Investing in our common stock involves a high degree of risk.
−Removed: You should carefully consider the risks described below, as well as the other information in this Report, including our financial statements and the related notes thereto and “
−Removed: Management ’
−Removed: s Discussion and Analysis of Financial Condition and Results of Operations, ”
−Removed: before deciding whether to invest in our common stock.
+Added: You should carefully consider the risks described below, as well as the other information in this Report, including our financial statements and the related notes thereto and “ Management ’ s Discussion and Analysis of Financial Condition and Results of Operations, ” before deciding whether to invest in our common stock.
The occurrence of any of the events or developments described below could harm our business, financial condition, operating results, and growth prospects.
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security breaches and cyber threats;
−Removed: system failures, outages, and/or disruption due to certain events and interruptions by man-made problems;
+Added: system failures, outages, and/or disruption due to certain events and interruptions by human-caused problems;
our ability to hire, retain and motivate highly skilled personnel;
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Governance Risks and Risks Related to Our Common Stock
−Removed: provisions of Delaware law and our certificate of incorporation and bylaws could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us;
+Added: provisions of Delaware law and our certificate of incorporation and bylaws could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us;
low trading volume of our common stock;
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We have incurred significant losses since our inception, and we may continue to experience losses in the future.
−Removed: Including a noncash goodwill impairment charge of $50.3 million recorded during the year ended December 31, 2022, the Company incurred net losses of $85.5 million and $20.7 million during the years ended December 31, 2022 and 2021, respectively.
−Removed: Noncash expense totaled $60.6 million and $5.7 million for the years ended December 31, 2022 and 2021, respectively.
−Removed: As of December 31, 2022, we had an accumulated deficit of $210.7 million (including fiscal year 2022 noncash goodwill impairment charges of $50.3 million).
+Added: The Company incurred net losses of $30.3 million and $85.5 million during the year ended December 31, 2023 (“Fiscal Year 2023”) and the year ended December 31, 2022 (“Fiscal Year 2022”, and collectively with Fiscal Year 2023, “Fiscal Years 2023 and 2022”), respectively.
+Added: Fiscal Years 2023 and 2022 included noncash stock compensation, amortization and impairment charges totaling $17.3 million and $60.1 million, respectively.
+Added: As of December 31, 2023, we had an accumulated deficit of $249.0 million.
We cannot predict if we will achieve profitability soon or at all.
We expect to continue to expend substantial financial and other resources on, among other things:
−Removed: investments to expand and enhance our esports technology platform and technology infrastructure, make improvements to the scalability, availability and security of our platform, and develop new offerings;
+Added: investments to expand and enhance our technology platform and technology infrastructure, make improvements to the scalability, availability and security of our platform, and develop new offerings;
sales and marketing, including expanding our customer acquisition and sales organization and marketing programs, and expanding our programs directed at increasing our brand awareness among current and new customers;
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We may not generate sufficient revenue to offset such costs to achieve or sustain profitability in the future.
−Removed: We expect to continue to invest heavily in our operations, our online and in person experiences, and business development related to game publishers, advertisers, sponsors and user acquisition, to maintain as well as accelerate our market position, support anticipated future growth and to meet our expanded reporting and compliance obligations as a public company.
+Added: We expect to continue to invest heavily in our operations, our online experiences, and business development related to game platforms and publishers, advertisers, sponsors and user acquisition, to maintain as well as accelerate our market position, support anticipated future growth and to meet our expanded reporting and compliance obligations as a public company.
We intend to continue implementing our business strategy with the expectation that there will be no material adverse developments in our business, liquidity or capital requirements.
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If we fail to achieve and sustain profitability, then we may not be able to achieve our business plan, fund our business or continue as a going concern.
−Removed: Our independent registered public accountants have expressed that substantial doubt exits as to the Company’s ability to continue as a going concern.
+Added: Our auditors have included an explanatory paragraph in their opinion regarding our ability to continue as a going concern.
+Added: If we are unable to continue as a going concern, our securities will have little or no value.
+Added: WithumSmith+Brown, PC, our independent registered public accounting firm for the fiscal year ended December 31, 2023, has included an explanatory paragraph in their opinion that accompanies our audited consolidated financial statements as of and for the year ended December 31, 2023, indicating that our recurring losses from operations and negative cash flows from operations raises substantial doubt about our ability to continue as a going concern.
+Added: If we are unable to obtain profitability or improve our liquidity position, we may not be able to continue as a going concern.
+Added: We anticipate that we will continue to generate operating losses and use cash in operations through the foreseeable future.
+Added: As further set forth below, we anticipate that we will need significant additional capital, or we may be required to curtail or cease operations.
+Added: In order to continue as a going concern, we will require significant additional capital, which we may be unable to obtain.
+Added: Revenues generated from our operations are not presently sufficient to sustain our operations.
+Added: Therefore, we will need to raise additional capital in the future to continue our operations.
+Added: We anticipate that our principal sources of liquidity will not be sufficient to fund our activities to obtain long-term, sustainable profitability.
+Added: In order to have sufficient cash to fund our operations to obtain long-term, sustainable profitability, we will need to raise additional equity or debt capital.
+Added: There can be no assurance that additional funds will be available when needed from any source or, if available, will be available on terms that are acceptable to us.
+Added: We will be required to pursue sources of additional capital through various means, including debt or equity financings.
+Added: Future financings through equity investments will be dilutive to existing stockholders.
+Added: The terms of securities we may issue in future capital transactions may be more favorable for new investors.
+Added: Newly issued securities may include preferences, superior voting rights, the issuance of warrants or other derivative securities, and the issuances of incentive awards under equity employee incentive plans, all of which will have additional dilutive effects.
+Added: Further, we may incur substantial costs in pursuing future capital and/or financing, including investment banking fees, legal fees, accounting fees, printing and distribution expenses and other costs.
+Added: We may also be required to recognize non-cash expenses in connection with certain securities we may issue, such as convertible notes and warrants, which may adversely impact our financial condition.
+Added: Our ability to obtain needed financing may be impaired by such factors as the capital markets and our history of losses, which could impact the availability and cost of future financings.
+Added: If the amount of capital we are able to raise from financing activities, together with our revenues and profits from operations, is not sufficient to satisfy our capital needs, even to the extent that we reduce our operations accordingly, we may be required to curtail or cease operations.
Our business is highly competitive and subject to rapid changes.
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We compete for both users, developers, and creators.
−Removed: We compete to attract and retain our users’
−Removed: attention on the basis of our content and user experiences.
+Added: We compete to attract and retain our users’ attention on the basis of our content and user experiences.
We compete for users and their engagement hours with global technology leaders such as Amazon, Apple, Meta Platforms, Google, Microsoft, and Tencent, global entertainment companies such as Comcast, Disney, and ViacomCBS, online content platforms including Netflix, Spotify, and YouTube, as well as social platforms such as Facebook, Instagram, Pinterest, and Snap.
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Should we fail to provide compelling advantages to continued use of our ecosystem to developers, they may elect to develop content on competing interactive entertainment platforms.
−Removed: If a significant number of our developers no longer provide content, we may experience an overall reduction in the quality of our experiences, which could adversely affect users’
−Removed: interest in our platform and lead to a loss of revenue opportunities and harm our results of operations.
+Added: If a significant number of our developers no longer provide content, we may experience an overall reduction in the quality of our experiences, which could adversely affect users’ interest in our platform and lead to a loss of revenue opportunities and harm our results of operations.
Many of our existing competitors have, and some of our potential competitors could have, substantial competitive advantages, such as:
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We may not be able to sustain our rapid growth, effectively manage our anticipated future growth or implement our business strategies.
−Removed: We have a limited operating history as a gaming-focused content and entertainment platform, and have experienced substantial growth in the last 12 months due, in large part, to the acquisitions we completed during the year ended December 31, 2021.
+Added: We have a limited operating history as a leading creator and publisher of content experiences and media solutions across the world’s largest immersive platforms and have experienced substantial growth during the periods presented herein due, in large part, to the acquisitions we completed during Fiscal Year 2023 and the year ending December 31, 2021 (“Fiscal Year 2021”).
However, recent growth rates may not be indicative of our future performance due to our limited operating history and the rapid evolution of our business model.
We may not be able to achieve similar results or accelerate growth at the same rate as we have organically or following the completion of our recent acquisitions and we may not achieve our expected results, all of which may have a material and adverse impact on our financial condition and results of operations.
−Removed: In addition, our rapid growth and expansion have placed, and continue to place, significant strain on our management and resources.
+Added: In addition, our rapid growth and expansion have placed, and continue to place, significant strain on our management and resources.
This level of significant growth may not be sustainable or achievable at all in the future.
−Removed: We believe that our continued growth will depend on many factors, including our ability to develop new sources of revenues, diversify monetization methods including our direct to consumer offerings, attract and retain competitive gamers and creators, increase engagement, continue developing innovative technologies, tournaments and competitions in response to shifting demand in online gaming, increase brand awareness, and expand into new markets.
+Added: We believe that our continued growth will depend on many factors, including our ability to develop new sources of revenues, diversify monetization methods including our direct to consumer offerings, attract and retain competitive gamers and creators, increase engagement, continue developing innovative technologies, and experiences in response to shifting demand in open world gaming, increase brand awareness, and expand into new markets.
We cannot assure you that we will achieve any of the above, and our failure to do so may materially and adversely affect our business and results of operations.
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Many elements of our business are unique, evolving and relatively unproven.
−Removed: Our business and prospects depend on the continuing development of gaming-focused entertainment and content creation.
+Added: Our business and prospects depend on the continuing development of leading position as a creator and publisher of content experiences and media solutions across the world’s largest immersive platforms.
The market for gaming-related content has grown significantly in recent years and continues to rapidly develop, which may present significant challenges.
−Removed: Our business relies upon our ability to cultivate and grow a robust community of creators and audience members, and our ability to successfully monetize such community through digital subscriptions, and advertising and sponsorship opportunities.
+Added: Our business relies upon our ability to cultivate and grow a robust community of developers and creators and audience members, and our ability to successfully monetize such community through advertising and direct to consumer opportunities.
In addition, our continued growth depends, in part, on our ability to respond to rapid technological evolution, continued shifts in gamer trends and demands, frequent introductions of new games and titles and the constant emergence of new industry standards and practices.
−Removed: Developing and integrating new games, titles, content, products, services or infrastructure could be expensive and time-consuming, and these efforts may not yield the benefits we expect to achieve at all.
−Removed: We cannot assure you that we will succeed in any of these aspects or that the esports gaming industry will continue to grow as rapidly as it has in the past.
+Added: Developing and integrating into new games, titles, content, products, services or infrastructure could be expensive and time-consuming, and these efforts may not yield the benefits we expect to achieve at all.
+Added: We cannot assure you that we will succeed in any of these aspects or that the industry within which we operate will continue to grow as rapidly as it has in the past.
We generate a significant portion of our revenues from advertising and sponsorships.
If we fail to attract more advertisers and sponsors to our platform, or if advertisers or sponsors are less willing to advertise with or sponsor us, our revenues may be adversely affected.
−Removed: We generate a growing portion of our revenues from advertising within our platform and through our service offerings, sponsorship of our league tournaments, and the operation of our live streaming gaming platform, which we expect to further develop and expand in the near future as online viewership across our content platforms continues to expand.
−Removed: Our revenues from advertising and sponsorship partly depend on the continual development of the online advertising industry and advertisers’
−Removed: willingness to allocate budgets to online advertising in the gaming and content streaming industry.
+Added: We generate a growing portion of our revenues from advertising on existing digital platforms and within our owned and operated platforms, which we expect to further develop and expand in the near future as online viewership across platforms continues to expand.
