Super League Enterprise, Inc. 10-K

ITEM 9A. CONTROLS AND PROCEDURES Evaluation of Disclosure Controls and Procedures Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, have evaluated the effectiveness of our disclosure controls and procedures as of December 31, 2023 (“Evaluation Date”). Disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) are designed to provide reasonable assurance that information required to be disclosed in our reports filed or submitted under the Exchange Act is (i) recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and (ii) accumulated and communicated to the company’s management, including its principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure. As a result of a material weakness in our internal control over financial reporting in connection with the preparation of our consolidated interim financial statements for the three and nine months ended September 30, 2023, related to the accounting for the triggering of a down round feature related to preferred stock, our management has reassessed the effectiveness of our disclosure controls and procedures and has determined that our disclosure controls and procedures were not effective as of the Evaluation Date. Restatement of Consolidated Interim Financial Statements for the three and nine months ended September 30, 2023. On March 26, 2024, the Audit Committee of the Board of Directors of the Company (the “Audit Committee”), based upon the recommendation of management, concluded that the Company’s previously filed Quarterly Report on Form 10-Q for the quarter ended September 30, 2023 (the “Third Quarter 10-Q”), as filed with the Securities and Exchange Commission (the “SEC”) on November 14, 2023, should no longer be relied upon. The determination resulted from an error made in the Company's unaudited consolidated financial statements for the three and nine months ended September 30, 2023, as previously filed in the Third Quarter 10-Q, arising from the exclusion of the calculated noncash value of the effect of the down round feature triggered in August of 2023, on the Company’s Series AA Convertible Preferred Stock, which should have been recorded as a noncash charge directly to accumulated deficit and a noncash reduction to income available to common stockholders in the computation of earnings per share. In connection with the Company’s year-end 2023 closing procedures, management reassessed the guidance set forth in ASC 260, “Earnings Per Share” and determined that the value of the effect of a down round feature that is triggered on preferred stock should be recognized as a noncash charge to accumulated deficit and a noncash reduction to income available to common stockholders in the computation of earnings per share in the period that the down round feature is triggered. 57 Table of Contents As a result: (i) management has noted an error affecting additional paid in capital and accumulated deficit, with no impact on total equity, and a noncash error with respect to the computation of loss per share as reported in the Third Quarter 10-Q; and (ii) in connection with the Company’s 2023 year-end closing procedures, on March 26, 2024, due to the materiality of the error to loss per share originally reported in the Third Quarter 10-Q, the Company’s management and the Audit Committee determined that the Company's Third Quarter 10-Q should be restated to reflect the modifications described above. None of the above changes had any impact on total assets, total liabilities, total equity, revenues, cost of revenues, operating expense or net loss as reported for the three and nine months ended September 30, 2023 in the Company’s Third Quarter 10-Q. No financial statements or disclosures prior to the financial statements for the quarterly periods ended September 30, 2023 were affected by the issue described above. Notwithstanding the material weakness described above, management believes the consolidated financial statements presented in this Annual Report on Form 10-K fairly present, in all material respects, our financial position, results of operations and cash flows for all periods presented herein, in conformity with generally accepted accounting principles. Remediation Plan . Since the date we identified this material weakness, we have taken steps to ensure that financial statement preparation checklists utilized by the Company to identify non-standard and complex transactions disclosure requirements are completed and reviewed by resources with requisite knowledge in a timely manner for interim financial reporting purposes, to improve disclosure controls and procedures and internal control over financial reporting in these complex non-standard technical areas. While we had procedures and processes to apply accounting and disclosure standards to non-standard and complex transactions, we did not have adequate resources to provide for the timely identification of the required treatment of the value of a down round feature in the period in which it is triggered. This material weakness prevented us from properly including the noncash impact of the down round feature as a noncash reduction to accumulated deficit and a noncash reduction of income available to common stockholders in the computation of earnings per share for the third quarter of 2023, and we have included the restated financial information for the third quarter in Note 12 to our Annual Report on Form 10-K as of and for the year ended December 31, 2023. Management will continue to review and make necessary changes to the overall design of our internal control environment, as well as to implement policies and procedures to improve the overall effectiveness of internal control over financial reporting. Limitations on Effectiveness of Controls and