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Item 5. Market for Registrant’s Common Equity

2024-04-15 compared with 2023-03-31 · 463 added, 347 removed, 169 unchanged (83% of the section changed)

MARKET FOR REGISTRANT ’

S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

MARKET FOR REGISTRANT ’ S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Market Information and Holders

Our common stock is listed on the Nasdaq Capital Market under the ticker symbol “SLGG.”

As of March 22, 2023, we had 164 holders of record of our common stock based upon the records of our transfer agent, which do not include beneficial owners of common stock whose shares are held in the names of various securities brokers, dealers and registered clearing agencies.

Our common stock is listed on the Nasdaq Capital Market under the ticker symbol “SLE.”

As of April 1, 2024, we had 274 holders of record of our common stock based upon the records of our transfer agent, which do not include beneficial owners of common stock whose shares are held in the names of various securities brokers, dealers and registered clearing agencies.

Dividend Policy

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Our ability to pay dividends may also be restricted by the terms of any future credit agreement or any future debt or preferred equity securities.

Issuance of Common Stock as Dividends

During the fourth quarter of 2023, the Company paid dividends to the holders of the Company’s Series A Convertible Preferred Stock, in the form of 232,981 shares of common stock, as further described in Note 7.

Recent Sales of Unregistered Equity Securities

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As a smaller reporting company, we are not required to provide the performance graph required by Item 201(e) of Regulation S-K.

MANAGEMENT ’

S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

MANAGEMENT ’ S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

You should read the following discussion and analysis of our financial condition and results of our operations together with our consolidated financial statements and the notes thereto appearing elsewhere in this Report.

This discussion contains forward-looking statements reflecting our current expectations, whose actual outcomes involve risks and uncertainties.

Risk Factors, ”

Special Note Regarding Forward-Looking Statements ”

and elsewhere in this Report .

Super League Gaming, Inc.

is a leading publisher of games, monetization tools and content channels across metaverse gaming platforms that empower developers, energize players, and entertain fans.

Our solutions provide incomparable access to an audience consisting of players in the largest global metaverse game environments, fans of hundreds of thousands of gaming influencers, and viewers of gameplay content across major social media and digital video platforms.

Fueled by proprietary and patented technology systems, the company’s platform includes access to vibrant in-game communities, a leading metaverse advertising platform, a network of highly viewed channels and original shows on Instagram, TikTok, Snap, YouTube, and Twitch, cloud-based livestream production tools, and an award-winning esports invitational tournament series.

Super League’s properties deliver powerful opportunities for brands and advertisers to achieve impactful insights and marketing outcomes with gamers of all ages.

Actual results and the timing of events may differ materially from those stated in or implied by these forward-looking statements due to a number of factors, including those discussed in the sections entitled “ Risk Factors, ” “ Special Note Regarding Forward-Looking Statements ” and elsewhere in this Report.

All references to “ Note, ” followed by a number reference from one to twelve herein, refer to the applicable corresponding numbered footnotes to the consolidated financial statements contained elsewhere herein.

Super League Enterprise, Inc.

is a leading creator and publisher of content experiences and media solutions across the world’s largest immersive platforms.

From open gaming powerhouses such as Roblox, Minecraft and Fortnite Creative, to bespoke worlds built using the most advanced 3D creation tools, Super League’s innovative solutions provide incomparable access to massive audiences who gather in immersive digital spaces to socialize, play, explore, collaborate, shop, learn and create.

As a true end-to-end activation partner for dozens of global brands, Super League offers a complete range of development, distribution, monetization and optimization capabilities designed to engage users through dynamic, energized programs.

As an originator of new experiences fueled by a network of top developers, a comprehensive set of proprietary creator tools and a future-forward team of creative professionals, Super League accelerates IP and audience success within the fastest growing sector of the media industry.

We generate revenue from (i) innovative advertising including immersive game world and experience publishing and in-game media products, (ii) direct to consumer offers, including in-game items, e-commerce, game passes and ticketing and digital collectibles, and (iii) content and technology through the production and distribution of our own, advertiser and third-party content.

We operate in one reportable segment to reflect the way management and our chief operating decision maker review and assess the performance of the business.

Reverse Stock Split and Name Change

On September 7, 2023, the Company filed a Certificate of Amendment (the “Amendment”) to the Company’s Second Amended and Restated Certificate of Incorporation, as Amended (the “Charter”), which became effective September 11, 2023, to change the name of the Company from Super League Gaming, Inc.

to Super League Enterprise, Inc.

(the “Name Change”) and to effect a reverse stock split of the Company’s issued and outstanding shares of common stock, par value $0.001 per share, at a ratio of 1-for-20 (the “Reverse Split”).

The Name Change and the Reverse Split were approved by the Company’s Board of Directors (the “Board”) on July 5, 2023, and approved by the stockholders of the Company on September 7, 2023.

Refer to Note 7 for additional information regarding the Reverse Split.

All references to common stock, warrants to purchase common stock, options to purchase common stock, restricted stock, share data, per share data and related information contained in the financial statements have been retroactively adjusted to reflect the effect of the Reverse Split for all periods presented.

Increase in Authorized Common Stock

On May 30, 2023, the Company filed a Certificate of Amendment to its Charter (the “May Amendment”), increasing the number of authorized shares of common stock from 100,000,000 to 400,000,000.

The Company’s Board previously approved the May Amendment on March 17, 2023, and the Company obtained the approval of the May Amendment by written consent of its stockholders holding greater than 50% of the voting securities of the Company on April 5, 2023.

In connection with the Name Change, the Company also changed its Nasdaq ticker symbol to “SLE” from “SLGG.”

Matters Affecting Comparability

Impairment Charges.

In the fourth quarter of 2023, we recorded a non-cash impairment charge related to our partner relationship related intangible assets, comprised primarily of our Microsoft Minecraft server and InPvP developed technology intangible assets originally acquired in connection with the acquisition of Mobcrush, Inc., in June 2021.

The Company assesses the recoverability of long-lived assets whenever events or changes in circumstances indicate that their carrying value may not be recoverable.

Factors we consider important, which could trigger an impairment review, include significant underperformance relative to expected historical or projected future operating results, and significant changes in the manner of our use of the acquired assets or the strategy in the context of our overall business.

Due to underperformance relative to historical and projected future operating results and a decision to deploy resources in other areas of the business, we performed an impairment analysis and determined that the sum of the expected undiscounted future cash flows resulting from the use of the assets was less than the carrying amount of the assets, resulting in an impairment loss totaling $7.1 million, which is recorded in the accompanying consolidated statement of operations for the year ended December 31, 2023.

Loss on intangible asset disposal.

In June 2023 , the Company assigned the intangible assets originally acquired in connection with the Company’s acquisition of Bannerfy in fiscal year 2021, to the original sellers.

The assets were disposed of in connection with management’s review of operations and decision to allocate resources elsewhere.

As a result, the Company recorded a write-off of net developed technology related intangible assets acquired in connection with the acquisition of Bannerfy totaling $2.3 million, which is included in “Loss on intangible asset disposal” in the accompanying consolidated statement of operations for the year ended December 31, 2023.

Impairment of Goodwill.

As described in more detail at Note 2 to the consolidated financial statements elsewhere herein, we performed goodwill impairment tests as of September 30, 2022 and December 31, 2022, resulting in aggregate goodwill impairment charges of $50,263,000 for Fiscal Year 2022.

Acquisitions.

During Fiscal Year 2021, we completed the acquisitions described below under the heading, “

Acquisitions Consummated during Fiscal Year 2021 .”

As described in more detail at Note 2, we performed goodwill impairment tests as of September 30, 2022 and December 31, 2022, resulting in aggregate goodwill impairment charges of $50.3 million for the year ended December 31, 2022.

Executive Summary

During Fiscal Year 2022, management continued to focus on monetization with respect to our three primary revenue streams:

(1) advertising revenues, (2) content revenues, and (3) direct to consumer revenues.

In addition to the strong key performance indicator (“KPI”) performance during the periods presented, as described herein, we:

(i) continued our focus on our premium advertising model and the monetization of our growing premium advertising inventory, including increased revenues generated from direct advertising sales, and from our global network of resellers focusing on selling our international media inventory on our behalf;

(ii) continued to focus on the monetization of our original and user generated content library and remote production and broadcast capabilities, which emerged as a component of revenue in 2020;

(iii) continued to focus on the monetization of the gamer and creator through direct-to-consumer offers, including increases in sales of digital goods with our Minehut, Mineville and Pixel Paradise digital properties;

and, (iv) continued to unlock new ways that our content production technology can extend beyond esports, into other entertainment formats representing revenue growth opportunities in the current and future periods.

We expect to continue to grow our advertising pipeline across various verticals with the capability to provide brands and advertisers with targeted, high-quality integrations that warrant premium costs per impressions (“CPM”) advertising rates.

Acquisitions Consummated during Fiscal Year 2021 (the “

2021 Acquisitions ”

The 2021 Acquisitions were comprised of the following:

Acquisition of Mobcrush Streaming, Inc.

On June 1, 2021, the Company completed the acquisition of Mobcrush Streaming, Inc.

(“Mobcrush”), a live streaming technology platform used by gaming influencers who generate and distribute original content to fans and subscribers across the most popular live streaming and social media platforms, including Twitch, YouTube, Facebook, Instagram, Twitter, and more.

Mobcrush also operates Mineville and Pixel Paradise, two of only seven official Minecraft servers in partnership with Microsoft Corporation (“Microsoft”).

Acquisition of Bannerfy, LTD.

On August 24, 2021, the Company completed the acquisition of Bannerfy, Ltd., (“Bannerfy”), an intelligent technology platform that enables digital video and live streaming creators to collaborate with tier one sponsors on their social media channels including YouTube through scalable and custom premium placements.

Acquisition of Super Biz.

On October 4, 2021, the Company acquired (i) substantially all of the assets of Super Biz, and (ii) the personal goodwill of the founders regarding Super Biz’s business, as described at Note 5.

Super Biz is a dynamic ad platform designed specifically for metaverse environments.

Super Biz’s initial deployment enables brands to advertise across popular Roblox game titles and helps Roblox creators with monetization and game analytics.

The acquisition allowed us to execute on our strategic plans to extend our existing and expanding presence and reach in the metaverse.

During the periods presented, we experienced significant organic and inorganic growth in our audience, further expanding our premium advertising inventory, increasing deal-sizes and strong repeat buying across the advertiser verticals of retail, entertainment, toys, fashion, consumer packaged goods, and automotive, while upholding our premium CPM advertising rates and margins, further validating a new premium social marketing channel for advertisers to reach elusive Generation Z and Alpha gamers.

We further developed our in-house direct sales capability to monetize our domestic experiential and media inventory and launched a global network of resellers to sell our international media inventory on our behalf.

In addition, we have deepened our product and engineering functions with specific expertise in metaverse game design, advertising technology, creator tool development, and data and analytics.

As an early-mover creating engaging experiences inside of metaverse game platforms, we converted our deep understanding of young gamers into significant audience reach in virtual world gaming platforms.

We believe we have successfully iterated our business model through these market insights, and our organic and inorganic growth to establish scale and ultimately drive our monetization strategies.

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.

Our software supports the creation and operation of our owned and third-party metaverse gaming worlds and experiences, along with creator tools and analytics underpinned by a creator economy.

These tools enable Super League to access these extended audiences with our innovative in-game and in-stream ad products, and allow our game designers and content creators to participate in our advertising economy.

Our analytics suite provides Super League, brands and advertisers, and game developers data that informs campaign measurement and insights, along with enhanced game design.

Beyond our primary advertising revenue stream, we have the opportunity to extend further downstream in the metaverse gaming worlds we operate, and generate direct to consumer revenues.

In addition, our platform, and our capability to produce compelling gaming-centric video and livestream broadcasts drives viewership to our own and our brand partner’s digital channels, and generates content production and syndication revenues from third party partners.

Specifically, Super League’s digital experience and media products provide a wide range of solutions for brands and advertisers.

From branded in-game experiences, through to custom content and media, Super League can provide end-to-end solutions for brands to acquire customers, deepen brand affinity and deliver campaign performance with innovative advertising inventory.

Additionally, our capability and proprietary technology is now being applied to new virtual world platforms beyond our core offering and is proving to be an enterprise solution for our owned and branded digital experiences that are less temporal and campaign-centric, generating revenue opportunities that are more diversified, annual in nature and less impacted by traditional advertising seasonality.

Through our organic and inorganic growth in Fiscal Year 2022 and Fiscal Year 2021, our premium advertising inventory and offer to brands has expanded significantly, which allows us to offer premium engagement with advertiser’s and brand’s targeted audiences, in a safe, trusted and measurable way, through deep, multi-faceted campaigns leading to growth in the size and scope of our advertising deals to attract a larger share of advertisers’

During the second half of Fiscal Year 2021 and throughout Fiscal Year 2022, we also focused on continuing to forge strategic partnerships to create a global reseller network to augment our direct salesforce efforts.

These partners have breadth and depth across all of the significant industry verticals along with global geographic coverage, which we believe will facilitate the acceleration of the rollout and awareness for our innovative ad products and drive the acceleration of future monetization.

On June 13, 2022 Super League Gaming, Inc.

entered into an investor relations consulting agreement with MZHCI, LLC.

Delisting Notice

On October 4, 2022, we received a letter (the “Letter”) from the Listing Qualifications Staff of The Nasdaq Stock Market, LLC (“Nasdaq”) indicating that, based upon the closing bid price of our common stock for 30 consecutive business days, the Company is not currently 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).

The Letter has no immediate effect on the listing of our common stock on the Nasdaq Capital Market.

The Company intends to monitor the closing bid price of its Common Stock.

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.

If the Company does not regain compliance with the minimum bid price requirement by April 3, 2023, Nasdaq may grant the Company a second 180-day period to regain compliance.

To qualify for this additional 180-day compliance period, the Company would be required to meet the continued listing requirement for market value of publicly held shares and all other initial listing standards for the Nasdaq Capital Market, other than the minimum bid price requirement.

In addition, the Company would also be required to notify Nasdaq of its intent to cure the minimum bid price deficiency by effecting a reverse stock split, if necessary.

If the Company does not regain compliance within the allotted compliance periods, including any extensions that may be granted by Nasdaq, Nasdaq will provide notice that our common stock will be subject to delisting.

The Company would then be entitled to appeal that determination to a Nasdaq hearings panel. 

Revenue for the years ended December 31, 2023 (“Fiscal Year 2023”) and 2022 (“Fiscal Year 2022”) totaled $25.1 million and $19.7 million, reflecting a year over year increase of 27%.

Excluding product design and software development kit related revenue totaling $919,000 recognized in the first quarter of Fiscal Year 2022, total revenue for Fiscal Year 2023 increased $6.3 million, or 34% compared to the comparable prior year period.

Cost of revenue for Fiscal Year 2023 and Fiscal Year 2022 (“Fiscal Years 2023 and 2022”) was $15.3 million and $11.2 million, respectively, reflecting an increase of 37%, driven primarily by the significant increase in Fiscal Year 2023 revenues, compared to the prior year.

As a percent of revenue, gross profit for Fiscal Year 2023 decreased to 39%, compared to 43% for the prior year period, driven by partial delivery during the third and fourth quarters of 2023 under a significant custom integration and platform media revenue contract with a customer that had a higher average direct cost profile, compared to the programs that generated revenues during the comparable prior year period, and lower cost one-off product design and software development kit related revenue recognized during the first quarter of Fiscal Year 2022.