+Added: Our revenues from advertising and sponsorship partly depend on the continual development of the online advertising industry and advertisers’ willingness to allocate budgets to online advertising in the gaming and content streaming industry.
In addition, companies that decide to advertise or promote online may utilize more established methods or channels, such as more established internet portals or search engines, over advertising on our platform.
If the online advertising and sponsorship market does not continue to grow, or if we are unable to capture and retain a sufficient share of that market, our ability to increase our current level of advertising and sponsorship revenue and our profitability and prospects may be materially and adversely affected.
−Removed: Furthermore, our core and long-term priority of optimizing the user experience and satisfaction may limit our platform’s ability to generate revenues from advertising and sponsorship.
−Removed: For example, in order to provide our users and creators with an uninterrupted experience, we do not place significant amounts of advertising on our streaming interface or insert pop-up advertisements during streaming.
+Added: Furthermore, our core and long-term priority of optimizing the user experience and satisfaction may limit our platform’s ability to generate revenues from advertising and sponsorship.
+Added: For example, in order to provide our users and creators with an uninterrupted experience, we do not place significant amounts of advertising on our streaming interface or insert pop-up advertisements during streaming.
While this decision could adversely affect our operating results in the short-term, we believe it enables us to provide a superior gamer experience on our platform, which will help us expand and maintain our current base of users and creators and enhance our monetization potential in the long-term.
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Our revenue model may not remain effective and we cannot guarantee that our future monetization strategies will be successfully implemented or generate sustainable revenues and profit.
−Removed: We generate revenues from advertising within our platform and through our service offerings, and through the operation of our live streaming platform using a revenue model whereby users and creators can get free access to certain live streaming content, and gamers and creators pay fees to compete in league competition.
+Added: The Company generates revenue from (i) innovative advertising including immersive game world and experience publishing and in-game media products, (ii) content and technology through the production and distribution of our own, advertiser and third-party content, and (iii) direct to consumer offers, including in-game items, e-commerce, game passes and digital collectibles.
We have generated, and expect to continue to generate, a substantial portion of revenues using this revenue model in the near term.
−Removed: We are, however, particularly focused on implementing a direct to consumer model for our expanding user base.
Although our business has experienced significant growth in recent years, there is no guarantee that our direct to consumer packages will gain significant traction to maximize our growth rate in the future, as the demand for our offerings may change, decrease substantially or dissipate, or we may fail to anticipate and serve user demands effectively.
The loss of or a substantial reduction in activity by one or more of our largest customers and/or vendors could materially and adversely affect our business, financial condition and results of operations.
−Removed: For the year ended December 31, 2022 (“Fiscal Year 2022”) and Fiscal Year 2021, one customer accounted for 8% and one customer accounted for 12% of revenue, respectively.
+Added: For Fiscal Years 2023 and 2022, one customer accounted for 14% and one customer accounted for 8% of revenue, respectively.
At December 31, 2023, three customers accounted for 55% of accounts receivable.
At December 31, 2022, three customers accounted for 33% of accounts receivable.
−Removed: At December 31, 2022, one vendor accounted for 10% of accounts payable.
−Removed: At December 31, 2021, one vendor accounted for 21% of accounts payable.
+Added: At December 31, 2023, two vendors accounted for 37% of accounts payable.
+Added: At December 31, 2022, one vendor accounted for 10% of accounts payable.
The loss of or a substantial reduction in activity by one or more of our largest customers and/or vendors could materially and adversely affect our business, financial condition and results of operations.
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Our service offerings are marketed through a diverse spectrum of advertising and promotional programs such as online and mobile advertising, marketing through websites, event sponsorship and direct communications with our user community including via email, blogs and other electronic means.
−Removed: An increasing portion of our marketing activity is taking place on social media platforms that are either outside, or not totally within, our direct control. Changes to user preferences, marketing regulations, privacy and data protection laws, technology changes or service disruptions may negatively impact our ability to reach target users and creators.
+Added: An increasing portion of our marketing activity is taking place on social media platforms that are either outside, or not totally within, our direct control.
+Added: Changes to user preferences, marketing regulations, privacy and data protection laws, technology changes or service disruptions may negatively impact our ability to reach target users and creators.
Our ability to market our service offerings is dependent in part upon the success of these programs.
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Despite our efforts, we may be unable to maintain our community culture and cease to be the preferred platform for our target users and creators as we expand our footprint, which would be detrimental to our business operations.
−Removed: The online gaming industry is very “
−Removed: We may not have access to “
−Removed: games or titles.
−Removed: Select game titles dominate competitive online gaming, and many new games titles are regularly introduced in each major industry segment (console, mobile and PC free-to-download).
−Removed: Despite the number of new entrants, only a very few “hit”
−Removed: titles account for a significant portion of total revenue in each segment.
−Removed: The size and engagement level of our users are critical to our success and are closely linked to the quality and popularity of the game publishers with which we have licenses.
+Added: The online gaming industry is very “ hit ” driven.
+Added: We may not have access to “ hit ” games or titles.
+Added: Select game titles and platforms dominate competitive online gaming and open world gaming, and many new games titles and platforms are regularly introduced in each major industry segment (console, mobile and PC free-to-download).
+Added: Despite the number of new entrants, only a very few “hit” titles or platforms account for a significant portion of total revenue in each segment.
+Added: The size and engagement level of our users are critical to our success and are closely linked to the quality and popularity of the game publishers with which we have licenses and the platforms on which we operate.
Game publishers on our platform, including those who have entered into license agreements with us, may leave us for other gaming platforms which may offer better competition, and terms and conditions than we do.
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In addition, if popular game publishers cease to license their games to us, or our live streams fail to attract gamers and creators, we may experience a decline in gamer traffic, direct to consumer opportunities and engagement, which may have a material and adverse impact on our results of operations and financial conditions.
−Removed: Although we have entered into multi-year agreements with certain publishers, if we fail to license multiple additional “hit”
−Removed: games or any of our existing licensed game publishers with which we currently have a license decide to breach the license agreement or choose not to continue with us once the term of the license agreement expires, the popularity of our tournaments, competitions and content generated across our platforms may decline and the number of our users and creators may decrease, which could materially and adversely affect our results of operations and financial condition.
−Removed: We have not entered into definitive license agreements with certain game publishers that we currently have relationships with, and we may never do so.
−Removed: We currently do not have definitive license agreements in place with game publishers for the use of certain of the game titled played on our platform, as these publishers currently permit us to integrate the specifications of the game title with our technology.
+Added: Platforms on which we operate may modify or restrict our access to their platforms.
+Added: If we fail to license multiple additional “hit” games or any of our existing licensed game publishers with which we currently have a license decide to breach the license agreement or choose not to continue with us once the term of the license agreement expires, or if platforms on which we operate modify or restrict our access, the popularity of our experiences and content generated across platforms may decline and the number of our users and creators may decrease, which could materially and adversely affect our results of operations and financial condition.
+Added: We have not entered into definitive license agreements with certain game publishers or platforms that we currently have relationships with, and we may never do so.
+Added: We currently do not have definitive license agreements in place with game publishers and platforms for the use of certain of the game titled played on our platform, as these publishers currently permit us to integrate the specifications of the game title with our technology.
We may not ever enter into license agreements with these parties in the future, instead continuing our relationship with these game publishers without a license agreement.
These game publishers may unilaterally choose to discontinue their relationship with the Company, thereby preventing us from offering experiences on our platform using their game titles, as the case may be.
−Removed: Should those game publishers choose not to allow us to offer experiences involving their respective game titles to our users, the popularity of our amateur city leagues, tournaments and competitions may decline and the number of our users and creators may decrease, which could materially and adversely affect our results of operations and financial condition.
−Removed: If we fail to keep our existing users and creators highly engaged, to acquire new users and creators, to successfully implement a direct to consumer model for our user community, our business, profitability and prospects may be adversely affected.
+Added: Should those game publishers or platforms choose not to allow us to offer experiences involving their respective game titles to our users, the popularity of our experiences and competitions may decline and the number of our users and creators may decrease, which could materially and adversely affect our results of operations and financial condition.
+Added: If we fail to keep our existing users and creators highly engaged, and/or acquire new users and creators, our business, profitability and prospects may be adversely affected.
Our success depends on our ability to maintain and grow the number of users and creators using our platform, and keeping our users and creators highly engaged.
−Removed: Of particular importance is the successful deployment and expansion of our direct to consumer model to our user community for purposes of creating predictable recurring revenues.
−Removed: In order to attract, retain and engage users and creators and remain competitive, we must continue to develop and expand our product offerings, including internationally, produce engaging tournaments and competitions, successfully license the newest “hit”
−Removed: esports games and titles, implement new technologies and strategies, improve features of our platform and stimulate interactions in our user community.
+Added: In order to attract, retain and engage users and creators and remain competitive, we must continue to develop and expand our product offerings, including internationally, implement new technologies and strategies, improve features of our platform and stimulate interactions in our user community.
A decline in the number of our users and creators in our ecosystem may adversely affect the engagement level of our users and creators, the vibrancy of our user community, or the popularity of our platform, which may in turn reduce our monetization opportunities, and have a material and adverse effect on our business, financial condition and results of operations.
−Removed: If we are unable to attract and retain, or convert users and creators into direct to consumer-based paying users and creators, our revenues may decline, and our results of operations and financial condition may suffer.
We cannot assure you that our platform will remain sufficiently popular with users and creators to offset the costs incurred to operate and expand it.
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Since we operate in a highly competitive market, brand maintenance and enhancement directly affect our ability to maintain and enhance our market position.
−Removed: Although we have developed our brand through word of mouth referrals, key strategic partners and our esports game publisher licensors, as we expand, we may conduct various marketing and brand promotion activities using various methods to continue promoting our brand.
+Added: Although we have developed our brand through word of mouth referrals, and key strategic partners, as we expand, we may conduct various marketing and brand promotion activities using various methods to continue promoting our brand.
We cannot assure you, however, that these activities will be successful or that we will be able to achieve the brand promotion effect we expect.
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Negative publicity or public complaints from users and creators may harm our reputation, and if complaints against us are not addressed to their satisfaction, our reputation and our market position could be significantly harmed, which may materially and adversely affect our business, results of operations and prospects.
−Removed: Negative perceptions about our brand, platforms, tournaments or competitions and/or business practices may damage our business and increase the costs incurred in addressing gamer concerns.
+Added: Negative perceptions about our brand, or platforms, and/or business practices may damage our business and increase the costs incurred in addressing user concerns.
Expectations regarding the quality, performance and integrity of our service offerings are high.
−Removed: Users and creators may be critical of our brand, platform, content, service offerings, tournaments or competitions and/or business practices for a wide variety of reasons.
+Added: Users and creators may be critical of our brand, platform, content, service offerings, and/or business practices for a wide variety of reasons.
These negative user reactions may not be foreseeable or within our control to manage effectively, including user reactions to content via social media or other outlets, components and services, or objections to certain of our business practices.
Negative user sentiment about our business practices also can lead to investigations from regulatory agencies and consumer groups, as well as litigation, which, regardless of their outcome, may be costly, damaging to our reputation and harm our business.
−Removed: Technology changes rapidly in our business and if we fail to anticipate or  
−Removed: successfully implement new technologies or adopt new business strategies, technologies or methods, the quality, timeliness and competitiveness of our offered services may suffer.
−Removed: Rapid technology changes require us to anticipate, sometimes years in advance, which technologies we must develop, implement and take advantage of in order to be and remain competitive in both the content-creation and delivery market, as well as the esports gaming market.
+Added: Technology changes rapidly in our business and if we fail to anticipate or successfully implement new technologies or adopt new business strategies, technologies or methods, the quality, timeliness and competitiveness of our offered services may suffer.