Procedures Our disclosure controls and procedures are designed to provide reasonable assurance of achieving the desired control objectives. Our management, including our Chief Executive Officer and Chief Financial Officer, does not expect that our disclosure controls or our internal control over financial reporting will prevent or detect all errors and all fraud. Our management recognizes that any control system, no matter how well designed and operated, is based upon certain judgments and assumptions and cannot provide absolute assurance that its objectives will be met. The design of a control system must reflect the fact that there are resource constraints and that management is required to apply judgment in evaluating the benefits of possible controls and procedures relative to their costs. Further, because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud, if any, have been detected. The design of any system of controls is based in part on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. 58 Table of Contents Management ’ s Report on Internal Control over Financial Reporting Internal Control Over Financial Reporting Our management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. Our internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of consolidated financial statements for external purposes in accordance with generally accepted accounting principles. This process includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our assets; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of consolidated financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures are being made only in accordance with authorizations of our management and directors; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on our consolidated financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of the internal control over financial reporting to future periods are subject to risk that the internal control may become inadequate because of changes in conditions, or that the degree of compliance with policies or procedures may deteriorate. Management ’ s Assessment of the Effectiveness of our Internal Control Over Financial Reporting Management has evaluated the effectiveness of our internal control over financial reporting as of December 31, 2023. In conducting its evaluation, management used the framework set forth in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). Based on our evaluation under such framework, our management has concluded that our internal control over financial reporting were not effective as of December 31, 2023, as described above. Report of Independent Registered Public Accounting Firm We are an “emerging growth company,” as defined in Rule 405 of the Securities Act and, accordingly, we are not required to provide the attestation report of our independent registered public accounting firm on our internal control over financial reporting required by Item 308(b) of Regulation S-K. Changes in Internal Control over Financial Reporting Except as described above, there have been no changes in our internal controls over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting during the fiscal quarter ended December 31, 2023. ITEM 9B. OTHER INFORMATION During the three months ended December 31, 2023, none of our officers (as defined in Rule 16a-1(f) of the Exchange Act) entered into contracts, instructions or written plans (each, a “Rule 10b5-1 Trading Plan” and collectively, the “Rule 10b5-1 Trading Plans”) for the purchase or sale of our securities that are intended to satisfy the conditions specified in Rule 10b5-1(c) under the Exchange Act for an affirmative defense against liability for trading in securities on the basis of material nonpublic information. ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS Not applicable. 59 Table of Contents PART III ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE Except as provided below, in accordance with General Instruction G(3) to Form 10-K, certain information required by this Item is incorporated herein by reference to our definitive proxy statement for our 2024 annual meeting of stockholders to be filed with the SEC no later than April 29, 2024. ITEM 11. EXECUTIVE COMPENSATION. Except as provided below, in accordance with General Instruction G(3) to Form 10-K, certain information required by this Item is incorporated herein by reference to our definitive proxy statement for our 2024 annual meeting of stockholders to be filed with the SEC no later than April 29, 2024. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS Except as provided below, in accordance with General Instruction G(3) to Form 10-K, certain information required by this Item is incorporated herein by reference to our definitive proxy statement for our 2024 annual meeting of stockholders to be filed with the SEC no later than April 29, 2024. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE Except as provided below, in accordance with General Instruction G(3) to Form 10-K, certain information required by this Item is incorporated herein by reference to our definitive proxy statement for our 2024 annual meeting of stockholders to be filed with the SEC no later than April 29, 2024. ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES Except as provided below, in accordance with General Instruction G(3) to Form 10-K, certain information required by this Item is incorporated herein by reference to our definitive proxy statement for our 2024 annual meeting of stockholders to be filed with the SEC no later than April 29, 2024. 60 Table of Contents PART IV ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES Exhibit No. Name Incorporation by Reference 2.1 Agreement and Plan of Merger, dated March 9, 2021, by and among Super League Enterprise, Inc., SLG Merger Sub II, Inc., and Mobcrush, Inc. Exhibit 2.1 to the Current Report on Form 8-K, filed on March 11, 2021. 