Total operating expense for Fiscal Year 2023 decreased to $42.6 million compared to $93.5 million in the comparable prior year period.

Operating expense for Fiscal Year 2023 included aggregate noncash impairment and loss on intangible asset disposal charges totaling $9.3 million, and Fiscal Year 2022 included a noncash goodwill impairment charge of $50.3 million.

Excluding the noncash impairment charges, the decrease in total operating expense reflects decreases in cloud services and other technology platform costs and decreases in personnel, marketing and other corporate costs, resulting from ongoing cost reduction and optimization activities.

Excluding noncash stock compensation expense, amortization expense, intangible asset impairment charges, legal settlement charges and mark to market related fair value adjustments, operating expense for Fiscal Year 2023 was $25.1 million, reflecting a 25% reduction in operating expense, compared to the comparable prior year period.

Net loss for Fiscal Year 2023, which includes the impact of significant mark to market related credits as described below, and noncash stock compensation, amortization and intangible asset impairment charges, as summarized below, was $30.3 million or $(13.67) per share, compared to a net loss of $85.5 million, or $(45.95) per share, in the comparable prior year period.

The calculation of net loss per share for Fiscal Year 2023 included noncash common stock dividend and deemed dividend related direct charges to accumulated deficit totaling $7.9 million, as described at Note 2.

Excluding the impact of the noncash common stock dividend and deemed dividend related direct charges to accumulated deficit, net loss per share for Fiscal Year 2023 was $(10.84).

During Fiscal Year 2023, we continued to deliver top line revenue growth, including, 52%, 42% and 32% increases in sequential quarterly revenues in the second, third and fourth quarters of Fiscal Year 2023, and 17% (excluding product design and software development kit related revenue in Fiscal Year 2022), 18%, 60% and 34%, increases in revenues compared to the prior year comparable quarter in the first, second, third and fourth quarters of Fiscal Year 2023.

During the quarter we continued to demonstrate the effectiveness of our overall strategy, providing us with increasing opportunities to take a greater share of advertisers’ wallet, as demonstrated by larger deal sizes and continued high repeat customer percentages, and our focus on cost reductions and optimization has positively impacted operating leverage.

In addition, we continued to focus on our direct sales force and continued to see increases in sales force effectiveness, as demonstrated by larger total revenue wins for our direct sellers.

During Fiscal Year 2023, we continued to work with signature Brands and clients, along with the acquisition and integration of Melon, where we are delivering immersive experiences that are not just short-term campaigns, but persistent virtual worlds that we believe will continue to change the magnitude and the distribution of our future revenues, more in-line with a recurring revenue model, more forecastable in nature and less like a traditional advertising model.

We are a leading scalable, vertically integrated publishing machine across some of today’s largest digital social platforms and a metaverse innovation engine for the future of the immersive web.

Entry into Financing and Security Agreement

The Company and its subsidiaries (collectively with the Company, the “Borrowers”), entered into a Financing and Security Agreement (the “SLR Agreement”) with SLR Digital Finance, LLC (“Lender”), effective December 17, 2023 (the “Effective Date”).

Pursuant to the SLR Agreement, Lender may, from time to time and in its sole discretion, make certain cash advances to the Company (each an “Advance”, and collectively, “Advances”), against the face amounts of certain uncollected accounts receivable of the Borrowers on an account-by-account basis (each, a “Financed Account”, and collectively, the “Accounts”), at a rate of 85% multiplied by the face value of such Account (the “Advance Rate”), less any reserved funds and any other amounts due to Lender from Borrowers, up to a maximum aggregate Advance amount of $4,000,000 (the “Maximum Amount”)(the Advances on the Accounts is hereinafter, the “Facility”).

Upon receipt of any Advance, Borrowers will have assigned all of its rights in such receivables and all proceeds thereof.

The proceeds received from the Facility are, and will be, used to fund general working capital needs.

The SLR Agreement is effective for 24 months from the Effective Date (the “Term”), automatically extends for successive Terms (each, a “Renewal Term”), and the Borrowers’ are obligated to pay the Lender an early termination fee in the event the SLR Agreement is terminated under certain circumstances prior to the end of any Term or Renewal Term, as more specifically set forth in the SLR Agreement.

In connection with the Facility, the Company agreed to, among other things, (i) pay a finance fee equal to 2% of the Maximum Amount, payable in 24 equal monthly installments on the last day of each month of the Term until paid in full, (ii) pay a servicing fee equal to 0.30% multiplied by the actual average daily amount of Advances outstanding at the time of determination (the “Outstanding Amount”) for the applicable month, on the last day of each calendar month during the Term (or so long as any obligations arising under the SLR Agreement are outstanding);

(iii) be charged a monthly financing fee (the “Financing Fee”), due upon receipt of full payment of a Financed Account by Lender, equal to 1/12 of (a) the prime rate plus 2% (the “Facility Rate”), multiplied by (b) the amount of the Outstanding Amount;

and (iv) utilize the facility such that the monthly average aggregate Advances outstanding is at $400,000 (the “Minimum Utilization”).

In the event that Borrower’s monthly utilization is less than the applicable Minimum Utilization for any month, the Financing Fee for such month shall be calculated as if the applicable Minimum Utilization has been satisfied.

Furthermore, the SLR Agreement imposes various restrictions on the activities of the Borrowers, including a prohibition on fundamental changes to the Company or its subsidiaries (including certain consolidations, mergers and sales and transfers of assets, and limitations on the ability of the Borrowers to grant liens upon their property or assets).

The SLR Agreement includes standard Events of Default (as defined in the SLR Agreement), and provide that, upon the occurrence of certain events of default, Lender may, among other things, immediately collect any obligation owing to Lender under the SLR Agreement, cease advancing money to the Borrowers, take possession of any collateral, and/or charge interest at a rate equal to the lesser of (i) 6% above the Facility Rate, and (ii) the highest default rate permitted by applicable law.

As security for the full and prompt payment and performance of any obligations arising under the SLR Agreement, the Borrowers granted to Lender a continuing first priority security interest in all the assets of the Borrowers.

The SLR Agreement also provides for customary provisions, including representations, warranties and covenants, indemnification, waiver of jury trial, arbitration, and the exercise of remedies upon a breach or default.

Acquisition of Melon, Inc.

On May 4, 2023 (the “Melon Closing Date”), we entered into an Asset Purchase Agreement (the “Purchase Agreement”) with Melon, Inc., a Delaware corporation (“Melon”), pursuant to which the Company acquired substantially all of the assets of Melon (the “Melon Assets”) (the “Melon Acquisition”).

The consummation of the Melon Acquisition (the “Closing”) occurred simultaneously with the execution of the Purchase Agreement.

Melon is a development studio building innovative virtual worlds in partnership with powerful consumer brands across music, film, TV, sports, fashion and youth culture.

With this acquisition, Super League further strengthens its position as a one-stop solutions provider and strategic operating partner for marquee brands and businesses seeking to expand and activate communities throughout the gaming metaverse.

At the Closing, the Company paid an aggregate total of $900,000 to Melon (the “Closing Consideration”), of which $150,000 was paid in cash, and the remaining $750,000 was paid in the form of shares of the Company’s common stock (with a closing date fair value of $722,000), valued at $9.64 (the “Closing Share Price”), the volume weighted average price (“VWAP”) of the Company’s common stock for the five trading days immediately preceding the Melon Closing Date, as quoted on the Nasdaq Capital Market.

Refer to the table at Note 5 for calculation of the fair value of consideration paid.

Pursuant to the terms and subject to the conditions of the Purchase Agreement, up to an aggregate of $2,350,000 (the “Contingent Consideration”) will be payable to Melon in connection with the achievement of certain revenue milestones for the period from the Closing until December 31, 2023 (the “First Earnout Period”) in the amount of $1,000,000, and for the year ending December 31, 2024 (the “Second Earnout Period) in the amount of $1,350,000 (the “Second Earnout Period” and the First Earnout Period are collectively referred to as the “Earnout Periods”).

The Contingent Consideration is payable in the form of cash and common stock, with $600,000 of the aggregate Contingent Consideration being payable in the form of cash, and $1,750,000 payable in the form of common stock, valued at the greater of (a) the Closing Share Price, and (b) the VWAP for the five trading days immediately preceding the end of each respective Earnout Period.

Additionally, pursuant to the Purchase Agreement, the Company entered into employment agreements with two former key Melon employees (“Key Melon Employees”), pursuant to which the Key Melon Employees were granted inducement awards consisting of restricted stock unit awards (“RSUs”) to acquire an aggregate of 103,780 shares of its common stock as described at Note 5.

Roblox Partner Program

On August 2, 2023, we announced that Super League joined the Roblox (NYSE:

RBLX) Partner Program.

As an early mover in building and distributing creative and impactful programs for brands, in partnership with hundreds of top Roblox developers, joining the Roblox Partner Program will allow Super League to elevate its offerings to include the official Roblox advertising system with Immersive Ads.

The added capabilities augment Super League’s powerful end-to-end, innovative solutions, enabling brands to reach the highly engaged audience on Roblox, a global immersive platform where over 66 million people connect and communicate daily.

Super League was an early mover in the space, enabling extensive third-party distribution for brands on Roblox by providing hundreds of developers in the community with measurement, monetization, and optimization tools.

Through the Roblox Partner Program, Super League is evolving its offering by repurposing its previous ad network to solely focus on Roblox’s Immersive Ads product to enable brands to reach audiences at scale.

Super League will be integrating Roblox’s Immersive Ads into its growing suite of cross-platform offerings and capabilities inclusive of experience creation, promotion, distribution, and monetization:

Highly immersive ad formats for the official Roblox advertising system;

Bespoke brand integrations into popular experiences;

Proprietary Pop-Up Shops, interactive characters, and integrated content products;

First-to-market home grown solution to turn digital in-experience codes into real-world physical redemptions;

Robust influencer marketing programs;

In-experience brand lift studies;

Expert video content creation for Tik Tok, YouTube, and more;

Metaverse strategy & innovation consulting.

Super League’s inclusion in the Roblox Partner Program, combined with its longstanding dedication to supporting hundreds of Roblox developers with software to help manage and grow their businesses, creates an unparalleled opportunity to achieve massive reach and powerful results for brands.

Immediate benefits of being part of the program include access to educational resources and training, along with comprehensive tools, collateral, and insights for brand onboarding and education.

LandVault Strategic Partnership

In April 2023, we formed a strategic partnership with LandVault, the largest construction company in the metaverse.

This created a unique powerful metaverse alliance ready to provide brands with scalable solutions and bridge the gap between Web2 and Web3.

Together, we have already launched programs in the UAE specific to virtual tourism and see significant opportunities in this vertical and others across the greater Gulf Cooperation Council (“GCC”) countries.

Equity Financings

Convertible Preferred Stock Issuances

Series AAA Convertible Preferred Financing

On the dates set forth in the applicable table below, we entered into subscription agreements with accredited investors in connection with the sale of an aggregate of 8,355 shares of newly designated Series AAA and AAA-2 Convertible Preferred Stock, each series having a $0.001 par value and a $1,000 purchase price, hereinafter collectively referred to as “Series AAA Preferred,” and the individual offerings of Series AAA Preferred stock, hereinafter collectively referred to as the “Series AAA Offerings”, raising gross proceeds of $8.4 million, before fees.

Series AA Convertible Preferred Financing

On the dates set forth in the applicable table below, we entered into subscription agreements with accredited investors in connection with the sale of an aggregate of 11,781 shares of newly designated Series AA, AA-2, AA-3, AA-4 and AA-5 Convertible Preferred Stock, each series having a $0.001 par value and a $1,000 purchase price, hereinafter collectively referred to as “Series AA Preferred,” and the individual offerings of Series AA Preferred stock hereinafter collectively referred to as the “Series AA Offerings”, raising gross proceeds of $11.8 million, before fees.

Series A Convertible Preferred Financing

On the dates set forth in the applicable table below, we entered into subscription agreements with accredited investors in connection with the sale of an aggregate of 12,622 shares of newly designated Series A, A-2, A-3, A-4 and A-5 Convertible Preferred Stock, each series having a $0.001 par value and a $1,000 purchase price, hereinafter collectively referred to as “Series A Preferred,” and the individual offerings of Series A Preferred stock, hereinafter, collectively referred to as the “Series A Offerings”, raising gross proceeds of $12.6 million, before fees.

In connection with the Series A Offerings, Series AA Offerings, and Series AAA Offerings (collectively, the “Preferred Offerings”), the Company filed Certificates of Designation of Preferences, Rights and Limitations of the respective series stock with the State of Delaware.

Use of net proceeds from the Preferred Offerings for the periods presented included working capital, repayment of certain indebtedness and general corporate purposes, including sales and marketing activities and product development.

The Company undertook the Preferred Offerings pursuant to certain placement agency agreements (collectively, the “Placement Agency Agreements”) with Aegis Capital Corporation, a New York corporation and registered broker-dealer and member of the Financial Industry Regulatory Authority (the “Placement Agent”), which acted as the Company’s exclusive placement agent for the Offerings.

Pursuant to the terms of the Placement Agency Agreements, in connection with the closings of the Offerings, the Company paid the Placement Agent aggregate cash fees, and non-accountable expense allowances as disclosed in the applicable tables below, and issued to the Placement Agent or its designees warrants to purchase shares of common stock as disclosed in the tables below, at the conversion prices disclosed below.

Refer to Liquidity and Capital Resources, below, and Note 7 for additional information.

Common Stock Issuances

On August 21, 2023, we entered into an underwriting agreement (the “Underwriting Agreement”) with Aegis Capital Corp.

(the “Underwriter”), relating to the Company’s public offering (the “Common Stock Offering”) of 778,653 shares of its common stock, and pre-funded warrants to purchase 67,500 shares of the Company’s common stock, in lieu of the Company’s common stock (the “Pre-Funded Warrants”, and collectively with the Shares, the “Firm Securities”) to certain investors.

Pursuant to the Underwriting Agreement, the Company also granted the Underwriters a 45-day option (“Option”) to purchase an additional 126,923 shares of the Company’s common stock and/or Pre-Funded Warrants (the “Option Securities”, and together with the Firm Securities, the “Securities”).

On September 12, 2023, the Underwriter partially exercised its Option and purchased an additional 32,616 shares of common stock at a price of $2.60 per share.

The issuance by the Company of the Option Securities resulted in total gross proceeds of approximately $84,800, before deducting underwriting discounts, commissions, and other offering expenses payable by the Company.

On August 23, 2023, the Company issued the Firm Securities and closed the Offering at a public price of $2.60 per share, and $2.58 per share underlying each Pre-Funded Warrant, for net proceeds to the Company of approximately $1.8 million after deducting underwriting discounts and commissions and estimated offering expenses payable by the Company.

Use of net proceeds from the Common Stock Offering for the periods presented included working capital and general corporate purposes, including sales and marketing activities and product development.

The Firm Securities were offered, issued, and sold pursuant to a prospectus supplement and accompanying prospectus filed with the Securities and Exchange Commission (the “SEC”) pursuant to an effective shelf registration statement filed with the SEC on Form S-3 (File No.

333-259347) (the “Registration Statement”) under the Securities Act of 1933, as amended (the “Securities Act”), as supplemented by a prospectus supplement, dated August 23, 2023, relating to the Securities (together with the accompanying base prospectus, dated September 7, 2021, the “Prospectus Supplement”), filed with the SEC pursuant to Rule 424(b) of the Securities Act on August 23, 2023.

Refer to “Liquidity and Capital Resources” and Note 7 below for additional information.