+Added: Rapid technology changes require us to anticipate, sometimes years in advance, which technologies we must develop, implement and take advantage of in order to be and remain competitive in both the content-creation and delivery market, social media markets, and the metaverse gaming market.
We have invested, and in the future may invest, in new business strategies including within metaverse gaming, a direct to consumer model, technologies, products, or games or first-tier game titles to continue to persistently engage the user and deliver the best user experience.
+Added: For example, if we are unable to react quickly to new technology trends—for example the continued growth of generative Artificial Intelligence (“AI”) solutions which disrupts the ways developers create experiences or may disrupt the way users consume virtual goods—it may harm our business and results of operation.
+Added: Further, social and ethical issues relating to the use of new and evolving technologies such as AI in our offerings, may result in reputational harm and liability, and may cause us to incur additional research and development costs to resolve such issues.
+Added: AI presents emerging ethical issues and if we enable or offer solutions that draw controversy due to their perceived or actual impact on society, we may experience brand or reputational harm, competitive harm, or legal liability.
+Added: Failure to address AI ethics issues by us or others in our industry could undermine public confidence in AI.
Such endeavors may involve significant risks and uncertainties, and no assurance can be given that the technology we choose to adopt and the features that we pursue will be successful.
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We continually face cyber risks and threats that seek to damage, disrupt or gain access to our networks and our platform, supporting infrastructure, intellectual property and other assets.
−Removed: In addition, we rely on technological infrastructure, including third party cloud hosting and broadband, provided by third party business partners to support the in person and online functionality of our platform.
−Removed: These business partners are also subject to cyber risks and threats. Such cyber risks and threats may be difficult to detect. Both our partners and we have implemented certain systems and processes to guard against cyber risks and to help protect our data and systems.
+Added: In addition, we rely on technological infrastructure, including third party cloud hosting and broadband, provided by third party business partners to support the in person and online functionality of our platform.
+Added: These business partners are also subject to cyber risks and threats.
+Added: Such cyber risks and threats may be difficult to detect.
+Added: Both our partners and we have implemented certain systems and processes to guard against cyber risks and to help protect our data and systems.
However, the techniques that may be used to obtain unauthorized access or disable, degrade, exploit or sabotage our networks and platform change frequently and often are not detected.
Our systems and processes, and the systems and processes of our third-party business partners, may not be adequate.
−Removed: Any failure to prevent or mitigate security breaches or cyber risks, or respond adequately to a security breach or cyber risk, could result in interruptions to our platform, degrade the user experience, cause users and creators to lose confidence in our gaming platform and cease utilizing it, as well as significant legal and financial exposure. This could harm our business and reputation, disrupt our relationships with partners and diminish our competitive position.
+Added: Any failure to prevent or mitigate security breaches or cyber risks, or respond adequately to a security breach or cyber risk, could result in interruptions to our platform, degrade the user experience, cause users and creators to lose confidence in our gaming platform and cease utilizing it, as well as significant legal and financial exposure.
+Added: This could harm our business and reputation, disrupt our relationships with partners and diminish our competitive position.
Successful exploitation of our networks and platform can have other negative effects upon the user experience we offer.
−Removed: In particular, the virtual economies that exist in certain of our licensed game publishers’
−Removed: games and developers’
−Removed: outside platforms, such as Roblox, are subject to abuse, exploitation and other forms of fraudulent activity that can negatively impact our business. Virtual economies involve the use of virtual currency and/or virtual assets that can be used or redeemed by a user within a particular online game or service.
+Added: In particular, the virtual economies that exist in certain of our licensed game publishers’ games and developers’ outside platforms, such as Roblox, are subject to abuse, exploitation and other forms of fraudulent activity that can negatively impact our business.
+Added: Virtual economies involve the use of virtual currency and/or virtual assets that can be used or redeemed by a user within a particular online game or service.
Our business could be adversely affected if our data privacy and security practices are not adequate, or perceived as being inadequate, to prevent data breaches, or by the application of data privacy and security laws generally.
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A data security breach of one of our vendors or business partners could cause reputational harm to them and/or negatively impact our ability to maintain the credibility of our user community.
−Removed: Data privacy, data protection, localization, security and consumer-protection laws are evolving, and the interpretation and application of these laws in the United States, Europe (including compliance with the General Data Protection Regulation), and elsewhere often are uncertain, contradictory and changing.
+Added: Data privacy, data protection, localization, security and consumer-protection laws are evolving, and the interpretation and application of these laws in the United States, Europe (including compliance with the European Union’s General Data Protection Regulation (“GDPA”), and elsewhere often are uncertain, contradictory and changing.
It is possible that these laws may be interpreted or applied in a manner that is averse to us or otherwise inconsistent with our practices, which could result in litigation, regulatory investigations and potential legal liability or require us to change our practices in a manner adverse to our business.
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Our advertising revenue is dependent on targeting and measurement tools that incorporate these signals, and any changes in our ability to use such signals will adversely affect our business.
−Removed: For example, legislative and regulatory developments, such as the European Union's General Data Protection Regulation (“GDPR”), and the California Consumer Privacy Act (“CCPA”), have impacted, and we expect will continue to impact, our ability to use such signals in our ad products.
+Added: For example, legislative and regulatory developments, such as the GDPR, and the California Consumer Privacy Act (“CCPA”), have impacted, and we expect will continue to impact, our ability to use such signals in our ad products.
In particular, we may see an increasing number of users opt to control certain types of ad targeting, which may increase further with expanded control over certain third-party data as part of our compliance with these laws and regulations, and we may have to introduce product changes that limit data signal use for certain users in California following adoption of the CCPA.
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Such failures, delays and other problems could harm our reputation and business, cause us to lose customers and expose us to customer liability.
−Removed: We may experience system failures, outages and/or disruptions of our infrastructure, including information technology system failures and network disruptions, cloud hosting and broadband availability at in person and online experiences.
+Added: We may experience system failures, outages and/or disruptions of our infrastructure, including information technology system failures, network disruptions, and cloud hosting and broadband disruptions.
Our operations could be interrupted or degraded by any damage to or failure of:
−Removed: our computer software or hardware, or our customers’ or suppliers’ computer software or hardware;
−Removed: our network, our customers’ networks or our suppliers’ networks;
+Added: our computer software or hardware, or our customers’ or suppliers’ computer software or hardware;
+Added: our network, our customers’ networks or our suppliers’ networks;
our connections and outsourced service arrangements with third parties.
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From time to time in the ordinary course of our business, our network nodes and other systems experience temporary outages.
−Removed: As a means of ensuring continuity in the services we provide to our community and partners, we have invested in system redundancies via partnerships with industry leading cloud service providers, proactive alarm monitoring and other back-up infrastructure, though we cannot assure you that we will be able to re-route our services over our back-up facilities and provide continuous service to customers in all circumstances without material degradation.
+Added: As a means of ensuring continuity in the services we provide to our community and partners, we have invested in system redundancies via partnerships with industry leading cloud service providers, proactive alarm monitoring and other back-up infrastructure, though we cannot assure you that we will be able to re-route our services over our back-up facilities and provide continuous service to customers in all circumstances without material degradation.
Because many of our services play a critical role for our community and partners, any damage to or failure of the infrastructure we rely on could disrupt or degrade the operation of our network, our platform and the provision of our services and result in the loss of current and potential community members and/or partners and harm our ability to conduct normal business operations.
9 unchanged sentences
We have made, and are continuing to make, investments to enable our developers to design and build compelling content and deliver it to our users on our platform.
−Removed: Existing and prospective developers may not be successful in creating content that leads to and maintains user engagement (including maintaining the quality of experiences) or they may fail to expand the types of experiences that our developers can build for users, and other global entertainment companies, online content platforms, and social platforms may entice our users and potential users away from, or to spend less time with, our platform, each of which could adversely affect users’
−Removed: interest in our platform and lead to a loss of revenue opportunities and harm our results of operations.
+Added: Existing and prospective developers may not be successful in creating content that leads to and maintains user engagement (including maintaining the quality of experiences) or they may fail to expand the types of experiences that our developers can build for users, and other global entertainment companies, online content platforms, and social platforms may entice our users and potential users away from, or to spend less time with, our platform, each of which could adversely affect users’ interest in our platform and lead to a loss of revenue opportunities and harm our results of operations.
Additionally, we may not succeed in further monetizing our platform and user base.
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While we intend for these efforts to generate increased recurring revenues from our existing user base, they may cause users to decrease their overall spend on our platform.
−Removed: Our ability to continue to attract and retain users of our paid subscription services will depend in part on our ability to consistently provide our subscribers with a quality experience.
+Added: Our ability to continue to attract and retain users of our paid subscription services will depend in part on our ability to consistently provide our subscribers with a quality experience.
If our users do not perceive these offerings to be of value, or if we introduce new or adjust existing features or pricing in a manner that is not favorably received by them, we may not be able to attract and retain subscribers or be able to convince users to become subscribers of such additional service offerings, and we may not be able to increase the amount of recurring revenue from our user base.
−Removed: Subscribers may cancel their subscription to our service for many reasons, including a perception that they do not use the service sufficiently, the need to reduce household expenses, competitive services that provide a better value or experience or as a result of changes in pricing.
+Added: Subscribers may cancel their subscription to our service for many reasons, including a perception that they do not use the service sufficiently, the need to reduce household expenses, competitive services that provide a better value or experience or as a result of changes in pricing.
If our efforts to attract and retain subscribers are not successful, our business, operating results, and financial condition may be adversely impacted.
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Our strong and growing product-market fit currently reaches over 100 million monthly unique players in Roblox, Minecraft and Fortnite and generates over one billion monthly impressions.
−Removed: We view our KPIs as a critical measure of our user engagement, and adding, maintaining, and engaging users has been and will continue to be necessary to our continued growth.
+Added: We view our key performance Indicators (“KPIs”) as a critical measure of our user engagement, and adding, maintaining, and engaging users has been and will continue to be necessary to our continued growth.
Our KPI growth rate has fluctuated in the past and may slow in the future due to various factors.
−Removed: As COVID-19 related shelter-in-place orders are lifted and children return to school, we have seen growth rates moderate in certain markets.
+Added: As COVID-19 related shelter-in-place orders lifted and children returned to school, we saw growth rates moderate in certain markets.
Other factors including:
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While these metrics are based on what we believe to be reasonable estimates of our user base for the applicable period of measurement, there are inherent challenges in measuring how our service offerings are used and as a result, the metrics may overstate the number of monthly unique players and monthly impressions.
−Removed: For example, there may be users who have multiple accounts, fake user accounts, or fraudulent accounts created by bots to inflate user activity for a particular developer or creator, thus making the developer or creator’s experience or other content appear more popular than it really is.
+Added: For example, there may be users who have multiple accounts, fake user accounts, or fraudulent accounts created by bots to inflate user activity for a particular developer or creator, thus making the developer or creator’s experience or other content appear more popular than it really is.
We strive to detect and minimize fraud and unauthorized access to our service offerings, and these practices are prohibited in our terms of service and we implement measures to detect and suppress that behavior.
Some of our demographic data may be incomplete or inaccurate.
−Removed: For example, because users self-report their dates of birth, our age demographic data may differ from our users’
+Added: For example, because users self-report their dates of birth, our age demographic data may differ from our users’ actual ages.
If our users provide us with incorrect or incomplete information regarding their age or other attributes, then our estimates may prove inaccurate.
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If any of our executive officers and key employees terminates their services with us, our business may be severely disrupted, our financial condition and results of operations may be materially and adversely affected and we may incur additional expenses to recruit, train and retain qualified personnel.
−Removed: If any of our executive officers or key employees joins a competitor or forms a competing company, we may lose users and creators, know-how and key professionals and staff members.
+Added: If any of our executive officers or key employees joins a competitor or forms a competing company, we may lose users and creators, know-how and key professionals and staff members.