2.2 Amendment No. 1 to Agreement and Plan of Merger by and between Super League Enterprise, Inc., and Mobcrush Streaming, Inc., dated April 20, 2021. Exhibit 10.1 to the Current Report on Form 8-K, filed on April 21, 2021. 2.3 Asset Purchase Agreement, dated October 4, 2021, among Super League Enterprise, Inc., Bloxbiz Co., Samuel Drozdov, and Benjamin Khakshoor. Exhibit 2.1 to the Current Report on Form 8-K, filed on October 7, 2021. 2.4 Asset Purchase Agreement, by and between Super League Gaming, Inc., and Melon, Inc., dated May 4, 2023 Exhibit 2.3 to the Current Report on Form 8-K, filed on May 9, 2023. 3.1 Second Amended and Restated Certificate of Incorporation of Super League Enterprise, Inc., dated November 19, 2018. Exhibit 3.1 to the Registration Statement, filed on January 4, 2019. 3.2 Second Amended and Restated Bylaws of Super League Enterprise, Inc. Exhibit 3.2 to the Registration Statement, filed on January 4, 2019. 3.3 Certificate of Amendment to the Second Amended and Restated Certificate of Incorporation of Super League Enterprise, Inc., dated February 8, 2019. Exhibit 3.3 to the Amendment No. 2 to the Registration Statement , filed on February 12, 2019. 3.4 Certificate of Amendment to the Second Amended and Restated Certificate of Incorporation of Super League Enterprise, Inc., dated July 24, 2020. Exhibit 3.1 to the Current Report on Form 8-K, filed on July 24, 2020. 3.5 Certificate of Designation of Preferences, Rights and Limitations of the Series A Preferred Stock Exhibit 3.5 to the Annual Report on Form 10-K for the year ended December 31, 2022 3.6 Certificate of Designation of Preferences, Rights and Limitations of the Series A-2 Preferred Stock Exhibit 3.6 to the Annual Report on Form 10-K for the year ended December 31, 2022 3.7 Certificate of Designation of Preferences, Rights and Limitations of the Series A-3 Preferred Stock Exhibit 3.7 to the Annual Report on Form 10-K for the year ended December 31, 2022 3.8 Certificate of Designation of Preferences, Rights and Limitations of the Series A-4 Preferred Stock Exhibit 3.8 to the Annual Report on Form 10-K for the year ended December 31, 2022 3.9 Certificate of Designation of Preferences, Rights and Limitations of the Series A-5 Preferred Stock Exhibit 3.9 to the Annual Report on Form 10-K for the year ended December 31, 2022 3.10 Certificate of Designation of Preferences, Rights and Limitations of the Series AA Preferred Stock Exhibit 3.1 to the Current Report on Form 8-K, filed on April 25, 2023 3.11* Certificate of Designation of Preferences, Rights and Limitations of the Series AA-2 Preferred Stock Filed herewith 3.12 Certificate of Designation of Preferences, Rights and Limitations of the Series AA-3 Preferred Stock Exhibit 3.1 to the Current Report on Form 8-K, filed on May 4, 2023 3.13 Certificate of Designation of Preferences, Rights and Limitations of the Series AA-4 Preferred Stock Exhibit 3.1 to the Current Report on Form 8-K/A, filed on May 9, 2023, as amended on May 10, 2023. 3.14 Certificate of Designation of Preferences, Rights and Limitations of the Series AA-5 Preferred Stock Exhibit 3.1 to the Current Report on Form 8-K, filed on June 2, 2023 3.15 Certificate of Amendment to Super League Gaming, Inc.’s Second Amended and Restated Certificate of Incorporation, as amended Exhibit 3.2 to the Current Report on Form 8-K, filed on June 2, 2023 3.16 Certificate of Amendment to the Second Amended and Restated Certificate of Incorporation, as Amended, of Super League Gaming, Inc. Exhibit 3.1 to the Current Report on Form 8-K, filed on September 8, 2023. 3.17 Certificate of Designation of Preferences, Rights and Limitations of the Series AAA Preferred Stock Exhibit 3.1 to the Current Report on Form 8-K, filed on December 6, 2023 61 Table of Contents 3.18 Certificate of Designation of Preferences, Rights and Limitations of the Series AAA-2 Preferred Stock Exhibit 3.1 to the Current Report on Form 8-K, filed on December 22, 2023 4.1 Form of Common Stock Certificate. Exhibit 4.1 to the Amendment No. 2 to the Registration Statement, filed on February 12, 2019. 4.2 Form of Registration Rights Agreement, among Super League Enterprise, Inc. and certain accredited investors. Exhibit 4.2 to the Registration Statement on Form S-1 , filed on January 4, 2019. 4.3 Common Stock Purchase Warrant dated June 16, 2017 issued to Ann Hand. Exhibit 4.3 to the Registration Statement on Form S-1, filed on January 4, 2019. 4.4 Form of 9.00% Secured Convertible Promissory Note. Exhibit 4.4 to the Registration Statement on Form S-1, filed on January 4, 2019. 4.5 Form of Callable Common Stock Purchase Warrant, issued to certain accredited investors. Exhibit 4.5 to the Registration Statement on Form S-1, filed on January 4, 2019. 4.6 Form of Representative’s Warrant. Exhibit 4.6 to the Amendment No. 2 to the Registration Statement on Form S-1, filed on February 12, 2019. 4.7 Form of May 2022 Convertible Promissory Note Exhibit 10.2 to the Current Report on Form 8-K, filed May 16, 2022. 4.8 Form of Placement Agent Warrant Exhibit 10.35 to the Annual Report on Form 10-K for the year ended December 31, 2022, filed March 31, 2023 4.9 Form of Placement Agent Warrants Exhibit 10.3 to the Current Report on Form 8-K, filed on April 25, 2023 4.10 Form of Pre-Funded Warrant Exhibit 10.2 to the Current Report on Form 8-K filed on August 24, 2023 4.11 Form of Placement Agent Warrants Exhibit 10.5 to the Current Report on Form 8-K filed on December 6, 2023 10.1† Super League Enterprise, Inc. Amended and Restated 2014 Stock Option and Incentive Plan. Exhibit 10.1 to the Registration Statement , filed on January 4, 2019. 