Compliance with NASDAQ Listing Rule 5550(a)(2)

On September 25, 2023, we received a written notice from The Nasdaq Stock Market (“Nasdaq”) informing us that the Company has regained compliance with the minimum bid price requirement under NASDAQ Listing Rule 5550(a)(2) (the “Rule”) for continued listing on the Nasdaq Capital Market.

Previously, On October 4, 2022, we received a letter (the “Letter”) from the Listing Qualifications Staff of Nasdaq, indicating that, based upon the closing bid price of our common stock for 30 consecutive business days, the Company was not currently 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 the Rule, and on April 4, 2023, we received an extension notice letter (the “Extension Notice”) from Nasdaq notifying the Company that Nasdaq has granted the Company a 180-day extension until October 2, 2023 (the “Extension Period”), to regain compliance with the Rule.

Sale of Minehut

On February 29, 2024, the Company sold its Minehut business unit (“Minehut”) to GamerSafer, Inc., a Delaware corporation (“GamerSafer”), in a transaction approved by the Board of Directors of the Company.

Pursuant to the Asset Purchase Agreement entered into by and between GamerSafer and the Company on February 26, 2024 (the “GS Agreement”), the Company will receive $1,000,000 of purchase consideration for Minehut, which amount will be paid by GamerSafer in revenue and royalty sharing over a period of two years, as described in the GS Agreement.

Other than with respect to the GS Agreement, there is no relationship between the Company or its affiliates with GamerSafer or its affiliates.

The transaction allows Super League to streamline its position in partnering with major brands to build, market, and operate 3D experiences across multiple immersive platforms, including open gaming powerhouses like Minecraft, and aligns with our cost improvement initiative.

The two companies will maintain a commercial relationship which ensures that Minehut can remain an ongoing destination available to Super League’s partners.

Our revenue fluctuates quarterly and is generally higher in the second half of our fiscal year, with the fourth quarter typically representing our highest revenue quarter each year.

Advertising spending is traditionally seasonally strong in the second half of each year, reflecting the impact of seasonal back to school, game release and holiday season advertising spending by brands and advertisers.

We believe that this seasonality in advertising spending affects our quarterly results, which generally reflect relatively higher advertising revenue in second half of each year, compared to the first half of the year.

Impact of COVID-19 Pandemic

The novel coronavirus and actions taken to mitigate the spread of it have had and are expected to continue to have an adverse impact on the economies and financial markets of many countries, including the geographical areas in which the Company operates.

It is unknown how long the adverse conditions associated with the coronavirus will last and what the complete financial effect will be to the Company.

Although we were impacted by the general deferral in advertising spending by brands and sponsors resulting from the COVID-19 pandemic for a significant portion of the year ended December 31, 2020 (“Fiscal Year 2020”), we reported significant quarter over quarter growth in revenue in the second half of Fiscal Year 2020, Fiscal Year 2021 and Fiscal Year 2022, and we expect to continue to expand our advertising revenue and revenue from the sale of our proprietary and third-party user generated content in future periods, as we continue to expand our advertising inventory, viewership and related sales activities.

For a discussion of the risk factors related to COVID-19, please refer to Part II, Item 1A.“"Risk Factors”" in elsewhere herein.

We believe that this seasonality in advertising spending affects our quarterly results, which generally reflect relatively higher advertising revenue in the second half of each year, compared to the first half of the year.

Results of Operations for the Fiscal Years Ended December 31, 2023 and 2022

We derived the financial data as of and for the years ended December 31, 2022 and 2021, set forth below, from our audited consolidated financial statements included elsewhere herein, and should be read in conjunction with those audited consolidated financial statements and related notes thereto, as well as the information found under this section.

We derived the financial data as of and for the Fiscal Years 2023 and 2022, set forth below, from our audited consolidated financial statements included elsewhere herein, and should be read in conjunction with those audited consolidated financial statements and related notes thereto, as well as the information found under this section.

Our historical results are not necessarily indicative of the results to be expected in future periods.

All references to “Note,”

followed by a number reference from one to eleven herein, refer to the applicable corresponding numbered footnotes to the consolidated financial statements contained elsewhere herein.

The following table sets forth a summary of our results of operations for the fiscal years ended December 31, 2022 and 2021:

All references to “Note,” followed by a number reference from one to twelve herein, refer to the applicable corresponding numbered footnotes to the consolidated financial statements contained elsewhere herein.

The following table sets forth a summary of our results of operations for Fiscal Years 2023 and 2022:

Fiscal Year Ended

COST OF REVENUE

4 unchanged sentences

Contingent consideration

Impairment of goodwill

Loss on intangible asset disposal

Impairment of intangible assets and goodwill

Total operating expense

4 unchanged sentences

Comparison of the Results of Operations for the Fiscal Years Ended December 31, 2023 and 2022

Revenue  

Advertising and sponsorships

Fiscal Year Ended

Media and advertising

Publishing and content studio

Direct to consumer

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Advertising and sponsorships

Advertising and sponsorship revenue increased driven primarily by a $3,795,000, or 53% increase in our direct sales advertising revenue, reflecting a 21% increase in our direct sales advertising revenue generating customers, driven by the growth of our premium in-game and in-stream advertising inventory, due in part to a full twelve months of revenues related to our FY 2021 Acquisitions, and an approximately 26% increase in the related average revenue per customer for Fiscal Year 2022, as compared to the prior year comparable period.

The increase also reflects a $2,391,000, or 492% increase in reseller advertising revenues reflecting the continued expansion of our global network sales partnerships focused on the expansion and acceleration of monetization of our unique advertising inventory.

Content sales revenue increased $1,647,000, or 73% driven primarily by a 24% increase in content sales revenue generating customers and an 11% increase in average content sales revenue per customer.

The increase also included $919,000 of product design and software development kit related revenue pursuant to a development agreement with a customer, which was completed during the first quarter of Fiscal Year 2022.

Direct to consumer revenue for Fiscal Year 2022 increased $406,000, or 29%, compared to the comparable prior year.

Direct to consumer revenue is primarily comprised of revenue generated from our Minehut digital property, which provides various Minecraft server hosting services on a subscription basis and other digital goods to the Minecraft gaming community, and direct to consumer in-game platform sales revenue through the sale of digital goods, including cosmetic items, durable goods, player ranks and game modes, within our Mineville and Pixel Paradise gaming servers.

Our Mineville and Pixel Paradise gaming servers leverage the flexibility of the Microsoft Minecraft Bedrock platform, are powered by our InPvP cloud architecture technology, and represent two of the seven official Microsoft Minecraft partner servers.

Revenue is generated when transactions are facilitated between Microsoft and the end user, either via in-game currency or cash.

Publishing and content studio

Total revenue increased $5.4 million, or 27%, to $25.1 million, compared to $19.7 million in the comparable prior year period.

Revenue for Fiscal Year 2022 included $919,000 of product design and software development kit related revenue pursuant to a development agreement with a customer.

Excluding product design and software development kit related revenue recognized during Fiscal Year 2022, total revenue for Fiscal Year 2023 increased $6.3 million, or 34% compared to the comparable prior year period.

Media and advertising revenue decreased $1.2 million, or 10%, to $10.9 million, compared to $12.1 million in the comparable prior year period.

The change reflected a $1.6 million increase in on-platform, off-platform and other related media sales revenue, offset by a $2.8 million decrease in influencer marketing related revenues, reflecting a strategic shift in the allocation of resources to higher margin media and custom products.

Publishing and content studio revenue, excluding product design and software development kit related revenue recognized during Fiscal Year 2022, increased $7.9 million, or 164%, driven primarily by a 253% increase in custom game development and immersive experience related revenues, including revenues for immersive experiences for Kraft Lunchables, Lego, Dave & Busters, Proctor & Gamble, Yas Island, Hamiliton, Arm & Hammer, Universal Pictures, “Trolls Band Together,” Universal Pictures, “Migration”, Canon and Motorola Solutions.

Publishing and content studio sales revenue for Fiscal Year 2022 included $919,000 of product design and software development kit related revenue pursuant to a development agreement with a customer.

Direct to consumer revenue decreased $383,000, or 21%, compared to the comparable prior year period, driven primarily by a 35% decrease in “in-game” platform sales of digital goods within our Mineville, official Microsoft Minecraft partner gaming server digital property, partially offset by a 26% increase in revenues for our Minehut digital property, which provides Minecraft server hosting services on a subscription basis and other digital goods to the Minecraft gaming community.

Cost of Revenues

Cost of revenue includes direct costs incurred in connection with the satisfaction of performance obligations under our revenue arrangements including internal and third-party engineering, creative, content, broadcast and other personnel, talent and influencers, developers, content capture and production services, direct marketing, cloud services, software, prizing, revenue sharing fees and venue fees.

Cost of revenue fluctuates period to period based on the specific programs and revenue streams contributing to revenue each period and the related cost profile of our physical and digital experiences, advertising campaigns and content sales activities occurring each period.

Cost of revenue increased $4,615,000, or 70%, driven primarily by, and consistent with, the 69% increase in related revenues for Fiscal Year 2022.

Cost of revenue includes direct costs incurred in connection with the satisfaction of performance obligations under our revenue arrangements including internal and third-party engineering, creative, content, broadcast and other personnel, talent and influencers, internal and third-party game developers, content capture and production services, direct marketing, cloud services, software, prizing, and revenue sharing fees.

Cost of revenue fluctuates period to period based on the specific programs and revenue streams contributing to revenue each period and the related cost profile of our physical and digital experiences, media and advertising campaigns and publishing and content studio sales activities occurring each period.

Cost of revenue increased $4.1 million, or 37%, driven primarily by the 27% increase in related revenues for the fiscal year periods presented.

The greater than proportionate change in cost of revenue was driven by partial delivery during the period under a significant custom integration and platform media revenue contract with a customer that had a higher average direct cost profile compared to the programs that generated revenues during the prior year period, and lower cost product design and software development kit related revenue recognized during the first quarter of Fiscal Year 2022.

Operating Expense

Fiscal Year Ended

Selling, marketing and advertising

2 unchanged sentences

Contingent consideration

Impairment of goodwill

Loss on intangible asset disposal

Impairment of intangible assets and goodwill

Total operating expense

Noncash Stock-Based Compensation Expense

Noncash stock-based compensation expense for the periods presented was included in the following operating expense line items:

Fiscal Year Ended

Selling, marketing and advertising

2 unchanged sentences

Total noncash stock-based compensation expense

On January 1, 2022, the Company issued 1,350,000 performance stock units (“PSUs”) under the Company’s 2014 Amended and Restated Stock Option and Incentive Plan, which vest in five equal increments of 270,000 PSUs, based on satisfaction of market related vesting conditions during the three-year period commencing on January 1, 2022, as described at Note 2 to the consolidated financial statements included elsewhere herein.

A market condition is reflected in the grant-date fair value of an award, and therefore, a Monte Carlo simulation model is utilized to determine the estimated fair value of the equity-based award.

Compensation cost is recognized for awards with a market condition, provided the requisite service period is satisfied, regardless of whether the market condition is ever satisfied.

Noncash stock compensation expense related to the PSUs totaled $2,142,000 for Fiscal Year 2022.

Amortization expense for the periods presented was included in the following operating expense line items:

Modifications to Equity-Based Awards

On January 1, 2022, the Company issued 67,500 performance stock units (“PSUs”) under the Company’s 2014 Amended and Restated Stock Option and Incentive Plan (the “2014 Plan”), which vest in five equal increments of 13,500 PSUs, based on satisfaction of market based vesting conditions, as described at Note 8.

Noncash stock compensation expense related to the PSUs, which is recognized on an accelerated basis over the derived term, totaled $299,000 and $2,142,000 for Fiscal Years 2023 and 2022, respectively.

On April 30, 2023, the Board approved the cancellation of the 67,500 PSUs previously granted to certain executives under the 2014 Plan (as described above).

In exchange for the cancelled PSUs, the executives were granted an aggregate of 67,500 PSUs, which vest, over a five-year term, upon the Company’s common stock achieving certain VWAP goals as follows:

(i) 20% upon achieving a 60-day VWAP of $16.00 per share, (ii) 20% upon achieving a 60-day VWAP of $20.00 per share;

(iii) 20% upon achieving a 60-day VWAP of $24.00 per share;

(iv) 20% upon achieving a 60-day VWAP of $28.00 per share;

and (v) 20% upon achieving a 60-day VWAP of $32.00 per share, in each case, as quoted on the Nasdaq Capital Market (“PSU Modification”).

Total incremental compensation cost related to the PSU Modification totaled $540,000 which is recognized over the remaining implied service period, ranging from .69 years to 1.5 years, calculated in connection with the Monte Carlo simulation model used to determine the fair value of the PSUs immediately before and after the modification.

Noncash stock compensation expense related to the modified PSUs, which is recognized on an accelerated basis over the derived term, totaled $351,000 for Fiscal Year 2023.

On April 30, 2023, the Board approved the cancellation of certain stock options to purchase an aggregate of 58,951 shares of the Company’s common stock previously granted to certain executives and employees under the 2014 Plan, with an average exercise price of approximately $56.40.

In addition, the Board approved the cancellation of certain warrants to purchase an aggregate of 26,100 shares of the Company’s common stock previously granted to certain executives and employees, with an average exercise price of approximately $199.80 (“Executive Grant Modification”).

In exchange for the cancelled options and warrants, certain executives and employees were granted options to purchase an aggregate of 305,000 shares of common stock under the 2014 Plan, at an exercise price of $9.80 (the closing price of the Company’s common stock as listed on the Nasdaq Capital Market on April 28, 2023, the last trading day before the approval of the awards), with one-third of the options vesting on the April 30, 2023, the grant date, with the remainder vesting monthly over the thirty-six month period thereafter, subject to continued service (“Executive Grant Modifications”).

The exercise of the options under these awards was contingent upon the Company receiving approval from its stockholders to increase the number of shares available under the 2014 Plan, which was obtained in connection with the Company’s 2023 annual shareholder meeting.

Total incremental compensation cost related to the Executive Grant Modifications totaled $347,000, $112,000 of which related to vested awards as of the modification date and was recognized as expense immediately, and $235,000 related to unvested awards which is recognized prospectively over the remaining service period of 3 years.

On May 1, 2023, the Board approved the cancellation of options to purchase an aggregate of 29,224 shares of the Company’s common stock previously granted to its employees under the 2014 Plan, in exchange for newly issued options to purchase an aggregate of 63,900 shares of the Company’s common stock under the 2014 Plan, at an exercise price equal to the closing trading price on May 1, 2023, or $9.81, with a range of zero to one-third of the options vesting on the May 1, 2023, the grant date, dependent upon the tenure of the employee, and the remainder vesting monthly over the forty-eight month period thereafter, subject to continued service (“Employee Grant Modifications”).

Unrecognized compensation expense related to the original award as of the date of the Employee Grant Modifications totaled $960,000 which is recognized prospectively over the remaining service period of 4 years.

Total incremental compensation cost related to the Employee Grant Modifications totaled $449,000, $101,000 of which related to vested awards as of the modification date and was recognized as expense immediately, and $348,000 related to unvested awards which is recognized prospectively over the remaining service period of 4 years.

Intangible Asset Amortization Expense

Intangible asset amortization expense for the periods presented was included in the following operating expense line items:

Fiscal Year Ended

Sales, marketing and advertising

2 unchanged sentences

Total amortization expense

The net increase in selling, marketing and advertising expense was primarily due to the following:

Selling, marketing and advertising personnel costs increased $1,172,000 or 18%, driven by the addition of 11 former Mobcrush employees in connection with the acquisition of Mobcrush and organic growth in connection with the increase in our inhouse direct sales and marketing team focused on monetization and personnel in our creative and content functions.