Certain of our executive officers and key employees have entered into a non-solicitation and non-competition agreements with us.
−Removed: However, certain provisions under the non-solicitation and non-competition agreement may be deemed legally invalid or unenforceable.
−Removed: If any dispute arises between our executive officers and us, we cannot assure you that we would be able to enforce these non-compete agreements.
−Removed: We plan to continue to make acquisitions and pursue other strategic transactions, which could impact our financial condition or results of operations and may adversely affect the price of our common stock.
+Added: However, certain provisions under the non-solicitation and non-competition agreement may be deemed legally invalid or unenforceable.
+Added: If any dispute arises between our executive officers and us, we cannot assure you that we would be able to enforce these non-compete agreements.
+Added: Our business is affected by seasonal demands, and our financial condition and results of operations will fluctuate from quarter to quarter, which makes our financial results difficult to predict and may not fully reflect our underlying performance.
+Added: Historically, our business has been highly seasonal, with the highest percentage of our revenues occurring in the second half of the fiscal year, with the fourth quarter typically representing our highest revenue quarter each year, when advertising spending is typically strongest due to the holiday seasons, and we expect this trend to continue.
+Added: For example, our revenue for the quarters ending September 30, 2023 and December 31, 2023 represented approximately 29% and 38% of our bookings for Fiscal Year 2023, respectively.
+Added: We may also experience fluctuations due to factors that may be outside of our control that affect user, developer, or creator engagement with our Platform.
+Added: Accordingly, our quarterly results of operations have fluctuated in the past and will fluctuate in the future, both based on the seasonality of our business as well as external factors impacting the global economy, our industry and our company, including, but not limited to our ability to maintain and grow our customer base, customer engagement, developer base and developer engagement;
+Added: the level of demand for our service offerings;
+Added: the ability of our developers to monetize their experiences;
+Added: increased competition;
+Added: our pricing model;
+Added: the maturation of our business;
+Added: our ability to introduce new revenue streams;
+Added: legislative or regulatory changes;
+Added: macroeconomic conditions, such as high inflation, recessionary or uncertain environments, and fluctuating foreign currency exchange rates;
+Added: our ability to maintain operating margins, cash used in operating activities, and free cash flow;
+Added: system failures or actual or perceived breaches or other incidents relating to privacy or cybersecurity;
+Added: adverse litigation judgments, settlements, or other litigation and dispute-related costs;
+Added: adverse media coverage or unfavorable publicity;
+Added: the effectiveness of our internal control over financial reporting;
+Added: changes in our effective tax rate;
+Added: and changes in accounting standards, policies, guidance, interpretations, or principles.
+Added: As a result, you should not rely on our past quarterly results of operations as indicators of future performance.
+Added: You should take into account the risks and uncertainties frequently encountered by companies in rapidly evolving market segments.
+Added: We plan to continue to make acquisitions and pursue other strategic transactions, which could require significant management attention, disrupt our business, dilute our stockholders, impact our financial condition or results of operations, significantly harm our business, and adversely affect the price of our common stock.
As part of our business strategy, we have made and intend to continue to make acquisitions to add specialized employees and complementary companies, products, or technologies, and from time to time may enter into other strategic transactions such as investments and joint ventures.
We may not be able to find suitable acquisition candidates, and we may not be able to complete acquisitions or other strategic transactions on favorable terms, or at all, including as a result of regulatory challenges.
+Added: The pursuit of potential acquisitions may divert the attention of management and cause us to incur significant expenses related to identifying, investigating, and pursuing suitable acquisitions, whether or not they are consummated.
In some cases, the costs of such acquisitions or other strategic transactions may be substantial, and there is no assurance that we will realize expected synergies from future growth and potential monetization opportunities for our acquisitions or a favorable return on investment for our strategic investments.
+Added: Furthermore, our acquisition strategy may not succeed if we are unable to remain attractive to target companies or expeditiously close transactions.
+Added: If we develop a reputation for being a difficult acquirer or having an unfavorable work environment, or if target companies view our common stock unfavorably, we may be unable to consummate key acquisition transactions essential to our corporate strategy and our business may be significantly harmed.
We may pay substantial amounts of cash or incur debt to pay for acquisitions or other strategic transactions, which has occurred in the past and could adversely affect our liquidity.
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The effectiveness of our due diligence review and our ability to evaluate the results of such due diligence are dependent upon the accuracy and completeness of statements and disclosures made or actions taken by the companies we acquire or their representatives, as well as the limited amount of time in which acquisitions are executed.
−Removed: In addition, we may fail to accurately forecast the financial impact of an acquisition or other strategic transaction, including tax and accounting charges.
+Added: In addition, we may not successfully evaluate or use the acquired products, technology, and personnel, or accurately forecast the financial impact of an acquisition or other strategic transaction, including tax and accounting charges which could be recognized as a current period expense.
+Added: Furthermore, it generally takes several months after the closing of an acquisition to finalize the purchase price allocation.
+Added: Therefore, it is possible that our valuation of an acquisition may change and result in unanticipated write-offs or charges, impairment of our goodwill, or a material change to the fair value of the assets and liabilities associated with a particular acquisition, any of which would affect our balance sheet and could significantly harm our business.
Acquisitions or other strategic transactions may also result in our recording of significant additional expenses to our results of operations and recording of substantial finite-lived intangible assets on our balance sheet upon closing.
Any of these factors may adversely affect our financial condition or results of operations.
−Removed: We may not be able to successfully integrate our acquisitions, including the 2021 Acquisitions, and we incur significant costs to integrate and support the companies we acquire.
−Removed: The integration of acquisitions, including the 2021 Acquisitions, requires significant time and resources, particularly with respect to companies that have significant operations or that develop products where we do not have prior experience, and we may not manage these processes successfully.
−Removed: We continue to make substantial investments of resources to support our acquisitions, including the 2021 Acquisitions, which has in the past resulted, and we expect will in the future result, in significant ongoing operating expense and the diversion of resources and management attention from other areas of our business.
+Added: We may experience difficulties in integrating the operations of Melon into our business and in realizing the expected benefits of the Melon Acquisition.
+Added: The success of the Melon Acquisition will depend in part on our ability to realize the anticipated business opportunities from combining the operations of the Melon Assets with our business in an efficient and effective manner.
+Added: The integration process could take longer than anticipated and could result in the loss of key employees, the disruption of each company’s ongoing businesses, tax costs or inefficiencies, or inconsistencies in standards, controls, information technology systems, procedures and policies, any of which could adversely affect our ability to maintain relationships with customers, employees or other third parties, or our ability to achieve the anticipated benefits of the Melon Acquisition, and could harm our financial performance.
+Added: If we are unable to successfully or timely integrate the operations of the Melon Assets with our business, we may incur unanticipated liabilities and be unable to realize the revenue growth, synergies and other anticipated benefits resulting from the Melon Acquisition, and our business, results of operations and financial condition could be materially and adversely affected.
+Added: The Melon Acquisition will present challenges associated with integrating operations, personnel, and other aspects of the companies and the potential assumption of liabilities that may exist and which may be known or unknown by the Company.
+Added: The results of the Company following the Melon Acquisition will depend in part upon the Company’s ability to integrate Melon’s business with the Company’s business in an efficient and effective manner.
+Added: The Company’s attempt to integrate Melon’s assets into the Company, two companies that have previously operated independently, may result in significant challenges, and the Company may be unable to accomplish the integration smoothly or successfully.
+Added: In particular, the necessity of coordinating geographically dispersed organizations and addressing possible differences in corporate cultures and management philosophies may increase the difficulties of integration.
+Added: The integration may require the dedication of significant management resources, which may temporarily distract management’s attention from the day-to-day operations of the businesses of the Company.
+Added: In addition, the Company may adjust the way in which Melon or the Company has conducted its operations and utilized its assets, which may require retraining and development of new procedures and methodologies.
+Added: The process of integrating operations and making such adjustments after the Melon Acquisition could cause an interruption of, or loss of momentum in, the activities of one or more of Company’s or Melon’s businesses and the loss of key personnel.
+Added: Employee uncertainty, lack of focus, or turnover during the integration process may also disrupt the business of the Company.
+Added: Any inability of management to integrate the operations of the Company and Melon successfully could have a material adverse effect on the business and financial condition of the combined company.
+Added: In addition, the Melon Acquisition will subject the Company to contractual or other obligations and liabilities associated with the Melon Assets, some of which may be unknown.
+Added: Although the Company and its legal and financial advisors have conducted due diligence on Melon and its business, there can be no assurance that the Company is aware of all obligations and liabilities of Melon related to the Melon Assets.
+Added: These liabilities, and any additional risks and uncertainties related to Melon’s business and to the Melon Acquisition not currently known to the Company or that the Company may currently be aware of, but that prove to be more significant than assessed or estimated by the Company, could negatively impact the business, financial condition, and results of operations of the combined company following consummation of the Melon Acquisition.
+Added: We may not be able to successfully integrate our acquisitions and we may incur significant costs to integrate and support the companies we acquire.
+Added: The integration of companies or assets we acquire requires significant time and resources, particularly with respect to companies that have significant operations or that develop products where we do not have prior experience, and we may not manage these processes successfully.
+Added: We continue to make substantial investments of resources to support our acquisitions, which has in the past resulted, and we expect will in the future result, in significant ongoing operating expense and the diversion of resources and management attention from other areas of our business.
We cannot assure you that these investments will be successful.
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The integration of any businesses is a complex, costly and time-consuming process.
−Removed: As a result, we have devoted, and will continue to devote, significant management attention and resources to integrating acquired businesses, including those acquired in the 2021 Acquisitions.
+Added: As a result, we have devoted, and will continue to devote, significant management attention and resources to integrating acquired businesses.
The failure to meet the challenges involved in integrating businesses and to realize the anticipated benefits of any acquisition could cause an interruption of, or a loss of momentum in, the activities of our combined business and could adversely affect our results of operations.
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Many of these factors are outside of our control, and any one of them could result in increased costs, decreased expected revenues and diversion of management time and energy, all of which could adversely impact our business and results of operations.
−Removed: These difficulties have been enhanced further during the COVID-19 pandemic as a result of our office closures and work-from home policies, which may hinder assimilation of key personnel.
+Added: These difficulties have been enhanced further as a result of our office closures and work-from home policies, which may hinder the assimilation of key personnel.
If we are not able to successfully integrate an acquisition, if we incur significantly greater costs to achieve the expected synergies than we anticipate or if activities related to the expected synergies have unintended consequences, our business, financial condition or results of operations could be adversely affected.
The preparation of our financial statements involves the use of good faith estimates, judgments and assumptions, and our financial statements may be materially affected if such good faith estimates, judgments or good faith assumptions prove to be inaccurate .
−Removed: Financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) typically require the use of good faith estimates, judgments and assumptions that affect the reported amounts.
+Added: Financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) typically require the use of good faith estimates, judgments and assumptions that affect the reported amounts.
Often, different estimates, judgments and assumptions could reasonably be used that would have a material effect on such consolidated financial statements, and changes in these estimates, judgments and assumptions may occur from period to period over time.
−Removed: Significant areas of accounting requiring the application of management’s judgment include, but are not limited to, determining the fair value of assets, share-based compensation and the timing and amount of cash flows from assets.
+Added: Significant areas of accounting requiring the application of management’s judgment include, but are not limited to, determining the fair value of assets, share-based compensation and the timing and amount of cash flows from assets.
These estimates, judgments and assumptions are inherently uncertain and, if our estimates were to prove to be wrong, we would face the risk that charges to income or other financial statement changes or adjustments would be required.
Any such charges or changes would require a restatement of our consolidated financial statements and could harm our business, including our financial condition and results of operations and the price of our securities.
