financial Officer March 31, 2023 Clayton Haynes (Principal Financial and Accounting Officer)         /s/ David Steigelfest Director March 31, 2023 David Steigelfest           /s/ Jeff Gehl Director March 31, 2023 Jeff Gehl           /s/ Kristin Patrick Director March 31, 2023 Kristin Patrick           /s/ Mark Jung Director March 31, 2023 Mark Jung           /s/ Michael Keller Director March 31, 2023 Michael Keller       F-36