The Fiscal Year 2022 period includes twelve months of net expense related to employees acquired in connection with the June 2021 acquisition of Mobcrush, compared to seven months of net expense for Fiscal Year 2021.

Increase in noncash stock compensation expense totaling $145,000 driven by the impact of noncash compensation expense related to the PSUs issued on January 1, 2022, as described above.

The increase in selling, marketing and advertising expense also included a full year of amortization of partner, customer and advertiser related intangible assets acquired in connection with the 2021 Acquisitions, totaling $2,104,000 for Fiscal Year 2022.

2021 Acquisition related amortization of partner, customer and advertiser related intangible assets for Fiscal Year 2021 totaled $1,180,000, reflecting partial 2021 Acquisition related amortization for the period from the respective acquisition closing dates to December 31, 2021.

Selling, Marketing and Advertising

Selling, marketing and advertising expense increased $414,000 or 3%, primarily due to the following:

An increase in personnel costs and sales commissions totaling $1.3 million, including an increase in personnel costs totaling $608,000, in connection with the Melon Acquisition, which included the acquisition of ten former Melon full time resources, which are included in our client facing sales and marketing functions.

The increase was partially offset by a $625,000, or 63% decrease in digital and other marketing and sales consulting expenses during Fiscal Year 2023, in connection with ongoing cost reduction and optimization activities.

Engineering, Technology and Development

 Components of our platform are available on a “free to use,”

“always on basis,”

and are utilized and offered as an audience acquisition tool, as a means of growing our audience, engagement, viewership, players and community.

Engineering, technology and development related operating expense include the costs described below, incurred in connection with our audience acquisition and viewership expansion activities.

Engineering, technology and development related operating expense includes (i) allocated internal engineering personnel expense, including salaries, noncash stock compensation, taxes and benefits, (ii) third-party contract software development and engineering expense, (iii) internal use software cost amortization expense, and (iv) technology platform related cloud services, broadband and other platform expense, incurred in connection with our audience acquisition and viewership expansion activities, including tools and product offering development, testing, minor upgrades and features, free to use services, corporate information technology and general platform maintenance and support. Capitalized internal use software development costs are amortized on a straight-line basis over the software’s estimated useful life. 

The net increase in engineering, technology and development costs was primarily due to the following:

Engineering and product function personnel costs increased $3,545,000 or 106%, driven by an increase in engineering and product function personnel associated with the 2021 Acquisitions and Fiscal Year 2022 organic growth in personnel in connection with an increase in staffing of our in-house product and engineering team focused on the development and enhancement of our product and technology offerings and platforms.

Fiscal year 2022 includes approximately twelve months of net expense related to employees acquired in connection with the 2021 Acquisitions, compared to a partial period of net personnel expense for the Fiscal Year 2021, for the periods from the respective acquisition closing dates to December 31, 2021. The increase in engineering and product function personnel was partially offset in connection with ongoing investment prioritization and cost optimization activities, which resulted in a net decrease of 13 full-time engineering and product function personnel during the second half of Fiscal Year 2022.

The increase in engineering, technology and development costs for Fiscal Year 2022 also reflected an increase in cloud services and other technology platform costs totaling $240,000, primarily reflecting costs resulting from our 2021 Acquisitions, as well as continued strong engagement across our digital properties.

The increase also included a full year of amortization of developed technology related intangible assets acquired in connection with the 2021 Acquisitions totaling $1,349,000 for Fiscal Year 2022.

2021 Acquisition related amortization of developed technology related intangible assets for Fiscal Year 2021 totaled $631,000, reflecting partial 2021 Acquisition related amortization for the period from the respective acquisition closing dates to December 31, 2021.

Components of our platform are available on a “free to use,” “always on basis,” and are utilized and offered as an audience acquisition tool, as a means of growing our audience, engagement, viewership, players and community.

Engineering, technology and development related operating expenses include the costs described below, incurred in connection with our audience acquisition and viewership expansion activities.

Capitalized internal use software development costs are amortized on a straight-line basis over the software’s estimated useful life.

The net increase in engineering, technology and development costs was primarily due to the following:

Engineering, technology and development costs decreased $6.4 million, or 40% driven primarily by a decrease in cloud services and other technology platform costs totaling $3.3 million, or 58%, and a decrease in product and engineering personnel costs totaling $2.7 million, or 39%, reflecting the impact of ongoing cost reduction and optimization activities.

General and Administrative

General and administrative expense for the periods presented was comprised of the following:

Fiscal Year Ended

Personnel costs

4 unchanged sentences

Total general and administrative expense

The net increase in general and administrative expense for the periods presented was primarily due to the following:

Personnel costs increased primarily due to net increases in headcount in our finance and accounting function, human resources and operations functions.

Noncash stock compensation expense increased primarily due to $1,665,000 of noncash stock compensation expense recorded in connection with the PSUs granted on January 1, 2022, which vest in five equal tranches based on the achievement of certain Company stock price targets, as described at Note 2 to the consolidated financial statements elsewhere herein.

Depreciation and amortization expense included a full year of amortization of trademark, developer and influencer related intangible assets acquired in connection with the 2021 Acquisitions totaling $1,045,000 for Fiscal Year 2022.

2021 Acquisition related amortization of trademark, developer and influencer related intangible assets for Fiscal Year 2021 totaled $318,000, reflecting partial 2021 Acquisition related amortization for the period from the respective acquisition closing dates to December 31, 2021.

During the third quarter of Fiscal Year 2022 ,  the Company rebranded certain products acquired in connection with the acquisition of Mobcrush.

As a result, the Company recorded a write down of trademark related intangible assets acquired in connection with the acquisition of Mobcrush totaling $423,000, which is included as a component of amortization expense in general and administrative expense in the accompanying consolidated statement of operations for Fiscal Year 2022.

Other general and administrative expense decreased driven by a 38% decrease in D&O insurance premiums for the 2022-2023 policy period, which covers the period from March 2022 to February 2023.

The net decrease in general and administrative expense for the periods presented was primarily due to the following:

Personnel costs decreased due to headcount reductions in various corporate, general and administrative functions in connection with ongoing cost reduction and optimization activities.

Noncash stock compensation expense included in general and administrative expense decreased primarily due to a reduction in amortization of noncash stock compensation expense in connection with performance-based stock units granted on January 1, 2022, which vest based on the achievement of certain Company stock price targets, as described at Note 8, and are amortized on an accelerated basis in the earlier periods due to the utilization of a Monte Carlo simulation model to determine the estimated fair value of the equity-based award.

The decrease also reflects the impact of the PSU Modification, as described above, and the related reduction in the grant date fair market value of the underlying Company common stock, as compared to the original grant date fair market value, which is used as an input to the Monte Carlo simulation model utilized to determine the estimated fair value of the equity-based award on the modification date.

Professional fees costs decreased primarily due to legal and audit related professional fees incurred in the prior year period in connection with our June 2022 convertible debt financing which were expensed as incurred, a decrease in external legal fees due to the transitioning of the Company’s corporate legal services function from third-party consultant to inhouse, and a reduction in complex transaction related audit fees.

Depreciation and amortization expense decreased due primarily to certain products and offerings acquired in connection with the Mobcrush Acquisition being rebranded during Fiscal Year 2022.

As a result, the Company recorded a write down of trademark related intangible assets acquired in connection with the Mobcrush Acquisition totaling $423,000 during Fiscal Year 2022.

During the fourth quarter of 2023, the Note Holders (as defined at Note 6) made certain claims arising from an interpretation of certain rights that the Note Holders had pursuant to the terms of the SPA (as defined at Note 6).

On March 12, 2024, the Company and the Note Holders (the “Parties”) executed a Mutual General Release and Settlement Agreement (the “Settlement Agreement”) settling all claims between the Parties with respect to the SPA.

In consideration for the Settlement Agreement, the Company agreed to issue the Parties an aggregate amount of 500,000 shares of common stock (the “Settlement Payment”).

The Company accrued the fair value of the Settlement Payment as of December 31, 2023, resulting in a settlement expense of $760,000 which is included in general and administrative expense in the consolidated statement of operations.

Contingent Consideration

During Fiscal Year 2022, the Company determined that it was probable that the contingency associated with the Initial Earn Out Period (as defined at Note 5 to the consolidated financial statements) would be met in accordance with the terms of the Super Biz Purchase Agreement (as defined at Note 5 to the consolidated financial statements), and the applicable amounts were reasonably estimable, resulting in a charge to compensation expense totaling $3,206,000 (including approximately 988,000 shares of common stock valued at $0.336, the closing price of our common stock as of December 31, 2022), which is reflected in the consolidated statement of operations for the year ended December 31, 2022.

Refer to Note 5 for additional information.

Super Biz Acquisition

The Company hired the Founders of Super Biz Co.

(“Super Biz”) in connection with the acquisition of (i) substantially all of the assets of Super Biz (the “Super Biz Assets”), and (ii) the personal goodwill of the founders of Super Biz (the “Founders”) regarding Super Biz’s business (collectively, the “Super Biz Acquisition”).

Pursuant to the provisions of the Asset Purchase Agreement entered into for the Super Biz Acquisition (the “Super Biz Purchase Agreement”), in the event that a Founder ceases to be an employee during the period from the October 4, 2021 (the “Super Biz Closing Date”) until December 31, 2022, and for Fiscal Year 2023 (the “Super Biz Earnout Periods”), as a consequence of his resignation without good cause, or termination for cause, the Super Biz Contingent Consideration will be reduced by one-half (50%) for the respective Super Biz Earn Out Period, if and when earned.

Under the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 805 - Accounting For Contract Assets And Contract Liabilities From Contracts With Customers (“ASC 805”), a contingent consideration arrangement in which the payments are automatically forfeited if employment terminates is considered to be compensation for post-combination services, and not acquisition consideration.

As such, the Contingent Consideration, is accounted for as post-combination services and expensed in the period that payment of any amounts of Contingent Consideration is determined to be probable and reasonably estimable.

During Fiscal Year 2022, the Company determined that it was probable that the contingency for the Super Biz Earn Out Periods would be met in accordance with the terms of the Super Biz Purchase Agreement, and the applicable amounts were reasonably estimable.

Contingent Consideration is recorded as a liability in the accompanying consolidated balance sheets in accordance with FASB ASC Topic 480 – “Distinguishing Liabilities from Equity” (“ASC 480”), which requires freestanding financial instruments where the company must or could settle the obligation by issuing a variable number of its shares, and the obligation’s monetary value is based solely or predominantly on variations in something other than the fair value of the company's shares, to be recorded as a liability at fair value and re-valued at each reporting date, with changes in the fair value reported in the consolidated statements of operations.

The change in accrued Super Biz Contingent Consideration and the related impact on our consolidated statement of operations for the periods presented was comprised of the following:

Beginning balance

Change in fair value

Current period accrued contingent consideration

Contingent consideration payments (2)

Accrued contingent consideration (1)

As of December 31, 2023, includes 27,968 shares of common stock valued at $1.52, the closing price of our common stock as of the applicable period end date.

As of December 31, 2022, included 49,399 shares of common stock valued at $6.72, the closing price of our common stock as of December 31, 2022.

In April 2023, the Company paid accrued contingent consideration related to the Initial Earn Out Period, comprised of $2.9 million of cash payments and payment of 49,399 shares of our common stock valued at $548,000.

Melon Acquisition

On May 4, 2023, (the “Melon Acquisition Date”), Super League entered into the Melon Purchase Agreement with Melon, pursuant to which the Company acquired substantially all of the Melon Assets in the Melon Acquisition.

Pursuant to the terms and subject to the conditions of the Purchase Agreement, the Melon Contingent Consideration will be payable to Melon in connection with the achievement of certain revenue milestones for the Earnout Periods.

The Melon Contingent Consideration is payable in the form of cash and common stock, with $600,000 of the aggregate Melon Contingent Consideration being payable in the form of cash, and $1,750,000 payable in the form of common stock, valued at the greater of (a) the Closing Share Price, and (b) the VWAP for the five trading days immediately preceding the end of each respective Earnout Period.

In accordance with the acquisition method of accounting, the financial results of Super League presented herein include the financial results of Melon subsequent to the Melon Closing Date.

Disclosure of revenue and net loss for Melon on a stand-alone basis for the applicable periods presented is not practical due to the integration of Melon activities, including sales, products, advertising inventory, resource allocation and related operating expense, with those of the consolidated Company upon acquisition, consistent with Super League operating in one reporting segment.

The Company determined that the Melon Acquisition constitutes a business acquisition as defined by ASC 805.

Accordingly, the assets acquired, and liabilities assumed in the transaction were recorded at their estimated acquisition date fair values, while transaction costs associated with the acquisition, totaling approximately $47,000, were expensed as incurred pursuant to the acquisition method of accounting in accordance with ASC 805.

Super League’s preliminary purchase price allocation was based on an evaluation of the appropriate fair values of the assets acquired and liabilities assumed and represents management’s best estimate based on available data.

Fair values are determined based on the requirements of ASC 820.

The following table summarizes the determination of the fair value of the purchase price consideration paid in connection with the Melon Acquisition:

Cash consideration at closing

Equity consideration at closing – shares of common stock

Super League closing stock price per share on the Melon Closing Date

Fair value of equity consideration issued at closing

Fair value of contingent consideration at closing

Fair value of total consideration issued at closing

The purchase price allocation was based upon an estimate of the fair value of the assets acquired and the liabilities assumed by the Company in connection with the Melon Acquisition, as follows:

Assets Acquired and Liabilities Assumed:

Accounts receivable and other assets

Liabilities assumed

Identifiable intangible assets

Identifiable net assets acquired

Total purchase price

The following table presents details of the fair values of the acquired intangible assets of Melon:

Useful Life (in

Developed technology

Developer relationships

Customer relationships

Trade names / trademarks

Total intangible assets acquired

Contingent consideration is recorded as a liability in the accompanying consolidated balance sheets in accordance with ASC 480, which requires freestanding financial instruments where the company must or could settle the obligation by issuing a variable number of its shares, and the obligation's monetary value is based solely or predominantly on variations in something other than the fair value of the company's shares, to be recorded as a liability at fair value and re-valued at each reporting date, with changes in the fair value reported in the consolidated statements of operations.

The estimated fair value of the Melon Contingent Consideration was $538,000 at December 31, 2023.

The fair value of the Melon Contingent Consideration on the respective valuation dates was determined utilizing a Monte Carlo simulation model and measured using Level 3 inputs, as described at Note 2.

Assumptions utilized in connection with utilization of the Monte Carlo simulation model for the periods presented included risk free interest rates ranging from 4.04 % to 5.35%, volatility rates ranging from 70% to 85%, and a discount rate of 30%.

The change in fair value, which is included in contingent consideration expense in the accompanying statement of operations for the year ended December 31, 2023 was comprised of the following:

Initial balance – Melon Acquisition Date

Change in fair value

Current period accrued contingent consideration

Post closing adjustments (2)

Accrued contingent consideration (1)

Includes total contingent consideration for the First Earn Out Period totaling $333,000, including 72,118 shares of common stock valued at $1.52, the closing price of our common stock as of the applicable period end date.

The Melon Purchase Agreement provided for adjustments to the calculated Melon Contingent Consideration amounts to account for advanced payments made to Melon from customers prior to the Melon Acquisition Date, for which the corresponding work was not performed as of the Melon Acquisition Date.