−Removed: See “Management’s Discussion and Analysis of Financial Condition and Results of Operations”
−Removed: for a discussion of the accounting estimates, judgments and assumptions that we believe are the most critical to an understanding of our consolidated financial statements and our business.
+Added: See “Management’s Discussion and Analysis of Financial Condition and Results of Operations” for a discussion of the accounting estimates, judgments and assumptions that we believe are the most critical to an understanding of our consolidated financial statements and our business.
We are currently dependent on certain game publishers and online game platforms for a substantial portion of our revenue.
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Additional revenue is generated through our owned and operated properties, along with properties we operate on behalf of others.
−Removed: In the event such game publishers or online game platforms change their current terms and conditions in a manner that limits our ability to deploy advertising campaigns or otherwise engage in direct-to-consumer offers through our partner’s metaverse gaming platforms, or our owned and operated properties, our business, growth prospects and financial condition could be adversely affected.
+Added: In the event such game publishers or online game platforms change their current terms and conditions in a manner that limits our ability to deploy advertising campaigns or otherwise engage in direct-to-consumer offers through our partner’s metaverse gaming platforms, or our owned and operated properties, our business, growth prospects and financial condition could be adversely affected.
Regulatory and Legal Risk Factors
9 unchanged sentences
New income, sales, use or other tax laws, statutes, rules, regulations or ordinances could be enacted at any time, which could affect the tax treatment of our earnings and adversely affect our operations, and our business and financial performance.
−Removed: Further, existing tax laws, statutes, rules, regulations or ordinances could be interpreted, changed, modified or applied adversely to us.
−Removed: For example, on December 22, 2017, tax legislation was signed into law that contained many significant changes to the U.S.
−Removed: tax laws. The new legislation reduced the corporate income tax rate from 34% to 21% effective January 1, 2018, resulting in our deferred income tax assets and liabilities, including NOLs, to be measured using the new rate as reflected in the valuation of these assets as of December 31, 2017.
+Added: Further, existing tax laws, statutes, rules, regulations or ordinances could be interpreted, changed, modified or applied adversely to us.
+Added: For example, on December 22, 2017, tax legislation was signed into law that contained many significant changes to the U.S.
+Added: The new legislation reduced the corporate income tax rate from 34% to 21% effective January 1, 2018, resulting in our deferred income tax assets and liabilities, including NOLs, to be measured using the new rate as reflected in the valuation of these assets as of December 31, 2017.
As a result, the value of our deferred tax assets decreased by approximately $4.3 million, and the related valuation allowance has been reduced by the same amount.
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No estimated tax provision has been recorded in the consolidated financial statements included herein for tax attributes that are incomplete or subject to change.
−Removed: The foregoing items could have a material adverse effect on our business, cash flow, financial condition or results of operations. In addition, it is unclear how these U.S.
−Removed: federal income tax changes will affect state and local taxation, which often uses federal taxable income as a starting point for computing state and local tax liabilities. The impact of this tax legislation on holders of our common stock is also uncertain and could be adverse.
+Added: The foregoing items could have a material adverse effect on our business, cash flow, financial condition or results of operations.
+Added: In addition, it is unclear how these U.S.
+Added: federal income tax changes will affect state and local taxation, which often uses federal taxable income as a starting point for computing state and local tax liabilities.
+Added: The impact of this tax legislation on holders of our common stock is also uncertain and could be adverse.
We urge our stockholders and investors to consult with our legal and tax advisors with respect to this legislation and the potential tax consequences of investing in or holding our common stock.
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In addition to our platform, we use third-party applications, websites, and social media platforms to promote our service offerings and engage users, as well as monitor and collect certain information about users in our online forums.
−Removed: A variety of laws and regulations have been adopted in recent years aimed at protecting children using the internet such as the Children’s Online Privacy and Protection Act of 1998 (“COPPA”).
+Added: A variety of laws and regulations have been adopted in recent years aimed at protecting children using the internet such as the Children’s Online Privacy and Protection Act of 1998 (“COPPA”).
COPPA sets forth, among other things, a number of restrictions on what website operators can present to children under the age of 13 and what information can be collected from them.
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In particular, the European Union and its member states traditionally have taken broader views as to types of data that are subject to privacy and data protection laws and regulations and have imposed greater legal obligations on companies in this regard.
−Removed: For example, in April 2016, European legislative bodies adopted the General Data Protection Regulation (“GDPR”), which became effective on May 25, 2018.
−Removed: The GDPR applies to any company established in the European Union as well as to those outside of the European Union if they collect and use personal data in connection with the offering of goods or services to individuals in the European Union or the monitoring of their behavior.
−Removed: The GDPR enhances data protection obligations for processors and controllers of personal data, including, for example, expanded disclosures about how personal information is to be used, limitations on retention of information, mandatory data breach notification requirements and onerous new obligations on service providers. Non-compliance with the GDPR may result in monetary penalties of up to €20 million or 4% of annual worldwide revenue, whichever is higher.
+Added: For example, in April 2016, European legislative bodies adopted the GDPR, which became effective on May 25, 2018.
+Added: The GDPR applies to any company established in the European Union as well as to those outside of the European Union if they collect and use personal data in connection with the offering of goods or services to individuals in the European Union or the monitoring of their behavior.
+Added: The GDPR enhances data protection obligations for processors and controllers of personal data, including, for example, expanded disclosures about how personal information is to be used, limitations on retention of information, mandatory data breach notification requirements and onerous new obligations on service providers.
+Added: Non-compliance with the GDPR may result in monetary penalties of up to €20 million or 4% of annual worldwide revenue, whichever is higher.
In addition, some countries are considering or have passed legislation implementing data protection requirements or requiring local storage and processing of data or similar requirements that could increase the cost and complexity of delivering our services.
−Removed: The GDPR and other changes in laws or regulations associated with the enhanced protection of certain types of personal data could greatly increase our cost of providing our products and services or even prevent us from offering certain services in jurisdictions in which we operate.
−Removed: The European Commission is also currently negotiating a new ePrivacy Regulation that would address various matters, including provisions specifically aimed at the use of cookies to identify an individual’s online behavior, and any such ePrivacy Regulation may provide for new compliance obligations and significant penalties.
+Added: The GDPR and other changes in laws or regulations associated with the enhanced protection of certain types of personal data could greatly increase our cost of providing our products and services or even prevent us from offering certain services in jurisdictions in which we operate.
+Added: The European Commission is also currently negotiating a new ePrivacy Regulation that would address various matters, including provisions specifically aimed at the use of cookies to identify an individual’s online behavior, and any such ePrivacy Regulation may provide for new compliance obligations and significant penalties.
Any of these changes to European Union data protection law or its interpretation could disrupt and/or harm our business.
−Removed: On June 23, 2016, the United Kingdom (“U.K.”) held a referendum in which voters approved an exit from the European Union, commonly referred to as “Brexit.”
−Removed: This decision created an uncertain political and economic environment, especially in regard to regulation of data protection, in the U.K.
+Added: On June 23, 2016, the United Kingdom (“U.K.”) held a referendum in which voters approved an exit from the European Union, commonly referred to as “Brexit.” This decision created an uncertain political and economic environment, especially in regard to regulation of data protection, in the U.K.
and other European Union countries, and the formal process for leaving the European Union has taken years to complete.
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In particular, while the U.K.
−Removed: has implemented legislation that implements and complements the GDPR, with penalties of noncompliance of up to the greater of £17.5 million or four percent of worldwide revenues, it is unclear how data transfers to and from the United Kingdom will be regulated.
+Added: has implemented legislation that implements and complements the GDPR, with penalties of noncompliance of up to the greater of £17.5 million or four percent of worldwide revenues, it is unclear how data transfers to and from the United Kingdom will be regulated.
The interpretation and application of many privacy and data protection laws are, and will likely remain, uncertain, and it is possible that these laws may be interpreted and applied in a manner that is inconsistent with our existing data management practices or product features.
−Removed: Although player interaction on our platform is subject to our privacy policies, end user license agreements (“EULAs”), and terms of service, if we fail to comply with our posted privacy policies, EULAs, or terms of service, or if we fail to comply with existing privacy-related or data protection laws and regulations, it could result in proceedings or litigation against us by governmental authorities or others, which could result in fines or judgments against us, damage our reputation, impact our financial condition and/or harm our business.
+Added: Although player interaction on our platform is subject to our privacy policies, end user license agreements (“EULAs”), and terms of service, if we fail to comply with our posted privacy policies, EULAs, or terms of service, or if we fail to comply with existing privacy-related or data protection laws and regulations, it could result in proceedings or litigation against us by governmental authorities or others, which could result in fines or judgments against us, damage our reputation, impact our financial condition and/or harm our business.
In addition to government regulation, privacy advocacy and industry groups may propose new and different self-regulatory standards that either legally or contractually apply to us.
1 unchanged sentence
Further, our failure, and/or the failure by the various third-party service providers and partners with which we do business, to comply with applicable privacy policies or federal, state or similar international laws and regulations or any other obligations relating to privacy, data protection or information security, or any compromise of security that results in the unauthorized release of personally identifiable information or other user data, or the perception that any such failure or compromise has occurred, could damage our reputation, result in a loss of creators or attendees, discourage potential creators and attendees from trying our platform and/or result in fines and/or proceedings by governmental agencies and/or users, any of which could have an adverse effect on our business, results of operations and financial condition.
−Removed: In addition, given the breadth and depth of changes in data protection obligations, ongoing compliance with evolving interpretation of the GDPR and other regulatory requirements requires time and resources and a review of the technology and systems currently in use against the requirements of GDPR and other regulations. 
+Added: In addition, given the breadth and depth of changes in data protection obligations, ongoing compliance with evolving interpretation of the GDPR and other regulatory requirements requires time and resources and a review of the technology and systems currently in use against the requirements of GDPR and other regulations.
We may be held liable for information or content displayed on, retrieved from or linked to our platform, or distributed to our users.
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Although we require our users and creators to register their real name, we do not require user identifications used and displayed while using the platform to contain any real-name information, and hence we are unable to verify the sources of all the information posted by our users and creators.
−Removed: In addition, because a majority of the communications on our online and in person platform is conducted in real time, we are unable to examine the content generated by users and creators before they are posted or streamed.
+Added: In addition, because a majority of the communications on our online and in person platform is conducted in real time, we are unable to examine the content generated by users and creators before they are posted or streamed.
Therefore, it is possible that users and creators may engage in illegal, obscene or incendiary conversations or activities, including publishing of inappropriate or illegal content that may be deemed unlawful.
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The Internet industry is increasingly subject to strict scrutiny.
−Removed: New laws and regulations may be adopted from time to time to address new issues that come to the authorities’
+Added: New laws and regulations may be adopted from time to time to address new issues that come to the authorities’ attention.
We may not timely obtain or maintain all the required licenses or approvals or make all the necessary filings in the future.
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From time to time we may become involved in legal proceedings.
−Removed: From time to time we may become subject to legal proceedings, claims, litigation and government investigations or inquiries, which could be expensive, lengthy, disruptive to normal business operations and occupy a significant amount of our employees’
−Removed: time and attention.
+Added: From time to time we may become subject to legal proceedings, claims, litigation and government investigations or inquiries, which could be expensive, lengthy, disruptive to normal business operations and occupy a significant amount of our employees’ time and attention.
In addition, the outcome of any legal proceedings, claims, litigation, investigations or inquiries may be difficult to predict and could have a material adverse effect on our business, operating results, or financial condition.
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Third parties may register trademarks or domain names or purchase internet search engine keywords that are similar to our registered trademark or pending trademarks, brands or websites, or misappropriate our data and copy our platform, all of which could cause confusion, divert users and creators away from our platform and service offerings, or harm our reputation.