10.2† Form of Stock Option Agreement under 2014 Stock Option and Incentive Plan. Exhibit 10.2 to the Registration Statement , filed on January 4, 2019. 10.3 Subscription Agreement, among Nth Games, Inc. and certain accredited investors. Exhibit 10.3 to the Registration Statement , filed on January 4, 2019. 10.4 Subscription Agreement, among Super League Enterprise, Inc. and certain accredited investors. Exhibit 10.4 to the Registration Statement, filed on January 4, 2019. 10.5 Form of Theater Agreement, filed herewith. Exhibit 10.5 to the Registration Statement , filed on January 4, 2019. 10.6 Lease between Super League Enterprise, Inc. and Roberts Business Park Santa Monica LLC, dated June 1, 2016. Exhibit 10.6 to the Registration Statement, filed on January 4, 2019. 10.7+ License Agreement between Super League Enterprise, Inc. and Riot Games, Inc., dated June 22, 2016. Exhibit 10.7 to the Registration Statement , filed on January 4, 2019. 10.8+ Amended and Restated License Agreement between Super League Enterprise, Inc. and Mojang AB, dated August 1, 2016. Exhibit 10.8 to the Registration Statement , filed on January 4, 2019. 10.9+ Master Agreement between Super League Enterprise, Inc. and Viacom Media Networks, dated June 9, 2017. Exhibit 10.9 to the Registration Statement, filed on January 4, 2019. 10.10 Form of Common Stock Purchase Agreement, among Super League Enterprise, Inc. and certain accredited investors. Exhibit 10.10 to the Registration Statement , filed on January 4, 2019. 10.11 Form of Investors’ Rights Agreement, among Super League Enterprise, Inc. and certain accredited investors. Exhibit 10.11 to the Registration Statement, filed on January 4, 2019. 10.12† Employment Agreement, between Super League Enterprise, Inc. and Ann Hand, dated June 16, 2017. Exhibit 10.12 to the Registration Statement , filed on January 4, 2019. 10.13† Employment Agreement, between Super League Enterprise, Inc. and David Steigelfest, dated October 31, 2017. Exhibit 10.13 to the Registration Statement, filed on January 4, 2019. 10.14 Riot Games, Inc. Extension Letter, dated November 21, 2017. Exhibit 10.14 to the Registration Statement, filed on January 4, 2019. 10.15 Form of Note Purchase Agreement, among Super League Enterprise, Inc. and certain accredited investors. Exhibit 10.15 to the Registration Statement , filed on January 4, 2019. 10.16 Form of Security Agreement, between Super League Enterprise, Inc. and certain accredited investors. Exhibit 10.16 to the Registration Statement, filed on January 4, 2019. 10.17 Form of Intercreditor and Collateral Agent Agreement, among Super League Enterprise, Inc. and certain accredited investors. Exhibit 10.17 to the Registration Statement , filed on January 4, 2019. 62 Table of Contents 10.18 Form of Investors’ Rights Agreement (9% Secured Convertible Promissory Notes), among Super League Enterprise, Inc. and certain accredited investors. Exhibit 10.18 to the Registration Statement , filed on January 4, 2019. 10.19 Master Service Agreement and Initial Statement of Work between Super League Enterprise, Inc. and Logitech Inc., dated March 1, 2018. Exhibit 10.19 to the Registration Statement , filed on January 4, 2019. 10.20 Asset Purchase Agreement, between Super League Enterprise, Inc. and Minehut, dated June 22, 2018. Exhibit 10.20 to the Registration Statement, filed on January 4, 2019. 10.21† Amended and Restated Employment Agreement, between Super League Enterprise, Inc. and Ann Hand, dated November 15, 2018. Exhibit 10.21 to the Registration Statement , filed on January 4, 2019. 10.22† Amended and Restated Employment Agreement, between Super League Enterprise, Inc. and David Steigelfest, dated November 1, 2018. Exhibit 10.22 to the Registration Statement, filed on January 4, 2019. 10.23† Employment Agreement, between Super League Enterprise, Inc. and Matt Edelman, dated November 1, 2018. Exhibit 10.23 to the Registration Statement, filed on January 4, 2019. 10.24† Employment Agreement, between Super League Enterprise, Inc. and Clayton Haynes, dated November 1, 2018. Exhibit 10.24 to the Registration Statement , filed on January 4, 2019. 10.25++ Commercial Partnership Agreement between Super League Enterprise, Inc., and ggCircuit, LLC, dated September 23, 2019. Exhibit 10.1 to the Quarterly Report on Form 10-Q for the period ended September 30, 2019, filed November 14, 2019. 10.26 Form of Registration Rights Agreement, dated March 2021. Exhibit 10.1 to the Current Report on Form 8-K, filed on March 11, 2021. 10.27 Form of Voting Agreement, dated March 2021. Exhibit 10.2 to the Current Report on Form 8-K, filed on March 11, 2021. 10.28 Form of Securities Purchase Agreement, dated March 19, 2021. Exhibit 10.1 to the Current Report on Form 8-K, filed on March 23, 2021. 10.29 Equity Distribution Agreement, dated as of September 3, 2021, by and between Super League Enterprise, Inc. and Maxim Group LLC. Exhibit 1.3 to the Company’s Registration Statement on Form S-3 (File No. 333-259347, filed September 7, 2021. 10.30 Share Purchase Agreement, by and between Super League Enterprise, Inc. and Bannerfy Ltd., dated August 11, 2021. Exhibit 10.4 to the Quarterly Report on Form 10-Q for the period ended June 30, 2021, filed August 16, 2021. 10.31† Executive Employment Agreement between Super League Gaming, Inc., and Ann Hand, dated January 5, 2022 Exhibit 10.1 to the Current Report on Form 8-K filed January 7, 2022. 10.32† Executive Employment Agreement between Super League Gaming, Inc., and Clayton Haynes, dated January 5, 2022 Exhibit 10.2 to the Current Report on Form 8-K filed January 7, 2022. 10.33† Executive Employment Agreement between Super League Gaming, Inc., and David Steigelfest, dated January 5, 2022 Exhibit 10.3 to the Current Report on Form 8-K filed January 7, 2022. 