Loss on intangible asset disposal

In June 2023 , the Company assigned the intangible assets originally acquired in connection with the Company’s acquisition of Bannerfy in fiscal year 2021, to the original sellers.

The assets were disposed of in connection with management’s review of operations and decision to allocate resources elsewhere.

As a result, the Company recorded a disposal of net developed technology related intangible assets acquired in connection with the acquisition of Bannerfy totaling $2,284,000, which is included in “Loss on intangible asset disposal” in the accompanying consolidated statement of operations for the year ended December 31, 2023.

Intangible Asset Impairment

Impairment Charges.

In the fourth quarter of Fiscal Year 2023 we recorded a non-cash impairment charge related to our partner relationship related intangible assets, comprised of our Microsoft Minecraft server and InPvP developed technology intangible assets originally acquired in connection with the acquisition of Mobcrush, Inc.

in June 2021.

The Company assesses the recoverability of long-lived assets whenever events or changes in circumstances indicate that their carrying value may not be recoverable.

The fair value was determined using a discounted cash flow approach, with cash flow projections over the remaining life of the intangible assets of five years and a discount rate of 16% based on the Company’s estimated cost of capital.

The impairment charge was based on the difference between the calculated fair value of the intangible assets totaling $860,000 and the carrying value of the applicable intangible assets which totaled $7,912,000 as of December 31, 2023.

Impairment of Goodwill

As described at Note 2 to the consolidated financial statements elsewhere herein, we performed goodwill impairment tests as of September 30, 2022 and December 31, 2022 (“Measurement Dates”).

We utilized the market capitalization of the Company (Level 1 observable input) as of the respective Measurement Dates to estimate the fair value of the Company’s single reporting unit.

As described at Note 2, we performed goodwill impairment tests as of September 30, 2022 and December 31, 2022 (“Measurement Dates”).

We utilized the market capitalization of the Company (Level 1 observable input) as of the respective Measurement Dates to estimate the fair value of the Company’s single reporting unit.

The estimated market capitalization was determined by multiplying the applicable measurement date stock prices and the common shares outstanding as of the respective Measurement Dates.

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Other Income (Expense)

On May 16, 2022, the Company entered into a securities purchase agreement with three institutional investors providing for the sale and issuance of a new series of senior convertible notes in the aggregate original principal amount of $4,320,000 (of which 8% was an original issue discount) which accrues interest at a guaranteed annual rate of 9% per annum, as described below and at Note 6 to the consolidated financial statements elsewhere herein.

Change in Fair Value of Warrant Liability

The Placement Agent Warrants issued in connection with the Preferred Offerings include provisions that are triggered in the event of the occurrence of a Fundamental Transaction, as defined in the underlying warrant agreement, which contemplates the potential for certain transactions that result in a third-party acquiring more than 50% of the outstanding shares of common stock of the Company for cash or other assets.

Given the existence of multiple classes of voting stock for the Company, as described herein, the Fundamental transaction provisions in the warrant agreements could result in a 50% or more change in ownership of outstanding common stock, without a 50% change in voting interests.

As such, the Placement Agent Warrants are not eligible for the scope exception under ASC 815, “Derivatives and Hedging,” (“ASC 815”), and therefore, the fair value of the Placement Agent Warrants are recorded as a liability at fair value on the consolidated balance sheet and re-valued at each reporting date, with changes in the fair value reported in the consolidated statements of operations.

The change in warrant liability and the related income statement impact for the applicable periods was comprised of the following:

Fiscal Year Ended

Beginning balance

Initial fair value of Series A and AA Preferred warrant liability – grant date

Initial fair value of Series AAA Preferred (including warrants issued in connection with the Exchange) warrant liability – grant date

Change in fair value (1)

Fair value of warrant liability

Reflected in the consolidated statement of operations for the applicable period.

Loss on Exchange of Placement Agent Warrants

In December 2023, as further described in Note 7, with respect to shares of Series AAA Preferred Stock issued in exchange for shares of Series A Preferred and Series AA Preferred, in the Series AAA Offerings (the “Exchange”), the Placement Agent exchanged previously issued Placement Agent Warrants to purchase 88,403 shares of common stock of the Company that were issued in connection with the Company’s Series A Offerings and Series AA Offerings, at exercise prices ranging from $7.60 to $13.41 per share, for new Placement Agent Warrants to purchase a total of 347,428 shares of common stock at an exercise price of $1.674 per share and 199,778 shares of common stock at an exercise price of $1.71 per share.

The terms of the new Placement Agent Warrants and the original placement agent warrants (recorded as a liability under ASC 815) was determined to be substantially different based on an analysis of the fair value of each instrument immediately before and after the modification, resulting in a loss on extinguishment recognized in current earnings totaling $681,000.

Convertible Debt

Convertible note related interest expense for Fiscal Year 2022 totaled $670,000, which was comprised of interest expense totaling $389,000, and the amortization of original issue discount totaling $280,000.

In May 2020, we entered into a forgivable loan from the U.

Small Business Administration (“SBA”) resulting in net proceeds of approximately $1.2 million pursuant to the Paycheck Protection Program (“PPP”) enacted by Congress under the Coronavirus Aid, Relief, and Economic Security Act (15 U.S.C.

636(a)(36)) (the “CARES Act”) administered by the SBA (the “PPP Loan”).

To facilitate the PPP Loan, we entered into a note payable agreement with a third-party lender (the “PPP Loan Agreement”). In May 2021, the PPP loan and accrued interest was forgiven pursuant to the terms and conditions of the PPP Loan Agreement and the provision of the Cares Act.

Upon forgiveness, and legal release, we reduced the liability by the amount forgiven, totaling $1,213,000 and recorded a gain on extinguishment in the accompanying statement of operations for Fiscal Year 2021.

Benefit for Income Taxes

Release of Valuation Allowance .

Since inception, we have maintained a full valuation allowance against our net deferred tax assets.

The net deferred tax liability resulting from the acquisition of Mobcrush created a source of income to utilize against our existing net deferred tax assets.

Under the acquisition method of accounting, the impact on the acquiring company’s deferred tax assets is recorded outside of acquisition accounting.

Accordingly, the valuation allowance on a portion of the Company’s net deferred tax assets was released, resulting in an income tax benefit of approximately $3,073,000, recorded as a credit to income tax expense for Fiscal Year 2021.

The offsetting amounts reduced net deferred tax liabilities, $3,073,000 of which reduced the net deferred tax liability established in connection with the application of the acquisition method of accounting for the acquisition of Mobcrush.

In June 2023, the Company assigned the intangible assets originally acquired in connection with the Company’s acquisition of Bannerfy, Ltd.

(“Bannerfy”)(the “Bannerfy Acquisition”) in 2021, to the original sellers, as described at Note 4.

The Bannerfy Acquisition was treated for tax purposes as a nontaxable transaction and, as such, the historical tax bases of the acquired assets and assumed liabilities, net operating losses, and other tax attributes of Bannerfy carried over, with no step-up to fair value of the underlying tax bases of the acquired net assets.

The acquisition method of accounting included the establishment of a net deferred tax liability resulting from book tax basis differences related to assets acquired and liabilities assumed on the date of acquisition.

When an acquisition of a group of assets is purchased in a transaction that is not accounted for as a business combination under FASB ASC Topic 805 – Business Combinations (“ASC 805”), a difference between the book and tax bases of the assets arises.

FASB ASC Topic 740 – Income Taxes (“ASC 740”), required the use of simultaneous equations to determine the assigned value of the asset and the related deferred tax asset or liability.

As a result of the disposal of the Bannerfy intangible assets, the Company fully amortized the related remaining net deferred tax liability, resulting in a $313,000 tax benefit reflected in the consolidated statement of operations for the year ended December 31, 2023.

Liquidity and Capital Resources

Cash and cash equivalents totaled approximately $2.5 million and $14.5 million at December 31, 2022 and 2021, respectively.

Cash and cash equivalents totaled approximately $7.6 million and $2.5 million at December 31, 2023 and 2022, respectively.

The change in cash and cash equivalents for the periods presented reflects the impact of operating, investing and financing cash flow related activities, as described below.

The accompanying consolidated financial statements have been prepared assuming the Company will continue as a going concern, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business.

Including a noncash goodwill impairment charge of $50.3 million in Fiscal Year 2022, the Company incurred net losses of $85.5 million and $20.7 million during Fiscal Year 2022 and Fiscal Year 2021, respectively, and had an accumulated deficit of $210.7 million (including Fiscal Year 2022 noncash goodwill impairment charges of $50.3 million) as of December 31, 2022.

For Fiscal Year 2022, net cash used in operating activities totaled $19.8 million.

To date, our principal sources of capital used to fund our operations and growth have been the net proceeds received from equity and debt financings. We have and will continue to use significant capital for the growth and development of our business, and, as such, we expect to seek additional capital either from operations or that may be available from future issuance(s) of common stock, preferred stock and / or debt financings, to fund our planned operations.

The Company incurred net losses of $30.3 million and $85.5 million for Fiscal Year 2023 and 2022, respectively, and had an accumulated deficit of $249.0 million as of December 31, 2023.

Noncash stock compensation, amortization and impairment charges for Fiscal Year 2023 and 2022 totaled $17.3 million and $60.1 million, respectively.

For Fiscal Years 2023 and 2022, net cash used in operating activities totaled $15.5 million and $19.8 million, respectively.

To date, our principal sources of capital used to fund our operations and growth have been the net proceeds received from equity and debt financings.

We have and will continue to use significant capital for the growth and development of our business, and, as such, we expect to seek additional capital either from operations or that may be available from future issuance(s) of common stock or debt financings, to fund our planned operations.

Accordingly, our results of operations and the implementation of our long-term business strategies have been and could continue to be adversely affected by general conditions in the global economy, including conditions that are outside of our control.

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A severe or prolonged economic downturn could result in a variety of risks to our business and could have a material adverse effect on us, including limiting our ability to obtain additional funding from the capital and credit markets.

In management’s judgement, these conditions raise substantial doubt about the ability of the Company to continue as a going concern as contemplated by Accounting Standards Codification (“ASC”) 205-40, “Going Concern”

(“ASC 205-40”).

Management ’

The Company experienced significant growth in Fiscal Year 2022 and Fiscal Year 2021 through organic and inorganic growth activities, including the expansion of our premium advertising inventory and quarter over quarter and year over year increases in recognized revenue across our three primary revenue streams.

In Fiscal Year 2022, we focused on the continued expansion of our service offerings and revenue growth opportunities through internal development, collaborations, and through opportunistic strategic acquisitions, as well as management and reduction of costs.

In management’s judgement, these conditions raise substantial doubt about the ability of the Company to continue as a going concern as contemplated by FASB ASC 205-40, “Going Concern,” (“ASC 205”).

Management ’ s Plans

The Company experienced significant growth during the periods presented through organic and inorganic growth activities, including the expansion of our premium advertising inventory and quarter over quarter and year over year increases in recognized revenue across our primary revenue streams.

In Fiscal Year 2023, we acquired Melon, as described above, and focused on the continued expansion of our service offerings and revenue growth opportunities through internal development, collaborations, and through opportunistic strategic acquisitions, as well as management and reduction of costs.

Management continues to explore alternatives for raising capital to facilitate our growth and execute our business strategy, including strategic partnerships and or other forms of equity or debt financings.

Series A Preferred Stock Financing

During the fourth quarter of Fiscal Year 2022, we entered into subscription agreements with accredited investors in connection with the sale of an aggregate of 10,323 shares of newly designated Series A, A-2, A-3 and A-4 Convertible Preferred Stock, each series having a $0.001 par value and a $1,000 purchase price, raising net proceeds totaling $8,926,000, after deducting placement agent and other financing costs totaling $1,397,000.

In addition, on January 31, 2023, we entered into subscription agreements with accredited investors in connection with the sale of an aggregate of 2,299 shares of newly designated Series A-5 Convertible Preferred Stock, par value $0.001 per share (collectively with the Series A, A-2, A-3 and A-4 Convertible Preferred Stock, the “Series A Preferred”), at a purchase price of $1,000 per share, raising net proceeds of $2,000,000, after deducting placement agent costs of $299,000.

The Company sold the shares of Series A Preferred pursuant to a Placement Agency Agreement (the “Placement Agency Agreement”) with a registered broker dealer, which acted as the Company’s exclusive placement agent (the “Placement Agent”) for the offer and sale of the Series A Preferred (the “Series A Offering”).

In connection with the Series A Offering, pursuant to the terms of the Placement Agency Agreement, the Company paid the Placement Agent an aggregate of $1,697,000 in Placement Agent fees and costs, and will issue to the Placement Agent or its designees warrants (the “Placement Agent Warrants”) to purchase 3,249,974 shares of Common Stock at a weighted average exercise price of $0.56 per share. The Placement Agent Warrants provide for a cashless exercise feature and are exercisable for a period of five years from the Effective Date.

In addition, the Company agreed to grant the Placement Agent the right to appoint, subject to the Company’s approval, one representative to serve as a member of the Company’s Board of Directors upon the closing of at least $10 million in the Series A Offering.

Concurrently with the Series A Preferred subscription agreements, the Company and the holders of the Series A Preferred entered into a Registration Rights Agreement, pursuant to which the Company agreed to file a registration statement covering the resale of the shares of common stock issuable upon conversion of the Series A Preferred within 60 days following the final closing of the Series A Offering and to use its best efforts to cause such registration statement to become effective within 90 days of the filing date.

Use of net proceeds from the Series A Offering include the repayment of certain indebtedness and working capital and general corporate purposes, including sales and marketing activities and product development.

Pursuant to the terms of the SPA (Note 6), as of March 31, 2023, $4.2 million of the net proceeds were utilized in connection with the partial redemption of the Notes (as defined below).

Securities Purchase Agreement

On May 16, 2022, the Company entered into a securities purchase agreement (the “SPA”) with three institutional investors (collectively, the “Note Holders”) providing for the sale and issuance of a new series of senior convertible notes in the aggregate original principal amount of $4,320,000, of which 8% was an original issue discount (each, a “Note,”

and, collectively, the “Notes,”

and such financing, the “Note Offering”).

Each Note accrued interest at a guaranteed annual rate of 9% per annum, matures 12 months from the date of issuance, and was convertible at the option of the Note Holders into that number of shares of the Company’s common stock, equal to the sum of the outstanding principal balance, accrued and unpaid interest, and accrued and unpaid late charges (the “Conversion Amount”), divided by $4.00, subject to adjustment upon the occurrence of certain events as more specifically set forth in the Note.

Concurrently with the SPA, the Company and the Note Holders entered into a Registration Rights Agreement, pursuant to which the Company filed a Registration Statement on Form S-3 within 30 days after the closing of the Note Offering.

See Note 6 to the consolidated financial statements contained elsewhere in this Report for additional information about the Note Offering.

As of December 31, 2022, the balance of the Notes and related accrued interest totaled $719,000 which was subsequently paid in full in the first quarter of fiscal year 2023.

Common Stock Purchase Agreement

On March 25, 2022, we entered into a common stock purchase agreement (the “Purchase Agreement”) with Tumim Stone Capital, LLC (“Tumim”), pursuant to which we have the right, but not the obligation, to sell to Tumim, and Tumim is obligated to purchase up to up to $10,000,000 of newly issued shares (the “Total Commitment”) from time to time during the term of the Purchase Agreement.

As consideration for Tumim’s commitment to purchase shares of common stock under the Purchase Agreement, we issued to Tumim 50,000 shares of common stock (the “Commitment Shares”), valued at $100,000, following the execution of the Purchase Agreement.