−Removed: Competitors and other third parties may purchase (i) trademarks that are similar to our trademarks and (ii) keywords that are confusingly similar to our brands or websites in Internet search engine advertising programs and in the header and text of the resulting sponsored links or advertisements in order to divert users and creators from us to their websites.
+Added: Competitors and other third parties may purchase (i) trademarks that are similar to our trademarks and (ii) keywords that are confusingly similar to our brands or websites in Internet search engine advertising programs and in the header and text of the resulting sponsored links or advertisements in order to divert users and creators from us to their websites.
Preventing such unauthorized use is inherently difficult.
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In particular, we may not be able to prevent others from developing or exploiting competing technologies and trademarks, which could have a material and adverse effect on our business operations, financial condition and results of operations.
−Removed: Currently, we have one patent application pending, 187 registered trademarks and eighteen pending trademark applications, along with licenses from game publishers to utilize their proprietary games.
+Added: Currently, we have one patent application pending, and 187 registered trademarks, along with certain licenses from game publishers to utilize their proprietary games.
For our pending patent application, we cannot assure you that we will be granted patents pursuant to our pending applications as well as future patent applications we intend to file.
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If we fail to maintain compliance with any of those requirements, our common shares could be delisted from Nasdaq.
−Removed: On October 4, 2022, we received a letter (the “Notice”) from the Listing Qualifications Staff of Nasdaq, indicating that, based upon the closing bid price of our common stock for the prior 30 consecutive business days, we are currently not in compliance with the requirement to maintain a minimum bid price of $1.00 per share for continued listing on the Nasdaq Capital Market, as set forth in Nasdaq Listing Rule 5550(a)(2).
−Removed: To regain compliance, the closing bid price of our common stock must be at least $1.00 per share for 10 consecutive business days during the 180-day period from October 4, 2022 to April 3, 2023.
−Removed: As a result, unless the closing bid of our common stock trades in such manner, we will need to solicit stockholder approval to authorize an amendment to its Certificate of Incorporation, as amended, to effect a reverse stock split of our issued and outstanding shares of common stock at a ratio calculated to maintain listing on the Nasdaq Capital Market, as determined by the Board in its sole discretion (the “Reverse Stock Split”). There is no guarantee that the Company’s stockholders will approve the Reverse Stock Split.
−Removed: If our stockholders fail to approve the Reverse Stock Split in such event, and our closing bid price does not meet or exceed $1.00 by the end of the compliance period and Nasdaq does not grant us an additional compliance period, or we fail to regain compliance by the end of such additional compliance period, our Board of Directors will weigh the available alternatives to regain compliance.
−Removed: However, there can be no assurance that we will be able to successfully resolve such noncompliance.
+Added: On October 4, 2022, we received a letter (the “Notice”) from the Listing Qualifications Staff of Nasdaq, indicating that, based upon the closing bid price of our common stock for the prior 30 consecutive business days, were not in compliance with the requirement to maintain a minimum bid price of $1.00 per share for continued listing on the Nasdaq Capital Market, as set forth in Nasdaq Listing Rule 5550(a)(2).
+Added: To regain compliance, the closing bid price of our common stock must be at least $1.00 per share for 10 consecutive business days (the “Minimum Bid Price Requirement”) during the 180-day period from October 4, 2022 to April 3, 2023.
+Added: On April 4, 2023, we received a letter (the “Extension Notice”) from Nasdaq notifying us that Nasdaq granted the Company a 180-day extension, or until October 2, 2023 to regain compliance with the Minimum Bid Price Requirement.
+Added: On September 7, 2023, the Company effected a reverse stock split of the Company’s issued and outstanding shares of common stock, at a ratio of 1-for-20 (the “ Reverse Split ”).
+Added: As a result of the Reverse Split, the Company regained compliance with the Minimum Bid Price Requirement.
+Added: On September 25, 2023, we received a written notice from Nasdaq informing the Company that it has regained compliance with the Minimum Bid Price Requirement for continued listing on the Nasdaq Capital Market.
If, for any reason, Nasdaq should delist our common stock from trading on its exchange and we are unable to obtain listing on another national securities exchange or take action to restore our compliance with the Nasdaq continued listing requirements, a reduction in some or all of the following may occur, each of which could have a material adverse effect on our stockholders:
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the market price of our common stock;
−Removed: we will become a “penny stock”, which will make trading of our common stock much more difficult;
+Added: we will become a “penny stock”, which will make trading of our common stock much more difficult;
our ability to obtain financing for the continuation of our operations;
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the number of broker-dealers willing to execute trades in shares of our common stock.
−Removed: Our amended and restated bylaws designate a state or federal court located within the State of Delaware as the exclusive forum for certain litigation that may be initiated by our stockholders, which could limit our stockholders ’
−Removed: ability to obtain a favorable judicial forum for disputes with us.
−Removed: Pursuant to our amended and restated bylaws, unless we consent in writing to the selection of an alternative forum, the sole and exclusive forum for (i) any derivative action or proceeding brought on our behalf, (ii) any action asserting a claim of breach of a fiduciary duty owed by any of our directors, officers or other employees to us or our stockholders, (iii) any action asserting a claim against us arising pursuant to any provision of the Delaware General Corporation Law, or (iv) any action asserting a claim against us that is governed by the internal affairs doctrine shall be a state or federal court located within the State of Delaware, in all cases subject to the court’s having personal jurisdiction over indispensable parties named as defendants.
+Added: Our amended and restated bylaws designate a state or federal court located within the State of Delaware as the exclusive forum for certain litigation that may be initiated by our stockholders, which could limit our stockholders ’ ability to obtain a favorable judicial forum for disputes with us.
+Added: Pursuant to our amended and restated bylaws, unless we consent in writing to the selection of an alternative forum, the sole and exclusive forum for (i) any derivative action or proceeding brought on our behalf, (ii) any action asserting a claim of breach of a fiduciary duty owed by any of our directors, officers or other employees to us or our stockholders, (iii) any action asserting a claim against us arising pursuant to any provision of the Delaware General Corporation Law, or (iv) any action asserting a claim against us that is governed by the internal affairs doctrine shall be a state or federal court located within the State of Delaware, in all cases subject to the court’s having personal jurisdiction over indispensable parties named as defendants.
Any person or entity purchasing or otherwise acquiring any interest in shares of our capital stock shall be deemed to have notice of and consented to this provision.
−Removed: The forum selection clause in our amended and restated bylaws may have the effect of discouraging lawsuits against us or our directors and officers and may limit our stockholders’
−Removed: ability to obtain a favorable judicial forum for disputes with us.
−Removed: Because the applicability of the exclusive forum provision is limited to the extent permitted by law, we believe that the exclusive forum provision would not apply to suits brought to enforce any duty or liability created by the Securities Exchange Act of 1934, as amended (the “Exchange Act”), the Securities Act of 1933, as amended (the “Securities Act”), any other claim for which the federal courts have exclusive jurisdiction or concurrent jurisdiction over all suits brought to enforce any duty or liability created by the Securities Act.
+Added: The forum selection clause in our amended and restated bylaws may have the effect of discouraging lawsuits against us or our directors and officers and may limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us.
+Added: Because the applicability of the exclusive forum provision is limited to the extent permitted by law, we believe that the exclusive forum provision would not apply to suits brought to enforce any duty or liability created by the Securities Exchange Act of 1934, as amended (the “Exchange Act”), the Securities Act of 1933, as amended (the “Securities Act”), any other claim for which the federal courts have exclusive jurisdiction or concurrent jurisdiction over all suits brought to enforce any duty or liability created by the Securities Act.
We note that there is uncertainty as to whether a court would enforce the provision and that investors cannot waive compliance with the federal securities laws and the rules and regulations thereunder.
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Although our common stock is listed on the Nasdaq Capital Market, our shares are likely to be thinly traded for some time and an active market may never develop.
−Removed: Although our common stock is listed on the Nasdaq Capital Market, it is likely that initially there will be a very limited trading market for our common stock, and we cannot ensure that a robust trading market will ever develop or be sustained.
+Added: Although our common stock is listed on the Nasdaq Capital Market, it is likely that initially there will be a very limited trading market for our common stock, and we cannot ensure that a robust trading market will ever develop or be sustained.
Our shares of common stock may be thinly traded, and the price, if traded, may not reflect our actual or perceived value.
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Our stock price may be volatile, and you could lose all or part of your investment.
−Removed: The trading price of our common stock following our offering may fluctuate substantially and may be higher or lower than the initial public offering price.
+Added: The trading price of our common stock may fluctuate substantially and may be higher or lower than the initial public offering price.
This may be especially true for companies with a small public float.
−Removed: The trading price of our common stock following our offering will depend on several factors, including those described in this “
−Removed: Risk Factors ”
−Removed: section, many of which are beyond our control and may not be related to our operating performance.
−Removed: These fluctuations could cause you to lose all or part of your investment in our common stock since you might be unable to sell your shares at or above the price you paid in the offering.
+Added: The trading price of our common stock will depend on several factors, including those described in this “ Risk Factors ” section, many of which are beyond our control and may not be related to our operating performance.
+Added: These fluctuations could cause you to lose all or part of your investment in our common stock since you might be unable to sell your shares at or above the price you paid.
Factors that could cause fluctuations in the trading price of our common stock include:
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Broad market and industry factors, as well as general economic, political and market conditions such as recessions or interest rate changes, may seriously affect the market price of our common stock, regardless of our actual operating performance.
−Removed: These fluctuations may be even more pronounced in the trading market for our stock shortly following our offering.
−Removed: If the market price of our common stock after our offering does not exceed the initial public offering price, you may not realize any return on your investment in us and may lose some or all of your investment.
−Removed: In addition, in the past, following periods of volatility in the overall market and the market prices of particular companies’
−Removed: securities, securities class action litigations have often been instituted against these companies.
−Removed: Litigation of this type, if instituted against us, could result in substantial costs and a diversion of our management’s attention and resources.
+Added: These fluctuations may be even more pronounced in the trading market for our stock shortly.
+Added: If the market price of our common stock after our offering does not exceed what you paid per share, you may not realize any return on your investment in us and may lose some or all of your investment.
+Added: In addition, in the past, following periods of volatility in the overall market and the market prices of particular companies’ securities, securities class action litigations have often been instituted against these companies.
+Added: Litigation of this type, if instituted against us, could result in substantial costs and a diversion of our management’s attention and resources.
Any adverse determination in any such litigation or any amounts paid to settle any such actual or threatened litigation could require that we make significant payments.
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As of March 14, 2024, we had the following shares of Preferred Stock outstanding:
−Removed: 5,359 shares of Series A Preferred Stock, 1,297 shares of Series A-2 Preferred Stock, 1,733 shares of Series A-3 Preferred Stock, 1,934 shares of Series A-4 Preferred Stock and 2,299 shares of Series A-5 Preferred Stock.