10.34† Executive Employment Agreement between Super League Gaming, Inc., and Matt Edelman, dated January 5, 2022 Exhibit 10.4 to the Current Report on Form 8-K filed January 7, 2022. 10.35† Executive Employment Agreement between Super League Gaming, Inc., and Michael Wann, dated January 5, 2022 Exhibit 10.5 to the Current Report on Form 8-K filed January 7, 2022. 10.36 Common Stock Purchase Agreement, dated March 25, 2022, by and between Super League Enterprise, Inc. and Tumim Stone Capital LLC Exhibit 10.31 to the Annual Report on Form 10-K for the year ended December 31, 2021, filed March 31, 2022. 10.37 Securities Purchase Agreement between Super League Gaming, Inc., and the investor signatories thereto, dated May 16, 2022 Exhibit 10.1 to the Current Report on Form 8-K, filed May 16, 2022. 10.38 Registration Rights Agreement between Super League Gaming, Inc., and the investor signatories thereto, dated May 16, 2022 Exhibit 10.3 to the Current Report on Form 8-K, filed May 16, 2022. 10.39† Transition Letter Agreement dated January 13, 2023, between Super League Gaming, Inc. and Mike Wann. Exhibit 10.1 to the Current Report on Form 8-K, filed January 20, 2023. 10.40 Form of Placement Agency Agreement Exhibit 10.32 to the Annual Report on Form 10-K for the year ended December 31, 2022, filed March 31, 2023 10.41 Form of Series A Subscription Agreement Exhibit 10.33 to the Annual Report on Form 10-K for the year ended December 31, 2022, filed March 31, 2023 10.42 Form of Registration Rights Agreement Exhibit 10.34 to the Annual Report on Form 10-K for the year ended December 31, 2022, filed March 31, 2023 63 Table of Contents 10.43 Form of Series AA Subscription Agreement Exhibit 10.1 to the Current Report on Form 8-K, filed on April 25, 2023 10.44 Form of Registration Rights Agreement Exhibit 10.2 to the Current Report on Form 8-K, filed on April 25, 2023 10.45 Placement Agency Agreement by and between Aegis Capital Corp. and Super League Gaming, Inc., dated March 24, 2023. Exhibit 10.1 to the Current Report on Form 8-K, filed on June 2, 2023 10.46 Underwriting Agreement, dated August 21, 2023, between Super League Gaming, Inc. and Aegis Capital Corp. Exhibit 10.1 to the Current Report on Form 8-K filed on August 24, 2023 10.47 Warrant Agency Agreement, dated August 23, 2023, between Super League Gaming, Inc and Direct Transfer, LLC Exhibit 10.3 to the Current Report on Form 8-K filed on August 24, 2023 10.48 Form of Series AAA Subscription Agreement Exhibit 10.1 to the Current Report on Form 8-K filed on December 6, 2023 10.49 Form of Registration Rights Agreement Exhibit 10.2 to the Current Report on Form 8-K filed on December 6, 2023 10.50 Form of Series A Exchange Agreement Exhibit 10.3 to the Current Report on Form 8-K filed on December 6, 2023 10.51 Form of Series AA Exchange Agreement Exhibit 10.4 to the Current Report on Form 8-K filed on December 6, 2023 10.52 Financing and Security Agreement, effective December 17, 2023, by and among Super League Enterprise, Inc., Mobcrush Streaming, Inc., InPVP, LLC and SLR Digital Finance, LLC Exhibit 10.1 to the Current Report on Form 8-K filed on December 22, 2023 10.53 Placement Agency Agreement, dated November 6, 2023, between Super League Enterprise, Inc., and Aegis Capital Corporation Exhibit 10.2 to the Current Report on Form 8-K filed on December 22, 2023 10.54 Mutual General Release and Settlement Agreement by and between 3i, LP, Nomis Bay Ltd. and BPY Limited and Super League Enterprise, Inc., dated March 12, 2024 Exhibit 10.1 to the Current Report on Form 8-K filed on March 15, 2024 10.55* Asset Purchase Agreement by and between Super League Enterprise, Inc. and GamerSafer, Inc. Filed herewith. 14.1 Super League Enterprise, Inc. Code of Business Conduct and Ethics. Exhibit 14.1 to the Registration Statement , filed on January 4, 2019. 21.1* Subsidiaries of Registrant Filed herewith. 23.1* Consent of Independent Registered Public Accounting Firm – WithumSmith+Brown, PC 23.2* Consent of Independent Registered Public Accounting Firm – Baker Tilly US, LLP Filed herewith. 31.1* Certification of Principal Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act. 31.2* Certification of Principal Financial and Accounting Officer Pursuant to Section 302 of the Sarbanes-Oxley Act. 32.1* Certification Pursuant to Section 906 of the Sarbanes-Oxley Act. 97.1* Super League Enterprise, Inc. Clawback Policy Filed herewith. 101.INS Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document 101.SCH Inline XBRL Taxonomy Extension Schema Document 101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase Document 101.DEF Inline XBRL Taxonomy Extension Definition Linkbase Document 101.LAB Inline XBRL Taxonomy Extension Label Linkbase Document 101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase Document 104 Cover Page Interactive Data File (embedded within the Inline XBRL Document and included in Exhibit 101) * Filed herewith. ** Furnished herewith. † Identifies exhibits that consist of a management contract or compensatory plan or arrangement. + Confidential treatment has been requested for certain confidential portions of this exhibit pursuant to Rule 406 under the Securities Act of 1933, as amended, and Rule 24b-2 under the Securities Exchange Act of 1934, as amended (together, the “Rules”). In accordance with the Rules, these confidential portions have been omitted from this exhibit and filed separately with the Securities and Exchange Commission. ++ Certain portions of this exhibit (indicated by “[*****]”) have been omitted as the Company has determined (i) the omitted information is not material and (ii) the omitted information would likely cause harm to the Company if publicly disclosed. 