The Purchase Agreement initially precludes us from issuing and selling more than 7,361,833 shares of our common stock, including the Commitment Shares, which number equals 19.99% of our common stock issued and outstanding as of March 25, 2022, unless we obtain stockholder approval to issue additional shares, or unless certain exceptions apply.

In addition, a beneficial ownership limitation in the agreement initially limits us from directing Tumim to purchase shares of common stock if such purchases would result in Tumim beneficially owning more than 4.99% of the then-outstanding shares of our common stock (subject to an increase to 9.99% at Tumim’s option upon at least 61 calendar days’

See Note 7 to the consolidated financial statements contained elsewhere in this Report for additional information about the Tumim Offering.

We may continue to evaluate potential strategic acquisitions.

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If we fail to obtain additional financing when needed, we may not be able to execute our business plans which, in turn, would have a material adverse impact on our financial condition, our ability to meet our obligations, and our ability to pursue our business strategies.

Recent Series AAA Convertible Preferred Financing

On the dates set forth in the table below, we entered into subscription agreements with accredited investors in connection with the sale and exchange of an aggregate of 8,355 shares of newly designated Series AAA and AAA-2 Convertible Preferred Stock, each series having a $0.001 par value and a $1,000 purchase price, hereinafter collectively referred to as “Series AAA Preferred,” and the individual offerings of Series AAA Preferred stock hereinafter collectively referred to as the Series AAA Offerings, as follows:

November 30, 2023

December 22, 2023

Issued upon final closing of the Series AAA Preferred Stock offering, effective as of the respective closing dates.

Use of net proceeds from the Series AAA Offerings for the periods presented included working capital and general corporate purposes, including sales and marketing activities and product development.

See Note 6 for additional information.

Cash Flows for the Fiscal Years Ended December 31, 2023 and 2022

The following table summarizes the change in cash and cash equivalents for the periods presented:

Fiscal Year Ended

Net cash used in operating activities

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Cash Flows from Operating Activities.

Net cash used in operating activities for Fiscal Year 2022 primarily reflected our net GAAP loss for Fiscal Year 2022, net of adjustments to reconcile net GAAP loss to net cash used in operating activities, which included $50,263,000 of goodwill impairment charges, $4,263,000 of noncash stock compensation charges, depreciation and amortization of $5,403,000, and a write down of a trademark related intangible asset totaling $423,000.

Changes in working capital primarily reflected the impact of the settlement of receivables and payables in the ordinary course.

Net cash used in operating activities for Fiscal Year 2021 primarily reflected our net GAAP loss for Fiscal Year 2021, net of adjustments to reconcile net GAAP loss to net cash used in operating activities, which included $2,381,000 of noncash stock compensation charges, depreciation and amortization of $3,323,000, a noncash gain totaling $1,213,000 in connection with the forgiveness of our PPP Loan in May 2021 and changes in valuation allowance and deferred income taxes totaling $3,073,000.

Net cash used in operating activities during Fiscal Year 2023, primarily reflected our net loss, net of adjustments to reconcile net loss to net cash used in operating activities, which included noncash stock compensation charges of $2,735,000, depreciation and amortization charges of $5,376,000, intangible asset impairment charges of $7,052,000, disposal of intangible asset charges of $2,284,000, net changes in fair value of warrant liabilities of ($2,898,000) and net changes in working capital of $116,000.

Changes in working capital primarily reflected the impact of the settlement of receivables and payables in the ordinary course and the payment of the cash portion of the Super Biz Contingent Consideration, as described above.

Net cash used in operating activities for Fiscal Year 2022 primarily reflected our net loss for Fiscal Year 2022, net of adjustments to reconcile net loss to net cash used in operating activities, which included $50,263,000 of goodwill impairment charges, $4,263,000 of noncash stock compensation charges, depreciation and amortization of $5,403,000, and a write down of a trademark related intangible asset totaling $423,000.

Changes in working capital primarily reflected the impact of the settlement of receivables and payables in the ordinary course.

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Cash flows from investing activities were comprised of the following for the periods presented:

Cash acquired in connection with the acquisition of Mobcrush, net

Cash paid in connection with the acquisition of Bannerfy, net

Cash paid in connection with the acquisition of Super Biz, net

Fiscal Year Ended

Cash paid in connection with the acquisition of Melon, net

Purchase of property and equipment

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Net cash used in investing activities

Acquisition of Mobcrush.

On June 1, 2021, we completed the Acquisition of Mobcrush pursuant to which we acquired all of the issued and outstanding shares of Mobcrush.

At closing, the Company issued to the former stockholders of Mobcrush an aggregate total of 12,067,571 shares of common stock and reserved an aggregate total of 514,633 shares of common stock for issuance pursuant to stock options to be granted to Mobcrush employees retained in connection with the Acquisition of Mobcrush, resulting in a total of 12,582,204 shares of common stock issued and reserved as consideration for the Acquisition of Mobcrush.

Upon completion of the Acquisition of Mobcrush, Mobcrush became a wholly owned subsidiary of the Company.

Refer to Note 5 to the consolidated financial statements herein for information regarding assets acquired and liabilities assumed in connection with the Acquisition of Mobcrush.

Acquisition of Bannerfy, LTD.

On August 24, 2021 (the “Bannerfy Closing Date”), the Company completed the acquisition of Bannerfy, Ltd., (“Bannerfy”) pursuant to which the Company acquired all of the issued and outstanding common shares of Bannerfy.

Pursuant to the Share Purchase Agreement, dated August 11, 2021 (the “Bannerfy Purchase Agreement”), the Company paid initial consideration of $2.45 million (the “Bannerfy Closing Consideration”), as follows:

(i) $525,000 in the form of a cash payment, and (ii) $1.925 million in the form of shares of the Company’s common stock at a price per share of $4.10, the closing price of the Company’s common stock on the date of the Bannerfy Purchase Agreement, as reported on the Nasdaq Capital Market.

Pursuant to the terms of the Bannerfy Purchase Agreement, $275,000 of the Bannerfy Closing Consideration (the “Holdback Amount”), was withheld from the Bannerfy Closing Consideration to satisfy any indemnifiable Losses incurred by the Company (as defined in the Bannerfy Purchase Agreement) prior to the first anniversary of the Bannerfy Closing Date.

The Company incurred no indemnifiable losses prior to the first anniversary of the Bannerfy Closing Date, and therefore during the three months ended September 30, 2022, the Company released to the Sellers the Holdback Amount as follows:

(i) $55,000 payable in the form of cash, and (ii) approximately $220,000 in the form of shares of the Company’s common stock at a price of $4.10.

In accordance with the Bannerfy Purchase Agreement, all remaining portions of the Bannerfy Purchase Price subsequent to the payment of the Bannerfy Closing Consideration, up to approximately $4.55 million (the “Contingent Consideration”), is payable upon the achievement of certain revenue and gross profit thresholds for the remainder of Fiscal Year 2021, and each of the fiscal years ending December 31, 2022, and December 31, 2023 (“Earnout Periods”).

Refer to Note 5 to the consolidated financial statements herein for additional information.

Acquisition of Super Biz Co.

On October 4, 2021 (“Super Biz Closing Date”), the Company entered into an Asset Purchase Agreement (the “Super Biz Purchase Agreement”) with Super Biz and the founders of Super Biz (the “Founders”), pursuant to which the Company acquired (i) substantially all of the assets of Super Biz, and (ii) the personal goodwill of the Founders regarding Super Biz’s business, (the “Super Biz Acquisition”).

The consummation of the Super Biz Acquisition (the “Super Biz Closing”) occurred simultaneously with the execution of the Super Biz Purchase Agreement on the Super Biz Closing Date.

On the Super Biz Closing Date, the Company paid an aggregate total of $6.0 million to Super Biz and the Founders, of which $3.0 million was paid in the form of cash and $3.0 million was paid in the form of shares of the Company’s common stock, at a per share price of $2.91, the closing price of the Company’s common stock on the Super Biz Closing Date, as reported on the Nasdaq Capital Market.

Pursuant to the terms and subject to the conditions of the Super Biz Purchase Agreement, up to aggregate amount $11.5 million will be payable to Super Biz and the Founders in connection with the achievement of certain revenue milestones for the period from the Super Biz Closing Date until December 31, 2022 and for the fiscal year ending December 31, 2023 (the “Super Biz Contingent Consideration”).

The Super Biz Contingent Consideration is payable in the form of both cash and shares of the Company’s common stock, in equal amounts, as more specifically set forth in the Super Biz Purchase Agreement.

As of December 31, 2022, the Company determined that it was probable that the contingency for the Initial Earn Out Period would be met in accordance with the terms of the Super Biz Purchase Agreement, and the applicable amounts were reasonably estimable, resulting in a charge to compensation expense totaling $3,206,000 (including approximately 988,000 shares of common stock valued at $0.336, the closing price of our common stock as of December 31, 2022), which is reflected in general and administrative expense in the consolidated statement of operations for the year ended December 31, 2022.

Melon Acquisition.

On May 4, 2023, we entered into an Asset Purchase Agreement with Melon, pursuant to which the Company acquired substantially all of the assets of Melon, as described above.

At the Closing, the Company paid an aggregate total of $900,000 to Melon, of which $150,000 was paid in cash, and the remaining $750,000 was paid in the form of shares of the Company’s common stock, valued at the Closing Share Price, as described above.

Capitalized Internal Use Software Costs .

Software development costs incurred to develop internal-use software during the application development stage are capitalized and amortized on a straight-line basis over the software’s estimated useful life, which is generally three years.

Software development costs incurred during the preliminary stages of development are charged to expense as incurred.

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Purchase of Third-Party Game Property.

In June 2022, we purchased 

Anime Battlegrounds  

X , a highly rated game on Roblox, from a third-party game developer.

The total purchase price of $500,000 was capitalized and is being amortized to cost of revenue over the estimated useful life of 5 years.

In June 2022, we purchased Anime Battlegrounds X , a highly rated game on Roblox, from a third-party game developer.

The total purchase price of $500,000 was capitalized and is being amortized over the estimated useful life of 5 years.

Cash Flows from Financing Activities .

Cash flows from financing activities were comprised of the following for the periods presented:

Proceeds from issuance of preferred stock, net of issuance costs (Note 7)

Proceeds from issuance of common stock, net of issuance costs (Note 7)

Proceeds from convertible notes, net (Note 6)

Payments on convertible notes (Note 6)

Fiscal Year Ended

Proceeds from issuance of preferred stock, net of issuance costs

Proceeds from issuance of common stock, net of issuance costs

Proceeds from convertible notes, net

Payments on convertible notes

Proceeds from common stock options and purchase warrant exercises

Net cash provided by financing activities

Convertible Preferred Stock

During the fourth quarter of Fiscal Year 2022, we entered into subscription agreements with accredited investors relating to offerings with respect to the sale of an aggregate of 10,323 shares of newly designated Series A, A-2, A-3 and A-4 Convertible Preferred Stock, each series having a $0.001 par value and a $1,000 purchase price, hereinafter collectively referred to as “Series A Preferred,”

and the individual offerings of Series A Preferred stock hereinafter collectively referred to as the Series A Offerings, as follows:

Series Designation

Conversion Price

Gross Proceeds

Conversion Shares

Placement Agent Warrants

Equity Financings

Issuances of Convertible Preferred Stock

During Fiscal Years 2023 and 2022, we entered into subscription agreements with accredited investors relating to offerings with respect to the sale of an aggregate of 32,758 newly designated series of convertible preferred stock (including Series A Preferred, Series AA Preferred, and Series AAA Preferred), each series having a $0.001 par value and a $1,000 purchase price, hereinafter collectively referred to as “Convertible Preferred,” and the individual offerings of Convertible Preferred stock hereinafter collectively referred to as the Preferred Offerings, as follows:

Series AAA Convertible Preferred Offerings

November 30, 2023

December 22, 2023

Issued upon final closing of the Series AAA Offerings, effective as of the respective closing dates.

Series AA Convertible Preferred Offerings

April 19, 2023

April 20, 2023

April 28, 2023

Issued on May 26, 2023, effective as of the applicable closing date, upon final closing of the Series AA Offerings.

The conversion price for Series AA Preferred outstanding as of August 23, 2023, totaling 10,706 shares of Series AA Preferred, was adjusted to $2.60 as a result of the Series AA Down Round Feature described at Note 7.

The Conversion price for Series AA Preferred outstanding as of November 30, 2023, totaling 7,322 shares of Series AA Preferred, was adjusted as described at Note 7, as a result of the Series AA Down Round Feature described at Note 7.

Series A Convertible Preferred Offerings

November 22, 2022

November 28, 2022

November 30, 2022

December 22, 2022

As disclosed at Note 6, in the event the Company consummated a subsequent equity financing during the term of the Notes, the Company is required, at the option of the Note Holders, to use 50% of the gross proceeds raised from such sale to redeem all or any portion of the Notes outstanding upon closing of such equity financing.

For the Fiscal Year 2022, $3,621,000 of the net proceeds from the Series A Offerings were utilized in connection with the partial redemption of the Notes.

January 31, 2023

Issued on May 26, 2023, effective as of the applicable closing date, upon final closing of the Series A Offerings.

Use of net proceeds from the Preferred Offerings include the repayment of certain indebtedness and working capital and general corporate purposes, including sales and marketing activities and product development.

As disclosed at Note 6, in the event the Company consummated a subsequent equity financing during the term of the Notes, the Company was required, at the option of the Note Holders, to use 50% of the gross proceeds raised from such sale to redeem all or any portion of the Notes outstanding upon closing of such equity financing.

For Fiscal Years 2023 and 2022, $719,000 and $3,782,000, respectively, of the Series A Offerings net proceeds were utilized in connection with the redemption of the Notes.

Issuances of Common Stock

On August 21, 2023, we entered into the Underwriting Agreement with the Underwriter (as defined above), relating to the Company’s Common Stock Offering of the Firm Securities to certain investors.

Pursuant to the Underwriting Agreement, the Company also granted the Underwriters the Option to purchase the Option Securities.

On September 12, 2023, the Underwriter partially exercised its Option and purchased an additional 32,616 shares of common stock at a price of $2.60 per share.

Each Pre-Funded Warrant had an exercise price per share of common stock equal to $0.001 per share.

The exercise price and the number of shares of common stock issuable upon exercise of each Pre-Funded Warrant was subject to appropriate adjustments in the event of certain stock dividends and distributions, stock splits, stock combinations, reclassifications or similar events affecting the common stock.

Under the Pre-Funded Warrants, a holder would not be entitled to exercise any portion of any Pre-Funded Warrant that, upon giving effect to such exercise, would cause:

(i) the aggregate number of shares of common stock beneficially owned by such holder (together with its affiliates) to exceed 4.99% of the number of shares of common stock outstanding immediately after giving effect to the exercise;

or (ii) the combined voting power of the Company’s securities beneficially owned by such holder (together with its affiliates) to exceed 4.99% of the combined voting power of all of the Company’s securities outstanding immediately after giving effect to the exercise, as such percentage ownership is determined in accordance with the terms of the Pre-Funded Warrant, which percentage may be changed at the holder’s election to a higher or lower percentage not in excess of 9.99% upon 61 days’ notice to the Company.

In addition, in certain circumstances, upon a fundamental transaction, a holder of Pre-Funded Warrants would be entitled to receive, upon exercise of the Pre-Funded Warrants, the kind and amount of securities, cash or other property that such holder would have received had they exercised the Pre-Funded Warrants immediately prior to the fundamental transaction.