+Added: (i) 440 shares of Series A Convertible Preferred Stock, par value $0.001 per share (the “Series A Preferred”);
+Added: (ii) 463 shares of Series A-2 Convertible Preferred Stock, par value $0.001 per share (the “Series A-2 Preferred”);
+Added: (iii) 315 shares of Series A-3 Convertible Preferred Stock, par value $0.001 per share (the “Series A-3 Preferred”);
+Added: (iv) 476 shares of Series A-4 Convertible Preferred Stock, par value $0.001 per share (the “Series A-4 Preferred”);
+Added: (v) 780 shares of Series A-5 Convertible Preferred Stock, par value $0.001 per share (the “Series A-5 Preferred”), (vi) 4,491 shares of Series AA Convertible Preferred Stock, par value $0.001 per share (the “Series AA Preferred”);
+Added: (vii) zero shares of Series AA-2 Convertible Preferred Stock, par value $0.001 per share (the “Series AA-2 Preferred”);
+Added: (viii) 391 shares of Series AA-3 Convertible Preferred Stock, par value $0.001 per share (the “Series AA-3 Preferred”);
+Added: (ix) 515 shares of Series AA-4 Convertible Preferred Stock, par value $0.001 per share (the “Series AA-4 Preferred”);
+Added: (x) 550 shares of Series AA-5 Convertible Preferred Stock, par value $0.001 per share (the “Series AA-5 Preferred”), (xi) 8,423 shares of Series AAA Convertible Preferred Stock, par value $0.001 per share (the “Series AAA Preferred”);
+Added: and (xii) 5,234 shares of Series AAA-2 Convertible Preferred Stock, par value $0.001 per share (the “Series AAA-2 Preferred”);
+Added: and, collectively with the Series A Preferred, Series A-2 Preferred, Series A-3 Preferred, Series A-4 Preferred, Series A-5 Preferred, Series AA Preferred, Series AA-2 Preferred, Series AA-3 Preferred, Series AA-4 Preferred, Series AA-5 Preferred, Series AAA Preferred, and Series AAA-2 Preferred (the “Preferred Stock”).
The issuance of shares of preferred stock with dividend or conversion rights, liquidation preferences or other economic terms favorable to the holders of preferred stock could adversely affect the market price for our common stock by making an investment in the common stock less attractive.
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The issuance of shares of preferred stock may also have the effect of delaying, deferring or preventing a change in control of our company without further action by the stockholders, even where stockholders are offered a premium for their shares.
−Removed: The holders of Series A Preferred Stock are entitled to vote on an as-converted to Class A common stock basis and have rights to approve certain actions.
−Removed: From November 2022 to January 2023, we issued 12,622 shares of our (i) Series A Convertible Preferred Stock, par value $0.001 per share (the “Series A Preferred”);
−Removed: (ii) Series A-2 Convertible Preferred Stock, par value $0.001 per share (the “Series A-2 Preferred”);
−Removed: (iii) Series A-3 Convertible Preferred Stock, par value $0.001 per share (the “Series A-3 Preferred”);
−Removed: (iv) Series A-4 Convertible Preferred Stock, par value $0.001 per share (the “Series A-4 Preferred”) and (v) Series A-5 Convertible Preferred Stock, par value $0.001 per share (the “Series A-5 Preferred”, and, collectively with the Series A Preferred, Series A-2 Preferred, Series A-3 Preferred and Series A-4 Preferred, the “Series A Stock”), to a group of accredited investors (collectively, the “Investors”), pursuant to a certain placement agency agreement.
−Removed: The holders of our Series A Stock are generally entitled to vote with the holders of our common stock on all matters submitted for a vote of our stockholders (voting together with the holders of common stock as one class) on an as-converted basis.
−Removed: Additionally, the consent of the holders of a majority of the outstanding shares of Series A Stock is required in order for us to take certain actions, including issuances of securities that are senior to, or equal in priority with, the Series A Stock.
−Removed: As a result, the holders of Series A Stock may in the future have the ability to influence the outcome of certain matters affecting our governance and capitalization.
−Removed: As of March 29, 2023, there were 12,622 shares of our Series A Preferred Stock outstanding, which are convertible without payment of additional consideration, into 22.4 million shares of our common stock, subject to certain ownership limitations.
+Added: The holders of Series A Preferred Stock are entitled to vote on an as-converted to common stock basis and have rights to approve certain actions.
+Added: From November 2022 to December 2023, we issued an aggregate of 39,125 shares of our Preferred Stock to a group of accredited investors (collectively, the “Investors”), pursuant to certain placement agency agreements.
+Added: The holders of our Preferred Stock are generally entitled to vote with the holders of our common stock on all matters submitted for a vote of our stockholders (voting together with the holders of common stock as one class) on an as-converted basis.
+Added: Additionally, the consent of the holders of a majority of the outstanding shares of Preferred Stock are required in order for us to take certain actions, including issuances of securities that are senior to, or equal in priority with, the Preferred Stock.
+Added: As a result, the holders of Preferred Stock may in the future have the ability to influence the outcome of certain matters affecting our governance and capitalization.
+Added: As of April 1, 2024, there were approximately 2,474 shares of our Series A Preferred, 5,947 shares of our Series AA Preferred, and 13,657 shares of our Series AAA Preferred outstanding, which are convertible without payment of additional consideration, into approximately 11.4 million shares of our common stock, subject to certain ownership limitations.
The conversion of the outstanding shares of our Series A Stock into common stock would be substantially dilutive to existing stockholders.
−Removed: Any dilatation or potential dilution may cause our stockholders to sell their shares, which may contribute to a downward movement in the stock price of our common stock.
+Added: Any dilution or potential dilution may cause our stockholders to sell their shares, which may contribute to a downward movement in the stock price of our common stock.
Future issuances of debt securities, which would rank senior to our common stock upon our bankruptcy or liquidation, and future issuances of preferred stock, which would rank senior to our common stock for the purposes of dividends and liquidating distributions, may adversely affect the level of return you may be able to achieve from an investment in our common stock .
In the future, we may attempt to increase our capital resources by offering debt securities.
−Removed: In the event of a bankruptcy or liquidation, holders of our debt securities, and lenders with respect to other borrowings we may make, would receive distributions of our available assets prior to any distributions being made to holders of our common stock.
+Added: In the event of bankruptcy or liquidation, holders of our debt securities, and lenders with respect to other borrowings we may make, would receive distributions of our available assets prior to any distributions being made to holders of our common stock.
Moreover, if we issue preferred stock in the future, the holders of such preferred stock could be entitled to preferences over holders of common stock in respect of the payment of dividends and the payment of liquidating distributions.
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Holders of our common stock must bear the risk that any such future offerings we conduct or borrowings we make may adversely affect the level of return they may be able to achieve from an investment in our common stock.
−Removed: We are an  
−Removed: emerging growth company, and any decision on our part to comply only with certain reduced reporting and disclosure requirements applicable to emerging growth companies could make our common stock less attractive to investors.
−Removed: We are an emerging growth company, and, for as long as we continue to be an emerging growth company, we may choose to take advantage of exemptions from various reporting requirements applicable to other public companies that are not “emerging growth companies,”
−Removed: not being required to have our independent registered public accounting firm audit our internal control over financial reporting under Section 404 of the Sarbanes-Oxley Act;
−Removed: reduced disclosure obligations regarding executive compensation in our periodic reports and annual report on Form 10-K;
−Removed: exemptions from the requirements of holding a non-binding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved.
−Removed: We could be an emerging growth company for up to five years following the completion of our offering.
−Removed: Our status as an emerging growth company will end as soon as any of the following takes place:
−Removed: the last day of the fiscal year in which we have more than $1.07 billion in annual revenue;
−Removed: the date we qualify as a “large accelerated filer,” with at least $700 million of equity securities held by non-affiliates;
−Removed: the date on which we have issued, in any three-year period, more than $1.0 billion in non-convertible debt securities;
−Removed: the last day of the fiscal year ending after the fifth anniversary of the completion of our offering.
−Removed: We cannot predict if investors will find our common stock less attractive if we choose to rely on the exemptions afforded emerging growth companies.
−Removed: If some investors find our common stock less attractive because we rely on any of these exemptions, there may be a less active trading market for our common stock and the market price of our common stock may be more volatile.
−Removed: Under the JOBS Act, emerging growth companies can also delay adopting new or revised accounting standards until such time as those standards apply to private companies.
−Removed: We have elected to use this extended transition period for complying with new or revised accounting standards that have different effective dates for public and private companies until the earlier of the date we (i) are no longer an emerging growth company or (ii) affirmatively and irrevocably opt out of the extended transition period provided in the JOBS Act.
−Removed: As a result, our consolidated financial statements may not be comparable to companies that comply with new or revised accounting pronouncements as of public company effective dates.
−Removed: Because of our status as an emerging growth company, you will not be able to depend on any attestation from our independent registered public accounting firm as to our internal control over financial reporting for the foreseeable future .
−Removed: Our independent registered public accounting firm will not be required to attest to the effectiveness of our internal control over financial reporting pursuant to Section 404 of the Sarbanes-Oxley Act until the later of the year following our first annual report required to be filed with the SEC, or the date we are no longer an “emerging growth company”
−Removed: as defined in the JOBS Act.
−Removed: Accordingly, you will not be able to depend on any attestation concerning our internal control over financial reporting from our independent registered public accounting firm for the foreseeable future. Subsequent to the time frame above, our independent registered public accounting firm will not be required to attest to the effectiveness of our internal control over financial reporting pursuant to the Sarbanes-Oxley Act until such time that the Company becomes an “accelerated filer,”
−Removed: as defined by the SEC.
+Added: We are an “ emerging growth company, ” and a “ smaller reporting company ” and we cannot be certain if the reduced reporting requirements applicable to emerging growth companies or smaller reporting companies will make an investment in us less attractive to investors.
+Added: In particular, our independent registered public accounting firm is not required to attest to the effectiveness of our internal control over financial reporting pursuant to Section 404 of the Sarbanes-Oxley Act.
+Added: We are an “emerging growth company” as defined in the JOBS Act.
+Added: We will remain an “emerging growth company” until the earliest to occur of (i) the last day of the first fiscal year in which our annual gross revenues exceed $1.07 billion, (ii) the date on which we become a “large accelerated filer” as defined in Rule 12b-2 under the Exchange Act, (iii) the date on which we have issued more than $1.0 billion in nonconvertible debt during the preceding three-year period, and (iv) the end of the year in which the five-year anniversary of the initial public offering of our common stock occurs in the future, if applicable.
+Added: We may take advantage of exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies, including but not limited to, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements.
+Added: Section 404 of the Sarbanes-Oxley Act requires annual management assessments of the effectiveness of our internal control over financial reporting, and generally requires in the same report a report by our independent registered public accounting firm on the effectiveness of our internal control over financial reporting.
+Added: Under the JOBS Act, our independent registered public accounting firm will not be engaged to attest to the effectiveness of our internal control over financial reporting pursuant to Section 404 of the Sarbanes-Oxley Act until we are no longer an “emerging growth company.”
+Added: In addition, we are also a smaller reporting company, as defined in Rule 12b-2 under the Exchange Act.
+Added: In the event that we are still considered a smaller reporting company at such time as we cease being an emerging growth company, the disclosure we will be required to provide in our SEC filings will increase, but will still be less than it would be if we were not considered either an emerging growth company or a smaller reporting company.
+Added: Rule 12b-2 of the Exchange Act defines a “smaller reporting company” as an issuer that is not an investment company, an asset-backed issuer or a majority-owned subsidiary of a parent that is not a smaller reporting company and that:
+Added: had a public float of less than $250 million;
+Added: had annual revenues of less than $100 million during the most recently completed fiscal year for which audited financial statements are available and either had no public float or a public float of less than $700 million.
+Added: Similar to emerging growth companies, smaller reporting companies are able to provide simplified executive compensation disclosures in their filings, and have certain other decreased disclosure obligations in their SEC filings, including, among other things, being required to provide only two years of audited financial statements in annual reports.
+Added: To the extent we take advantage of some or all of the reduced reporting requirements applicable to emerging growth companies or smaller reporting companies, an investment in our company may be less attractive to investors.
+Added: We have identified a material weakness in our internal controls over financial reporting as of December 31, 2023, related solely to the accounting for the noncash value of the effect of a down round feature that was triggered on preferred stock during the three months ended September 30, 2023.
+Added: For a discussion of management’s consideration of the material weakness identified related to our accounting for a non-standard and complex transaction related to the noncash value of the effect of a down round feature that was triggered on our Series AA preferred stock, see Note 12, as well as Part II, Item 9A:
+Added: “Controls and Procedures” elsewhere herein.