64 Table of Contents INDEX TO CONSOLIDATED FINANCIAL STATEMENTS SUPER LEAGUE ENTERPRISE, INC. Page Report of Independent Registered Public Accounting Firm (WithumSmith+Brown, PC; Whippany, New Jersey; PCAOB ID: 100) F-2 Report of Independent Registered Public Accounting Firm (Baker Tilly US, LLP; Los Angeles, California; PCAOB ID: 23) F-3 Consolidated Financial Statements for the Years Ended December 31, 2023 and 2022 Consolidated Balance Sheets as of December 31, 2023 and 2022 F-4 Consolidated Statements of Operations for the years ended December 31, 2023 and 2022 F-5 Consolidated Statements of Stockholders’ Equity for the years ended December 31, 2023 and 2022 F-6 Consolidated Statements of Cash Flows for the years ended December 31, 2023 and 2022 F-7 Notes to Consolidated Financial Statements F-8 F-1 Table of Contents REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Stockholders and Board of Directors of Super League Enterprise, Inc. Opinion on the Consolidated Financial Statements We have audited the accompanying consolidated balance sheet of Super League Enterprise, Inc. and subsidiaries (the “Company”) as of December 31, 2023, and the related consolidated statements of operations and comprehensive loss, stockholders’ equity, and cash flows for the year ended December 31, 2023, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2023, and the results of its operations and its cash flows for the year ended December 31, 2023, in conformity with accounting principles generally accepted in the United States of America. Going Concern The accompanying financial statements have been prepared assuming that the entity will continue as a going concern. As discussed in Note 2 to the consolidated financial statements, the entity has recurring and expected future losses and negative cash flows from operations that raise substantial doubt about its ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 2. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. Emphasis of the Matter – Restatement of Unaudited Interim Financial Statements As discussed in Note 12 to the financial statements, the unaudited interim financial statements as of and for the three and nine months ended September 30, 2023 have been restated to correct certain misstatements. Basis for Opinion These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audit we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control over financial reporting. Accordingly, we express no such opinion. Our audit included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statement. We believe that our audit provides a reasonable basis for our opinion. /s/ WithumSmith+Brown, PC We have served as the Company’s auditor since 2023. Whippany, New Jersey April 12, 2024 PCAOB ID Number 100 F-2 Table of Contents REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Stockholders and Board of Directors Super League Enterprise, Inc. Opinion on the Financial Statements We have audited the accompanying consolidated balance sheet of Super League Enterprise, Inc. (formerly, “Super League Gaming, Inc.”)(the “Company”) as of December 31, 2022, the related consolidated statements of operations, stockholders’ equity and cash flows for the year then ended, and the related notes to the consolidated financial statements (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2022, and the results of its operations and its cash flows for the year then ended, in conformity with accounting principles generally accepted in the United States of America. Going Concern Uncertainty The accompanying financial statements have been prepared assuming the Company will continue as a going concern. As noted in Note 2 to the consolidated financial statements, the Company has suffered recurring losses from operations and negative cash flows from operations. This raises substantial doubt about the Company’s ability to continue as a going concern. Management’s plans in regard to these matters are also included in Note 2. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. Basis for Opinion These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audit, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. Our audit included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audit provides a reasonable basis for our opinion. /s/ Baker Tilly US, LLP We have served as the Company’s auditor from 2016 to 2023. Los Angeles, California March 31, 2023 PCAOB ID Number 23 F-3 Table of Contents SUPER LEAGUE ENTERPRISE, INC. CONSOLIDATED BALANCE SHEETS DECEMBER 31, 2023 AND 2022 (Rounded to the nearest thousands, except share and per share data) 2023 2022 ASSETS Current Assets Cash and cash equivalents $ 7,609,000 $ 2,482,000 Accounts receivable 8,287,000 6,134,000 Prepaid expense and other current assets 862,000 1,381,000 Total current assets 16,758,000 9,997,000 Property and Equipment, net 70,000 147,000 Intangible and Other Assets, net 6,636,000 20,066,000 Goodwill 1,864,000 - Total assets $ 25,328,000 $ 30,210,000 LIABILITIES AND STOCKHOLDERS ’ EQUITY Current Liabilities Accounts payable and accrued expenses $ 10,420,000 $ 6,697,000 Accrued contingent consideration 1,812,000 3,206,000 Contract liabilities 339,000 111,000 Secured loan – SLR Facility 800,000 - Convertible note payable and accrued interest - 679,000 Total current liabilities 13,371,000 10,693,000 Accrued contingent consideration – long term 396,000 - Warrant liability 1,571,000 - Deferred taxes - 313,000 Total liabilities 15,338,000 11,006,000 Commitments and Contingencies (Note 10) Stockholders ’ Equity Preferred stock, par value $ 0.001 per share; 10,000,000 shares authorized; 23,656 and 10,323 shares issued and outstanding as of December 31, 2023 and 2022, respectively. - - Common stock, par value $ 0.001 per share; 400,000,000 shares authorized; 4,774,116 and 1,880,299 shares issued and outstanding as of December 31, 2023 and 2022, respectively. 