The Pre-Funded Warrants were fully exercised as of August 29, 2023.

The Firm Securities were offered, issued, and sold pursuant to a prospectus supplement and accompanying prospectus filed with the SEC pursuant to the Registration Statement under the Securities, as supplemented by the Prospectus Supplement, filed with the SEC pursuant to Rule 424(b) of the Securities Act on August 23, 2023.

Account Receivable Financing Facility

The Borrowers entered into the SLR Agreement with the Lender, effective on the Facility Effective Date.

Pursuant to the SLR Agreement, Lender may, from time to time and in its sole discretion, make certain Advances, against the face amounts of certain Accounts, at the Advance Rate, less any reserved funds and any other amounts due to Lender from Borrowers, up to the Maximum Amount.” Upon receipt of any Advance, Borrowers will have assigned all of its rights in such receivables and all proceeds thereof.

The proceeds received from the Facility will be used to fund general working capital needs.

The SLR Agreement is effective for the Term, automatically extends for successive Renewal Terms, and the Borrowers’ are obligated to pay the Lender an early termination fee in the event the SLR Agreement is terminated under certain circumstances prior to the end of any Term or Renewal Term, as more specifically set forth in the SLR Agreement.

In connection with the AR Facility, the Company agreed to, among other things, (i) pay a finance fee equal to 2% of the Maximum Amount, payable in 24 equal monthly installments on the last day of each month of the Term until paid in full, (ii) pay a servicing fee equal to 0.30% multiplied by the Outstanding Amount for the applicable month, on the last day of each calendar month during the Term (or so long as any obligations arising under the SLR Agreement are outstanding);

(iii) be charged the Financing Fee, due upon receipt of full payment of a Financed Account by Lender, equal to 1/12 of (a) the Facility Rate, multiplied by (b) the amount of the Outstanding Amount;

and (iv) utilize the facility such that the monthly average aggregate Advances outstanding is at or above the Minimum Utilization.

Transfers of financial assets that do not qualify for sale accounting are reported as collateralized borrowings.

Financing and servicing fees calculated with reference to amounts advanced under the AR Facility are included in interest expense.

The commitment fee, based on the maximum facility amount and payable irrespective of drawdowns, is expensed on a straight line basis over the term of the AR Facility.

Total amounts advanced under the AR Facility from the Facility Effective Date to December 31, 2023 totaled $800,000.

Interest expense and commitment fee expense for the year ended December 31, 2023 totaled $3,000 and $3,000, respectively.

Refer to Note 6 for additional information.

Convertible Debt

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As of December 31, 2023, the outstanding balance of the Notes and related accrued interest totaled $719,000, which was subsequently paid in full in the first quarter of 2023.

Common Stock Purchase Agreement

See Note 7 to the consolidated financial statements contained elsewhere in this Report for additional information about the Tumim Offering.

During Fiscal Year 2022, we issued 7,425 shares of common stock pursuant to the Purchase Agreement, at an average price of $1.11, raising net proceeds of approximately $8,000, under the Purchase Agreement.

Equity Distribution Agreement

On September 3, 2021, we entered into an Equity Distribution Agreement (the “Sales Agreement”) with two investment banks (the “Agents”), pursuant to which we could offer and sell, from time to time, through the Agents (the “ATM Offering”), up to $75 million of shares of our common stock (the “Shares”), as described at Note 7.

Under the Sales Agreement, the Agents were able to sell the Shares by any method permitted by law deemed to be an “at-the-market”

offering as defined in Rule 415 promulgated under the Securities Act.

Under the Sales Agreement, the Agents were able to sell the Shares by any method permitted by law deemed to be an “at-the-market” offering as defined in Rule 415 promulgated under the Securities Act.

Any Shares offered and sold in the ATM Offering were issued pursuant to our Registration Statement on Form S-3 filed with the SEC on September 7, 2021.

During Fiscal Year 2022 the Company issued 323,639 shares of common stock, at an average price of $0.99, raising net proceeds of $312,000, under the Sales Agreement.

During Fiscal Year 2022 the Company issued 16,182 shares of common stock, at an average price of $19.80, raising net proceeds of $312,000, under the Sales Agreement.

The term of the ATM Offering terminated on November 16, 2022, one year from the date that the Form S-3 was declared effective by the SEC.

The net proceeds from sales of Shares pursuant to the ATM Offering were used primarily for the repayment of certain indebtedness, working capital and general corporate purposes.

Other Equity Financings

In January 2021, the Company issued 3,076,924 shares of common stock at a price of $2.60 per share, raising aggregate net proceeds of approximately $8.0 million, after deducting offering costs totaling $73,000.

In February 2021, the Company issued 2,926,830 shares of common stock at a price of $4.10 per share, raising aggregate net proceeds of approximately $12.0 million, after deducting offering costs totaling $70,000.

In March 2021, the Company issued 1,512,499 shares of common stock at a price of $9.00 per share, raising aggregate net proceeds of approximately $13.6 million, after deducting offering costs totaling $72,000.

The offerings described above were made pursuant to an effective shelf Registration Statement on Form S-3, which was originally filed with the SEC on April 10, 2020 (File No.

The net proceeds from these offerings were used for working capital and other general corporate purposes, including sales and marketing activities, product development and capital expenditures.

The Company utilized a portion of the net proceeds for the acquisition of, or investment in, technologies, solutions or businesses.

Contractual Obligations and Off-Balance Sheet Commitments and Arrangements

As of December 31, 2022, we had no significant commitments for capital expenditures, nor do we have any committed lines of credit, other committed funding or long-term debt, and no guarantees.

As of December 31, 2023, other than as described herein, we had no significant commitments for capital expenditures, nor do we have any committed lines of credit, other committed funding or long-term debt, and no guarantees.

As of December 31, 2023 we maintain approximately 3,200 square feet of office space, 1,650 square feet of which is on a month-to-month basis, and 1,550 square feet of which is subject to a two-year lease, commencing on August 1, 2021.

We have not entered into any off-balance sheet financial guarantees or other off-balance sheet commitments to guarantee the payment obligations of any third parties.

We have not entered into any derivative contracts that are indexed to our shares and classified as stockholder’s equity or that are not reflected in our consolidated financial statements included elsewhere herein.

We have not entered into any off-balance sheet financial guarantees or other off-balance sheet commitments to guarantee the payment obligations of any third parties.

Furthermore, we do not have any retained or contingent interest in assets transferred to an unconsolidated entity that serves as credit, liquidity or market risk support to such entity.

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Certain conditions may exist as of the date the consolidated financial statements are issued, which may result in a loss to the Company, but which will only be resolved when one or more future events occur or fail to occur.

The Company’s management, in consultation with its legal counsel as appropriate, assesses such contingent liabilities, and such assessment inherently involves an exercise of judgment.

In assessing loss contingencies related to legal proceedings that are pending against the Company or unasserted claims that may result in such proceedings, the Company, in consultation with legal counsel, evaluates the perceived merits of any legal proceedings or unasserted claims, as well as the perceived merits of the amount of relief sought or expected to be sought therein.

If the assessment of a contingency indicates it is probable that a material loss has been incurred and the amount of the liability can be estimated, then the estimated liability would be accrued in the Company’s consolidated financial statements.

If the assessment indicates a potentially material loss contingency is not probable, but is reasonably possible, or is probable, but cannot be estimated, then the nature of the contingent liability, together with an estimate of the range of possible loss, if determinable and material, would be disclosed.

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Some accounting policies have a significant impact on amounts reported in our financial statements.

The SEC has defined a company’s critical accounting policies as the ones that are most important to the portrayal of a company’s financial condition and results of operations, and which require a company to make its most difficult and subjective judgments.

A summary of significant accounting policies and a description of accounting policies that are considered critical may be found in the audited financial statements and notes thereto included elsewhere herein.

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Revenue Recognition

Revenue is recognized when we transfer promised goods or services to customers in an amount that reflects the consideration to which we expect to be entitled in exchange for those goods and services.

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.

Revenue is recognized when the Company transfers promised goods or services to customers in an amount that reflects the consideration to which the Company expects to be entitled in exchange for those goods and services and when the customer obtains control of the good or service.

In this regard, revenue is recognized when:

(i) the parties to the contract have approved the contract (in writing, orally, or in accordance with other customary business practices) and are committed to perform their respective obligations;

(ii) the entity can identify each party’s rights regarding the goods or services to be transferred;

(iii) the entity can identify the payment terms for the goods or services to be transferred;

(iv) the contract has commercial substance (that is, the risk, timing, or amount of the entity’s future cash flows is expected to change as a result of the contract);and (v) it is probable that the entity will collect substantially all of the consideration to which it will be entitled in exchange for the goods or services that will be transferred to the customer.

Transaction prices are based on the amount of consideration to which we expect to be entitled in exchange for transferring promised goods or services to a customer, excluding amounts collected on behalf of third parties, if any.

We consider the explicit terms of the revenue contract, which are typically written and executed by the parties, our customary business practices, the nature, timing, and the amount of consideration promised by a customer, in connection with determining the transaction price for our revenue arrangements.

We report revenue on a gross or net basis based on management’s assessment of whether we act as a principal or agent in the transaction and is evaluated on a transaction-by-transaction basis.

To the extent we act as the principal, revenue is reported on a gross basis net of any sales tax from customers, when applicable.

The determination of whether we act as a principal or an agent in a transaction is based on an evaluation of whether we control the good or service prior to transfer to the customer.

Where applicable, we have determined that it acts as the principal in all of its advertising and sponsorships, content and direct to consumer revenue streams, except in situations where we utilize a reseller partner with respect to direct advertising sales arrangements.

Revenue billed or collected in advance is recorded as deferred revenue until the event occurs or until applicable performance obligations are satisfied.

Advertising and Sponsorships:

Advertising revenue primarily consists of direct sales activity along with sales of programmatic display and video advertising units to third-party advertisers and exchanges.

Advertising arrangements typically include contract terms for time periods ranging from several days to several weeks in length.

For advertising arrangements that include performance obligations satisfied over time, customers typically simultaneously receive and consume the benefits under the arrangement as we satisfy our performance obligations, over the applicable contract term.

As such, revenue is recognized over the contract term based upon estimates of progress toward complete satisfaction of the contract performance obligations (typically utilizing a time, effort or delivery-based method of estimation).

Revenue from shorter term advertising arrangements that provide for a contractual delivery or performance date is recognized when performance is substantially complete and or delivery occurs.

Payments are typically due from customers during the term of the arrangement for longer-term campaigns, and once delivery is complete for shorter-term campaigns.

Sponsorship revenue arrangements may include exclusive or non-exclusive title sponsorships, marketing benefits, official product status exclusivity, product visibly and additional infrastructure placement, social media rights, rights to on-screen activations and promotions, display material rights, media rights, hospitality and tickets and merchandising rights.

Sponsorship revenue also includes revenue pursuant to arrangements with brand and media partners, retail venues, game publishers and broadcasters that allow our partners to run amateur esports experiences, and or capture specifically curated gameplay content that is customized for our partners’

distribution channels.

Sponsorship arrangements typically include contract terms for time periods ranging from several weeks or months to terms of twelve months in length.

For sponsorship arrangements that include performance obligations satisfied over time, customers typically simultaneously receive and consume the benefits under the agreement as we satisfy our performance obligations, over the applicable contract term.

Payments are typically due from customers during the term of the arrangement.

Revenue from sponsorship arrangements for one-off branded experiences and/or the development of content tailored specifically for our partners’

distribution channels that provide for a contractual delivery or performance date, is recognized at a point in time, when performance is substantially complete and or delivery occurs.

Content Sales:

Content-related revenue is generated in connection with our curation and distribution of esports and entertainment content for our own network of digital channels and media and entertainment partner channels.

We distribute three primary types of content for syndication and licensing, including:

(1) our own original programming content, (2) user generated content (“UGC”), including online gameplay and gameplay highlights, and (3) the creation of content for third parties utilizing our remote production and broadcast technology.

For content arrangements that include performance obligations satisfied over time, customers typically simultaneously receive and consume the benefits under the arrangement as we satisfy our performance obligations, over the applicable contract term.

Revenue from shorter-term content sales arrangements that provide for a contractual delivery or performance date is recognized when performance is substantially complete and or delivery occurs.

Payments are typically due from customers during the term of the arrangement for longer-term campaigns, and once delivery is complete for shorter-term campaigns.

Direct to Consumer:

Direct to consumer revenue primarily consists of digital subscription fees, in-game digital goods, and gameplay access fees.

Subscription revenue is recognized in the period the services are rendered.

Payments are typically due from customers at the point of sale.

Platform Generated Sales Transactions .

Our Mobcrush subsidiary generates in-game Platform sales revenue via digital goods sold within the platform, including cosmetic items, durable goods, player ranks and game modes, leveraging the flexibility of the Microsoft Minecraft Bedrock platform, and powered by the InPvP cloud architecture technology platform.

Revenue is generated when transactions are facilitated between Microsoft and the end user, either via in-game currency or cash.

Revenue for digital goods sold on the platform is recognized when Microsoft (our partner) collects the revenue and facilitates the transaction on the platform.

Revenue for such arrangements includes all revenue generated, bad debt, make goods, and refunds of all transactions managed via the platform by Microsoft.

The revenue is recognized on a monthly basis.

Payments are made to the Company monthly based on the reconciled sales revenue generated.

(iv) the contract has commercial substance (that is, the risk, timing, or amount of the entity’s future cash flows is expected to change as a result of the contract);

and (v) it is probable that the entity will collect substantially all of the consideration to which it will be entitled in exchange for the goods or services that will be transferred to the customer.

We make estimates and judgments when determining whether we will collect substantially all of the consideration to which we will be entitled in exchange for the goods or services that will be transferred to the customer.

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If it is determined that collection is not reasonably assured, amounts due are recognized when collectability becomes reasonably assured, assuming all other revenue recognition criteria have been met, which is generally upon receipt of cash for transactions where collectability may have been an issue.

Management’s estimates regarding collectability impact the actual revenue recognized each period and the timing of the recognition of revenue.

Our assumptions and judgments regarding future collectability could differ from actual events and thus materially impact our financial position and results of operations. 

Depending on the complexity of the underlying revenue arrangement and related terms and conditions, significant judgments, assumptions and estimates may be required to determine each parties rights regarding the goods or services to be transferred, each parties performance obligations, whether performance obligations are satisfied at a point in time or over time, estimates of completion methodologies, the timing of satisfaction of performance obligations, and the appropriate period or periods in which, or during which, the completion of the earnings process occurs.

Management’s estimates regarding collectability impact the actual revenue recognized each period and the timing of the recognition of revenue.

Our assumptions and judgments regarding future collectability could differ from actual events and thus materially impact our financial position and results of operations.

Depending on the complexity of the underlying revenue arrangement and related terms and conditions, significant judgments, assumptions and estimates may be required to determine each parties rights regarding the goods or services to be transferred, each parties performance obligations, whether performance obligations are satisfied at a point in time or over time, estimates of completion methodologies, the timing of satisfaction of performance obligations, whether we are a principal or agent in the arrangement and the appropriate period or periods in which, or during which, the completion of the earnings process and transfer of control occurs.

Depending on the magnitude of specific revenue arrangements, if different judgments, assumptions and estimates are made regarding revenue arrangements in any specific period, our periodic financial results may be materially affected.

Accounting for Business Combinations

Acquisition Method.

 Acquisitions that meet the definition of a business under ASC 805, “Business Combinations”

(“ASC 805”) are accounted for using the acquisition method of accounting.