+Added: On March 26, 2024, the Audit Committee of the Board of Directors of the Company (the “Audit Committee”), based upon the recommendation of management, concluded that the Company’s previously filed Quarterly Report on Form 10-Q for the quarter ended September 30, 2023 (the “Third Quarter 10-Q”), as filed with the SEC on November 14, 2023, and any reports, related earnings releases, investor presentations or similar communications of the Company’s Third Quarter 10-Q should no longer be relied upon, as described below.
+Added: The determination resulted from an error made in the Company's unaudited consolidated financial statements for the three and nine months ended September 30, 2023, as previously filed in the Third Quarter 10-Q, arising from the exclusion of the calculated noncash value of the effect of the down round feature triggered in August of 2023 on the Company’s Series AA Convertible Preferred Stock, which should have been recorded as a noncash charge directly to accumulated deficit and a noncash reduction to income available to common stockholders in the computation of earnings per share.
+Added: In connection with the Company’s year-end 2023 closing procedures, management reassessed the guidance set forth in ASC 260, “Earnings Per Share” and determined that the value of the effect of a down round feature that is triggered on preferred stock should be recognized as a noncash charge to accumulated deficit and a noncash reduction to income available to common stockholders in the computation of earnings per share in the period that the down round feature is triggered.
+Added: (i) management noted an error affecting additional paid in capital and accumulated deficit, with no impact on total equity, and a noncash error with respect to the computation of loss per share as reported in the Third Quarter 10-Q; and (ii) in connection with the Company’s 2023 year-end closing procedures, on March 26, 2024, due to the material error to loss per share originally reported in the Third Quarter 10-Q, the Company’s management and the Audit Committee determined that the Company's Third Quarter 10-Q should be restated to reflect the modifications described above.
+Added: None of the above changes had any impact on total assets, total liabilities, total equity, revenues, cost of revenues, operating expense, net loss, or cash flows as reported for the three and nine months ended September 30, 2023 in the Company’s Third Quarter 10-Q.
+Added: No financial statements or disclosures prior to the financial statements for the quarterly periods ended September 30, 2023 were affected by the issue described above.
+Added: The Company has not amended its previously filed Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2023.
+Added: The financial information that has been previously filed or otherwise reported for the quarterly period ended September 30, 2023 is superseded by the information in this Annual Report (refer to Note 12), and the financial statements and related financial information for the quarterly period ended September 30, 2023 contained in such previously filed report should no longer be relied upon.
+Added: The Company’s management concluded that, in light of the error described above, a material weakness existed in the Company’s internal control over financial reporting and that the Company’s disclosure controls and procedures were not effective for the applicable quarterly period.
+Added: The Company’s remediation plan with respect to such material weakness is described below under Part II, Item 9A:
+Added: “Controls and Procedures.”
+Added: A material weakness is a deficiency, or a combination of deficiencies, in internal controls over financial reporting such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented, or detected and corrected on a timely basis.
+Added: Effective internal controls are necessary for us to provide reliable financial reports and prevent fraud, and a material weakness could result in us being unable to maintain compliance with securities law requirements regarding timely filing of periodic reports in addition to applicable stock exchange listing requirements, investors losing confidence in our financial reporting, our securities price declining or us facing litigation as a result of the foregoing.
+Added: We have taken steps to remediate the material weakness identified, including a review of the accounting practices for non-standard and complex transactions in consultation with accounting and legal experts.
+Added: These remediation measures may be time consuming and costly, and we cannot provide assurance that the measures we have taken to date, or any measures we may take in the future, will be sufficient to avoid potential future material weaknesses.
+Added: Limitations on Effectiveness of Controls and Procedures.
+Added: Our disclosure controls and procedures are designed to provide reasonable assurance of achieving the desired control objectives.
+Added: 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.
+Added: 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.
+Added: 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.
+Added: 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.
+Added: 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.
We have granted, and may continue to grant, share incentive awards, which may result in increased share-based compensation expenses.
−Removed: We adopted our Amended and Restated 2014 Stock Option and Incentive Plan (the “2014 Plan”) in October 2014, for purposes of granting share-based compensation awards to employees, directors and consultants to incentivize their performance and align their interests with ours.
+Added: We adopted our Amended and Restated 2014 Stock Option and Incentive Plan (the “2014 Plan”) in October 2014, for purposes of granting share-based compensation awards to employees, directors and consultants to incentivize their performance and align their interests with ours.
We account for compensation costs for all share-based awards issued under the 2014 Plan using a fair-value based method and recognize expenses in our statements of comprehensive loss in accordance with GAAP.
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We have significant intangible assets recorded on our consolidated balance sheets as of December 31, 2023.
−Removed: We will continue to evaluate the recoverability of the carrying amount of our intangible assets on an ongoing basis, and we may incur substantial impairment charges, which would adversely affect our consolidated financial results. There can be no assurance that the outcome of such reviews in the future will not result in substantial impairment charges.
−Removed: Impairment assessment inherently involves judgment as to assumptions about expected future cash flows and the impact of market conditions on those assumptions.
−Removed: Future events and changing market conditions may impact our assumptions as to prices, costs, holding periods or other factors that may result in changes in our estimates of future cash flows. Although we believe the assumptions we used in testing for impairment are reasonable, significant changes in any one of our assumptions could produce a significantly different result.
+Added: We will continue to evaluate the recoverability of the carrying amount of our intangible assets on an ongoing basis, and we may incur substantial impairment charges, which would adversely affect our consolidated financial results.
+Added: There can be no assurance that the outcome of such reviews in the future will not result in substantial impairment charges.
+Added: Impairment assessment inherently involves judgment as to assumptions about expected future cash flows and the impact of market conditions on those assumptions.
+Added: Future events and changing market conditions may impact our assumptions as to prices, costs, holding periods or other factors that may result in changes in our estimates of future cash flows.
+Added: Although we believe the assumptions we used in testing for impairment are reasonable, significant changes in any one of our assumptions could produce a significantly different result.
General Risk Factors
−Removed: Actual or threatened epidemics, pandemics, outbreaks, or other public health crises may adversely affect our business .
−Removed: Our business could be materially and adversely affected by the risks, or the public perception of the risks, related to an epidemic, pandemic, outbreak, or other public health crisis, such as the recent outbreak of novel coronavirus (COVID-19).
−Removed: The risk, or public perception of the risk, of a pandemic or media coverage of infectious diseases could cause a decrease to the attendance of our in person gaming experiences, or cause certain of our partners, such as Wanda Theaters in China, to avoid holding in person events.
−Removed: Moreover, an epidemic, pandemic, outbreak or other public health crisis, such as COVID-19, could cause members of our Action Squad, in whom we rely on to manage the logistics of our in person experiences, or on-site employees of partners to avoid any involvement with our in person experiences or other events, which would adversely affect our ability to hold such events.
−Removed: The ultimate extent of the impact of any epidemic, pandemic or other health crisis on our business, financial condition and results of operations will depend on future developments, which are highly uncertain and cannot be predicted, including new information that may emerge concerning the severity of such epidemic, pandemic or other health crisis and actions taken to contain or prevent their further spread, among others.
−Removed: These and other potential impacts of an epidemic, pandemic or other health crisis, such as COVID-19, could therefore adversely affect our business, financial condition and results of operations. 
+Added: Catastrophic events may disrupt our business.
+Added: Natural disasters or other catastrophic events may cause damage or disruption to our operations, international commerce, and the global economy, and thus could harm our business.
+Added: We have our headquarters in Santa Monica, California, an area which in recent years has been increasingly susceptible to fires, severe weather events, and power outages, any of which could disrupt our operations, and which contains active earthquake zones.
+Added: In the event of a major earthquake, hurricane, or catastrophic event such as fire, power loss, rolling blackouts or power loss, telecommunications failure, pandemic, geopolitical conflict such as the Russian invasion of Ukraine and Hamas’ attack against Israel and the ensuing war, cyber-attack, war, other physical security threats or terrorist attack, we may be unable to continue our operations and may endure system interruptions, reputational harm, delays in our service offering development, lengthy interruptions in our service offerings, breaches of security, and loss of critical data, all of which would harm our business, results of operations, and financial condition.
+Added: Acts of terrorism and similar events would also cause disruptions to the internet or the economy as a whole.
+Added: Global climate change could also result in natural disasters occurring more frequently or with more intense effects, which could cause business interruptions.
+Added: The long-term effects of the COVID-19 pandemic and recovery from it on society and developer, creator, and user engagement remain uncertain, and a subsequent health crisis or pandemic, as well as the actions taken by various governmental, business and individuals in response, will impact our business, operations and financial results in ways that we may not be able to accurately predict.
+Added: In addition, the insurance we maintain would likely not be adequate to cover our losses resulting from disasters or other business interruptions.
+Added: Our disaster recovery plan may not be sufficient to address all aspects of any unanticipated consequence or incident, we may not be able to maintain business continuity at profitable levels or at all, and our insurance may not be sufficient to compensate us for the losses that could occur.
Changes in the state of the U.S.
−Removed: economy and a return to volatile or recessionary conditions in the United States or abroad could adversely affect our business or our access to capital markets in a material manner.
+Added: economy, such as rising inflation and a return to volatile or recessionary conditions in the United States or abroad, and volatile global economic conditions in general, could adversely affect our business or our access to capital markets in a material manner.
To date, our principal sources of capital used to fund our operations have been the net proceeds we received from sales of equity securities and proceeds received from the issuance of convertible debt, as described herein.
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 or debt financings, to fund our planned operations.
−Removed: Accordingly, our results of operations and the implementation of our long-term business strategy could be adversely affected by general conditions in the global economy, including conditions that are outside of our control, such as the impact of health and safety concerns from the current outbreak of COVID-19.
+Added: Accordingly, our results of operations and the implementation of our long-term business strategy could be adversely affected by general conditions in the global economy, including conditions that are outside of our control, such as the historically high levels of inflation recently experienced by the United States, Europe and other key global markets.
+Added: If the inflation rate continues to increase, it will likely affect all of our expenses, including, but not limited to, employee compensation expenses and energy expenses and it may reduce consumer discretionary spending, which could affect the buying power of individuals to which our advertisers promote, developers, and creators and lead to a reduced demand for our service offerings.
+Added: Geopolitical developments, such as the war in Ukraine, Hamas’ attack against Israel and the ensuing war, and tensions with China, and the responses by central banking authorities to control inflation, can increase levels of political and economic unpredictability globally and increase the volatility of global financial markets.
+Added: Adverse macroeconomic conditions, including lower consumer confidence, persistent unemployment, wage and income stagnation, slower growth or recession, changes to fiscal and monetary policy, inflation, higher interest rates, currency fluctuations, economic and trade sanctions, the availability and cost of credit, and the strength of the economies in which we and our customers are located, have adversely affected and may continue to adversely affect our consolidated financial condition and results of operations.
The most recent global financial crisis caused by COVID-19 resulted in extreme volatility and disruptions in the capital and credit markets.
3 unchanged sentences
Our business is subject to risks that are generally associated with the entertainment industry, many of which are beyond our control.
−Removed: These risks could negatively impact our operating results and include the popularity, price to play, and timing of release of our esports licensed games, economic conditions that adversely affect discretionary consumer spending, changes in user demographics, the availability and popularity of other forms of entertainment, and critical reviews and public tastes and preferences, which may change rapidly and cannot necessarily be predicted.
−Removed: UNRESOLVED STAFF COMMENTS
+Added: These risks could negatively impact our operating results and include the popularity, price to play, and timing of release of third-party and our own games and interactive content, economic conditions that adversely affect discretionary consumer spending, changes in user demographics, the availability and popularity of other forms of entertainment, and critical reviews and public tastes and preferences, which may change rapidly and cannot necessarily be predicted.
Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.