81,000 47,000 Additional paid-in capital 258,923,000 229,900,000 Accumulated deficit ( 249,014,000 ) ( 210,743,000 ) Total stockholders’ equity 9,990,000 19,204,000 Total liabilities and stockholders’ equity $ 25,328,000 $ 30,210,000 The accompanying notes are an integral part of these consolidated financial statements. F-4 Table of Contents SUPER LEAGUE ENTERPRISE, INC. CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 2023 AND 2022 (Rounded to the nearest thousands, except share and per share data) 2023 2022 REVENUES $ 25,079,000 $ 19,677,000 COST OF REVENUES 15,297,000 11,162,000 GROSS PROFIT 9,782,000 8,515,000 OPERATING EXPENSE Selling, marketing and advertising 12,450,000 12,036,000 Engineering, technology and development 9,500,000 15,876,000 General and administrative 10,258,000 12,094,000 Contingent consideration 1,075,000 3,206,000 Loss on intangible asset disposal 2,284,000 - Impairment of intangible assets 7,052,000 - Impairment of goodwill - 50,263,000 Total operating expense 42,619,000 93,475,000 NET OPERATING LOSS ( 32,837,000 ) ( 84,960,000 ) OTHER INCOME (EXPENSE) Interest expense ( 50,000 ) ( 679,000 ) Loss on exchange of preferred instruments ( 681,000 ) - Change in fair value of warrant liability 2,898,000 - Other 27,000 ( 17,000 ) Total other income 2,194,000 ( 696,000 ) LOSS BEFORE BENEFIT FROM INCOME TAXES ( 30,643,000 ) ( 85,656,000 ) Benefit from income taxes 313,000 205,000 NET LOSS $ ( 30,330,000 ) $ ( 85,451,000 ) Net loss per share attributable to common stockholders – basic and diluted Basic and diluted loss per common share (1) $ ( 13.67 ) $ ( 45.95 ) Weighted-average number of common shares outstanding, basic and diluted 2,799,044 1,859,474 (1) Refer to Note 2 for calculation of net loss attributable to common stockholders The accompanying notes are an integral part of these consolidated financial statements. F-5 Table of Contents SUPER LEAGUE ENTERPRISE, INC. CONSOLIDATED STATEMENTS OF STOCKHOLDERS ’ EQUITY FOR THE YEARS ENDED DECEMBER 31, 2023 AND 2022 (Rounded to the nearest thousands, except share and per share data) 2023 2022 Preferred stock (Shares): Balance, beginning of period 10,323 - Issuance of Series A preferred stock - 5,359 Issuance of Series A-2 preferred stock - 1,297 Issuance of Series A-3 preferred stock - 1,733 Issuance of Series A-4 preferred stock - 1,934 Issuance of Series A-5 preferred stock at $1,000 per share 2,299 - Issuance of Series AA preferred stock at $1,000 per share 7,680 - Issuance of Series AA-2 preferred stock at $1,000 per share 1,500 - Issuance of Series AA-3 preferred stock at $1,000 per share 1,025 - Issuance of Series AA-4 preferred stock at $1,000 per share 1,026 - Issuance of Series AA-5 preferred stock at $1,000 per share 550 - Issuance of Series AAA preferred stock at $1,000 per share 5,377 - Issuance of Series AAA-2 preferred stock at $1,000 per share 2,978 - Series AAA-1 Issued in Exchange for Series A & AA Preferred 4,011 - Series AAA-2 Issued in Exchange for Series A & AA Preferred 2,356 - Exchanged Series A and AA Preferred stock ( 6,367 ) - Conversions of Series A Preferred stock to common stock ( 5,761 ) - Conversions of Series AA Preferred stock to common stock ( 3,116 ) - Conversions of Series AAA Preferred stock to common stock ( 225 ) - Balance, end of period 23,656 10,323 Preferred stock (Amount, at Par Value): Balance, beginning of period $ - $ - Issuance of Series A preferred stock, $0.001 par value, at $ 1,000 per share - - Issuance of Series A-2 preferred stock, $0.001 par value, at $ 1,000 per share - - Issuance of Series A-3 preferred stock, $0.001 par value, at $ 1,000 per share - - Issuance of Series A-4 preferred stock, $0.001 par value, at $ 1,000 per share - - Issuance of Series A-5 preferred stock, $0.001 par value, at $ 1,000 per share - - Issuance of Series AA preferred stock, $0.001 par value, at $ 1,000 per share - - Issuance of Series AA-2 preferred stock, $0.001 par value, at $ 1,000 per share - - Issuance of Series AA-3 preferred stock, $0.001 par value, at $ 1,000 per share - - Issuance of Series AA-4 preferred stock, $0.001 par value, at $ 1,000 per share - - Issuance of Series AA-5 preferred stock, $0.001 par value, at $ 1,000 per share - - Issuance of Series AAA preferred stock, $0.001 par value, at $ 1,000 per share - - Issuance of Series AAA-2 preferred stock, $0.001 par value, at $ 1,000 per share - - Series AAA-1 Issued in Exchange for Series A & AA Preferred - - Series AAA-2 Issued in Exchange for Series A & AA Preferred - - Exchanged Series A and AA Preferred stock - - Conversions of Series A Preferred stock - - Conversions of Series AA Preferred stock - - Conversions of Series AAA Preferred stock - - Balance, end of period $ - $ - Common stock (Shares): Balance, beginning of period 1,880,299 1,840,460 Issuance of common stock at $2.60 per share, net of issuance costs 811,270 - Exercise of prefunded common stock warrants at $2.60 per share, net of issuance costs 67,500 - Common stock issued for Melon Acquisition 77,834 - Common stock issued for Bannerfy Acquisition 8,985 2,683 Common stock issued for Super Biz Acquisition 49,400 - Stock-based compensation 69,666 18,103 Conversion of Series A preferred stock 520,931 - Conversion of Series AA preferred stock 922,097 - Conversion of Series AAA preferred stock 133,153 - Preferred stock dividends paid – common stock 232,981 - Other - 19,053 Balance, end of period 4,774,116 1,880,299 Common stock (Amount, at Par Value): Balance, beginning of period $ 47,000 $ 46,000 Issuance of common stock at $ 2.60 per share, net of issuance costs 16,000 - Exercise of prefunded common stock warrants at $ 2.60 per share, net of issuance costs 1,000 - Conversion