Under the acquisition method of accounting, assets acquired, liabilities assumed, contractual contingencies, and contingent consideration, when applicable, are recorded at fair value at the acquisition date.

Any excess of the purchase price over the fair value of the net assets acquired is recorded as goodwill.

The application of the acquisition method of accounting requires management to make significant estimates and assumptions in the determination of the fair value of assets acquired and liabilities assumed in connection with the allocation of the purchase price consideration to the assets acquired and liabilities assumed.

Transaction costs associated with business combinations are expensed as incurred and are included in general and administrative expense in the consolidated statements of operations.

Contingent consideration, if any, is recognized and measured at fair value as of the acquisition date.

Cost Accumulation Model.

 Acquisitions that do not meet the definition of a business under ASC 805 are accounted for as an asset acquisition, utilizing a cost accumulation model.

Assets acquired and liabilities assumed are recognized at cost, which is the consideration the acquirer transfers to the seller, including direct transaction costs, on the acquisition date.

The cost of the acquisition is then allocated to the assets acquired based on their relative fair values.

Goodwill is not recognized in an asset acquisition. Direct transaction costs include those third-party costs that can be directly attributable to the asset acquisition and would not have been incurred absent the acquisition transaction.

Contingent consideration, representing an obligation of the acquirer to transfer additional assets or equity interests to the seller if future events occur or conditions are met, is recognized when probable and reasonably estimable.

Contingent consideration recognized is included in the initial cost of the assets acquired, with subsequent changes in the recorded amount of contingent consideration recognized as an adjustment to the cost basis of the acquired assets.

Subsequent changes are allocated to the acquired assets based on their relative fair value.

Depreciation and/or amortization of adjusted assets are recognized as a cumulative catch-up adjustment, as if the additional amount of consideration that is no longer contingent had been accrued from the outset of the arrangement.

Contingent consideration that is paid to sellers that remain employed by the acquirer and linked to future services is generally considered compensation cost and recorded in the statement of operations in the post-combination period. 

We account for our business combinations under the acquisition method of accounting.

Identifiable assets acquired, liabilities assumed and any noncontrolling interest in the acquiree are recognized and measured as of the acquisition date at fair value.

Additionally, contingent consideration is recorded at fair value on the acquisition date and classified as a liability.

Goodwill is recognized to the extent by which the aggregate of the acquisition-date fair value of the consideration transferred and any noncontrolling interest in the acquiree exceeds the recognized basis of the identifiable assets acquired, net of assumed liabilities.

Determining the fair value of assets acquired, liabilities assumed and noncontrolling interest requires management’s judgment and often involves the use of significant estimates and assumptions, including assumptions with respect to future cash flows, discount rates and asset lives among other items.

In addition, when we have acquisitions where substantially all of the fair value of assets acquired is concentrated in a single asset or group of similar assets, we account for the acquisitions as asset acquisitions.

Impairment of Long-Lived Assets

The Company assesses the recoverability of long-lived assets whenever events or changes in circumstances indicate that their carrying value may not be recoverable.

Factors we consider important, which could trigger an impairment review, include the following:

significant underperformance relative to expected historical or projected future operating results;

significant changes in the manner of our use of the acquired assets or the strategy for our overall business;

significant negative industry or economic trends;

significant adverse changes in legal factors or in the business climate, including adverse regulatory actions or assessments;

and significant decline in our stock price for a sustained period.

In the event the sum of the expected undiscounted future cash flows resulting from the use of the asset is less than the carrying amount of the asset, an impairment loss equal to the excess of the asset’s carrying value over its fair value is recorded.

Other assets of a reporting unit that are held and used may be required to be tested for impairment when certain events trigger interim goodwill impairment tests.

In such situations, other assets, or asset groups, are tested for impairment under their respective standards and the other assets’ or asset groups’ carrying amounts are adjusted for impairment before testing goodwill for impairment as described below.

Significant judgements and estimates may be required in connection with determining the number of reporting units;

determining intangible asset groupings;

if, and in what period a triggering event has occurred requiring and impairment review;

determining the nature timing and extent of undiscounted cash flows, including revenue forecasts and related growth rates and applicable costs;

residual values if any;

and discount rates and other inputs used in connection with the calculation of the fair values of applicable asset groups.

Variations in any of these judgements and estimates could have a material impact on our financial results.

in June 2021.

The Company assesses the recoverability of long-lived assets whenever events or changes in circumstances indicate that their carrying value may not be recoverable.

Goodwill represents the excess of the purchase price of the acquired business over the acquisition date fair value of the net assets acquired.

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We operate in one reporting segment.

If a potential impairment exists, a calculation is performed to determine the fair value of existing goodwill.

This calculation can be based on quoted market prices and / or valuation models, which consider the estimated future undiscounted cash flows resulting from the reporting unit, and a discount rate commensurate with the risks involved.

Third-party appraised values may also be used in determining whether impairment potentially exists.

In assessing goodwill impairment, significant judgment is required in connection with estimates of market values, estimates of the amount and timing of future cash flows, and estimates of other factors that are used to determine the fair value of our reporting unit.

If these estimates or related projections change in future periods, future goodwill impairment tests may result in charges to earnings.

When conducting the Company’s annual or interim goodwill impairment assessment, we initially perform a qualitative evaluation of whether it is more likely than not that goodwill is impaired.

In evaluating whether it is more likely than not that the fair value of our reporting unit is less than its carrying amount, we consider the guidance set forth in ASC 350, “Intangibles Goodwill and Other”

(“ASC 350”) which requires an entity to assess relevant events and circumstances, including macroeconomic conditions, industry and market considerations, cost factors, financial performance and other relevant events or circumstances.

When conducting the Company’s annual or interim goodwill impairment assessment, we have the option to initially perform a qualitative evaluation of whether it is more likely than not that goodwill is impaired.

The Company is also permitted to bypass the qualitative assessment and proceed directly to the quantitative test.

In evaluating whether it is more likely than not that the fair value of our reporting unit is less than its carrying amount, we consider the guidance set forth in FASB ASC Topic 350 - Intangibles Goodwill and Other (“ASC 350”) which requires an entity to assess relevant events and circumstances, including macroeconomic conditions, industry and market considerations, cost factors, financial performance and other relevant events or circumstances.

The Company is also permitted to bypass the qualitative assessment and proceed directly to the quantitative test.

For the year ended December 31, 2023:

December 31, 2023 Goodwill Impairment Testing :

At December 31, 2023, the Company bypassed the optional qualitative assessment and performed a quantitative goodwill impairment test.

We utilized the market capitalization of the Company as of December 31, 2023, a Level 1 input, to estimate the fair value of the Company’s single reporting unit.

Based on the analysis, the estimated fair value of our reporting unit was $29.1 million, compared to a carrying value of our single reporting unit of $10.0 million as of December 31, 2023.

Based on the analysis, the fair value of our single reporting unit exceeded its carrying value as of December 31, 2023, and therefore, the Company concluded that goodwill was not “more likely than not” impaired as of December 31, 2023.

For the year ended December 31, 2022:

As of January 1, 2022, goodwill totaled $50,263,000.

During the year ended December 31, 2022, goodwill impairment charges totaled $50,263,000, and were comprised of the following:

September 30, 2022 Goodwill Impairment Testing

At September 30, 2022, prior to the completion of our goodwill impairment testing, the goodwill balance totaled $50.3 million.

At September 30, 2022, from a qualitative standpoint, we considered the Company’s history of reported losses and negative cash flows from operating activities, and also considered the sustained downturn in industry and macroeconomic conditions, including inflationary pressures and potential reductions in advertising spending and the sustained downturn of the broader mid-cap and micro-cap equity markets in the third quarter of Fiscal Year 2022.

We also considered that the Company experienced significant inorganic and organic growth in Fiscal Year 2021, including the impact of the acquisitions of Mobcrush, Bannerfy and Super Biz on our premium advertising inventory, product offerings to advertisers, current period revenue recognized and future revenue generating opportunities.

However, the Company's stock price has been volatile, and the volatility continued during the three months ended September 30, 2022, declining 34% to $0.68 as of September 30, 2022, reflecting a market capitalization that was approximately 38% of the Company’s September 30, 2022 net book value.

To assess whether the decline in our market capitalization was an indicator requiring an interim goodwill impairment test, we considered the significance of the decline and the length of time our common stock has been trading at a depressed value along with the macro factors described above.

At September 30, 2022, prior to the completion of our goodwill impairment testing, the goodwill balance totaled $50,263,000.

We also considered that the Company experienced significant inorganic and organic growth in the year ended December 31, 2021, including the impact of the acquisitions of Mobcrush, Bannerfy and Super Biz on our premium advertising inventory, product offerings to advertisers, applicable current period revenue recognized and future revenue generating opportunities.

However, the Company's stock price had been volatile, and the volatility continued during the three months ended September 30, 2022, declining 34% to $13.60 as of September 30, 2022, reflecting a market capitalization that was approximately 38% of the Company’s September 30, 2022 net book value.

To assess whether the decline in our market capitalization was an indicator requiring an interim goodwill impairment test, we considered the significance of the decline and the length of time our common stock had been trading at a depressed value along with the macro factors described above.

The significance of the decline is consistent with the broader microcap market.

As of September 30, 2022 the decline in our stock price and other factors were deemed to be sustained, and therefore a triggering event requiring a goodwill impairment test as of September 30, 2022 was deemed to have occurred.

We utilized the market capitalization of the Company as of September 30, 2022, a Level 1 input as described above, to estimate the fair value of the Company’s single reporting unit.

The estimated market capitalization was determined by multiplying our September 30, 2022 stock price and the common shares outstanding as of September 30, 2022.

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Based on the analysis, the estimated fair value of our reporting unit was $25.2 million, compared to a carrying value of our single reporting unit of $67.3 million as of September 30, 2022.

As such, the fair value of our single reporting unit was deemed to be below its carrying value as of September 30, 2022, resulting in a goodwill impairment charge of $42.0 million, which was reflected in the consolidated statement of operations for the nine months ended September 30, 2022.

As such, the fair value of our single reporting unit was deemed to be below its carrying value as of September 30, 2022, resulting in a goodwill impairment charge of $42.0 million in the third quarter of 2022, which was reflected in the consolidated statement of operations for the year ended December 31, 2022.

December 31, 2022 Goodwill Impairment Testing

At December 31, 2022, prior to the completion of our goodwill impairment testing, the goodwill balance totaled $8.3 million.

At December 31, 2022, from a qualitative standpoint, we considered the factors described above under “September 30, 2022 Goodwill Impairment Testing,”

including the current period reported loss and negative cash flows from operating activities, and the sustained downturn in industry and macroeconomic conditions, including inflationary pressures and potential reductions in advertising spending and the sustained downturn of the broader mid-cap and micro-cap equity markets in the fourth quarter of Fiscal Year 2022.

Similarly, given the Company’s recent significant growth, management does not believe that the current market capitalization of the Company is indicative of any fundamental change in the Company’s underlying business or future prospects as of the December 31, 2022 measurement date.

The Company's stock price has been volatile, and the volatility continued during the three months ended December 31, 2022, declining 50% from the September 30, 2022 closing price to $0.336 as of December 31, 2022, reflecting a market capitalization that was approximately 46% of the Company’s December 31, 2022 net book value.

At December 31, 2022, from a qualitative standpoint, we considered the factors described above under “September 30, 2022 Goodwill Impairment Testing,” including the applicable current period reported loss and negative cash flows from operating activities, and the sustained downturn in industry and macroeconomic conditions, including inflationary pressures and potential reductions in advertising spending and the sustained downturn of the broader mid-cap and micro-cap equity markets in the fourth quarter of Fiscal Year 2022.

Similarly, given the Company’s recent significant growth, management did not believe that the December 31, 2022 market capitalization of the Company was indicative of any fundamental change in the Company’s underlying business or future prospects as of the December 31, 2022 measurement date.

The Company's stock price had been volatile, and the volatility continued during the three months ended December 31, 2022, declining 50% from the September 30, 2022 closing price to $6.72 as of December 31, 2022, reflecting a market capitalization that was approximately 46% of the Company’s December 31, 2022 net book value.

As of December 31, 2022 the decline in our stock price and other factors were deemed to be sustained, and therefore a triggering event requiring a goodwill impairment test as of December 31, 2022 was deemed to have occurred.

We utilized the market capitalization of the Company as of December 31, 2022, a Level 1 input as described above, to estimate the fair value of the Company’s single reporting unit.

We utilized the market capitalization of the Company as of December 31, 2022, a Level 1 input, to estimate the fair value of the Company’s single reporting unit.

Based on the analysis, the estimated fair value of our reporting unit was $12.6 million, compared to a carrying value of our single reporting unit of $27.5 million as of December 31, 2022.

As such, the fair value of our single reporting unit was deemed to be below its carrying value as of December 31, 2022, resulting in an additional goodwill impairment charge of $8.3 million in the fourth quarter of Fiscal Year 2022, reflecting the write down of the remaining balance of goodwill for our single reporting unit.

As such, the fair value of our single reporting unit was deemed to be below its carrying value as of December 31, 2022, resulting in an additional goodwill impairment charge of $8.3 million for the year ended December 31, 2022, reflecting the write down of the remaining balance of goodwill for our single reporting unit.

Relaxed Ongoing Reporting Requirements

Upon the completion of our initial public offering, we elected to report as an “emerging growth company”

(as defined in the JOBS Act) under the reporting rules set forth under the Exchange Act.

For so long as we remain an “emerging growth company,”

we may take advantage of certain exemptions from various reporting requirements that are applicable to other Exchange Act reporting companies that are not “emerging growth companies,”

including but not limited to:

Upon the completion of our initial public offering, we elected to report as an “emerging growth company” (as defined in the JOBS Act) under the reporting rules set forth under the Exchange Act.

For so long as we remain an “emerging growth company,” we may take advantage of certain exemptions from various reporting requirements that are applicable to other Exchange Act reporting companies that are not “emerging growth companies,” including but not limited to:

not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act;

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being exempt from the requirement to hold a non-binding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved.

We are subject to ongoing public reporting requirements that are less rigorous than Exchange Act rules for companies that are not “emerging growth companies,”

and our stockholders could receive less information than they might expect to receive from more mature public companies.

We are subject to ongoing public reporting requirements that are less rigorous than Exchange Act rules for companies that are not “emerging growth companies,” and our stockholders could receive less information than they might expect to receive from more mature public companies.

We expect to take advantage of these reporting exemptions until we are no longer an emerging growth company.

We will remain an “emerging growth company”

for up to five years, although if the market value of our Common Stock that is held by non-affiliates exceeds $700 million as of any June 30 before that time, we would cease to be an “emerging growth company”

as of the following December 31.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

In the ordinary course of our business, we are not currently exposed to market risk of the sort that may arise from changes in interest rates or foreign currency exchange rates, or that may otherwise arise from transactions in derivatives.

The preparation of financial statements in conformity with GAAP requires our management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period.

Actual results could differ from those estimates.

The Company’s significant estimates and assumptions include the fair value of the Company’s common stock, stock-based compensation, the recoverability and useful lives of long-lived assets, and the valuation allowance relating to the Company’s deferred tax assets.

We will remain an “emerging growth company” for up to five years, although if the market value of our Common Stock that is held by non-affiliates exceeds $700 million as of any June 30 before that time, we would cease to be an “emerging growth company” as of the following December 31.

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.

What changed 10-K

Item 5. Market for Registrant’s Common Equity