of Series A, AA and AAA preferred stock 15,000 - Stock-based compensation - - Common stock issued for Super Biz Acquisition 1,000 - Common stock issued for Melon Acquisition 1,000 - Common stock issued for Bannerfy Acquisition - - Other - 1,000 Balance, end of period $ 81,000 $ 47,000 Additional paid-in-capital: Balance, beginning of period $ 229,900,000 $ 215,943,000 Issuance of Series A preferred stock at $1,000 per share, net of issuance costs - 4,607,000 Issuance of Series A-2 preferred stock at $1,000 per share, net of issuance costs - 1,128,000 Issuance of Series A-3 preferred stock at $1,000 per share, net of issuance costs - 1,508,000 Issuance of Series A-4 preferred stock at $1,000 per share, net of issuance costs - 1,683,000 Issuance of Series A-5 preferred stock at $1,000 per share, net of issuance costs 1,919,000 - Issuance of Series AA preferred stock at $1,000 per share, net of issuance costs 5,319,000 - Issuance of Series AA-2 preferred stock at $1,000 per share, net of issuance costs 1,278,000 - Issuance of Series AA-3 preferred stock at $1,000 per share, net of issuance costs 690,000 - Issuance of Series AA-4 preferred stock at $1,000 per share, net of issuance costs 681,000 - Issuance of Series AA-5 preferred stock at $1,000 per share, net of issuance costs 379,000 - Series AA Preferred additional investment rights 1,794,000 - Issuance of Series AAA preferred stock at $1,000 per share, net of issuance costs 4,488,000 - Issuance of Series AAA-2 preferred stock at $1,000 per share, net of issuance costs 2,591,000 - Issuance of common stock at $2.60 per share, net of issuance costs 1,745,000 - Exercise of prefunded common stock warrants at $2.60 per share, net of issuance costs 159,000 - Conversion of Series A, AA and AAA preferred stock ( 15,000 ) - Preferred stock dividends paid – common stock 374,000 - Deemed dividend on Series AA Preferred Stock 7,567,000 - Common stock purchase warrants issued to placement agent ( 3,788,000 ) - Common stock issued for Melon Acquisition 721,000 - Common stock issued for Bannerfy Acquisition 70,000 220,000 Common stock issued for Super Biz Acquisition 547,000 - Stock-based compensation 2,504,000 4,491,000 Other - 320,000 Balance, end of period $ 258,923,000 $ 229,900,000 Accumulated Deficit: Balance, beginning of period $ ( 210,743,000 ) $ ( 125,292,000 ) Deemed dividend on Series AA Preferred Stock ( 7,567,000 ) - Preferred stock dividends paid – common stock ( 374,000 ) - Net loss ( 30,330,000 ) ( 85,451,000 ) Balance, end of period $ ( 249,014,000 ) $ ( 210,743,000 ) Total stockholders ’ equity $ 9,990,000 $ 19,204,000 The accompanying notes are an integral part of these consolidated financial statements. F-6 Table of Contents SUPER LEAGUE ENTERPRISE, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2023 AND 2022 (Rounded to the nearest thousands) 2023 2022 CASH FLOWS FROM OPERATING ACTIVITIES Net loss $ ( 30,330,000 ) $ ( 85,451,000 ) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization 5,376,000 5,403,000 Stock-based compensation 2,735,000 4,263,000 Change in fair value of warrant liability ( 2,898,000 ) - Change in fair value of contingent consideration ( 545,000 ) - Loss on exchange of placement agent warrants 681,000 - Impairment of intangible assets and goodwill 7,052,000 50,263,000 Write-off of intangible assets - 423,000 Loss on intangible asset disposal 2,284,000 - Amortization of convertible notes discount 40,000 280,000 Changes in assets and liabilities: Accounts receivable ( 2,113,000 ) 193,000 Prepaid expense and other current assets 146,000 182,000 Accounts payable and accrued expense 3,412,000 1,402,000 Accrued contingent consideration ( 1,064,000 ) 3,206,000 Contract liabilities 228,000 35,000 Deferred taxes ( 313,000 ) ( 205,000 ) Accrued interest on notes payable ( 180,000 ) 180,000 Net cash used in operating activities ( 15,489,000 ) ( 19,826,000 ) CASH FLOWS FROM INVESTING ACTIVITIES Cash paid in connection with Melon Acquisition, net ( 150,000 ) - Purchase of property and equipment ( 8,000 ) ( 149,000 ) Purchase of third-party game properties - ( 500,000 ) Capitalization of software development costs ( 650,000 ) ( 923,000 ) Acquisition of other intangible and other assets ( 17,000 ) ( 118,000 ) Net cash used in investing activities ( 825,000 ) ( 1,690,000 ) CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from issuance of preferred stock, net of issuance costs 19,295,000 8,926,000 Proceeds from issuance of common stock, net of issuance costs 1,885,000 320,000 Proceeds from note payable - 4,000,000 Payments on convertible notes ( 539,000 ) ( 3,781,000 ) Proceeds from accounts receivable facility 800,000 - Net cash provided by financing activities 21,441,000 9,465,000 INCREASE / (DECREASE) IN CASH AND CASH EQUIVALENTS 5,127,000 ( 12,051,000 ) CASH AND CASH EQUIVALENTS – beginning of year 2,482,000 14,533,000 CASH AND CASH EQUIVALENTS – end of year $ 7,609,000 $ 2,482,000 SUPPLEMENTAL NONCASH INVESTING ACTIVITIES Issuance of common stock in connection with Melon Acquisition $ 722,000 $ - Issuance of common stock in connection with the payment of Super Biz Contingent Consideration 548,000 - Issuance of common stock in connection with Bannerfy disposition 70,000 220,000 The accompanying notes are an integral part of these consolidated financial statements. F-7 Table of Contents SUPER LEAGUE ENTERPRISE, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. DESCRIPTION OF BUSINESS Super League Enterprise, Inc. (Nasdaq: SLE), (“Super League,” the “Company,” “we,” “us” or “our”) 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 intellectual property (“IP”) and audience success within the fastest growing sector of the media industry. Super League was incorporated on October 1, 2014 as Nth Games, Inc. under the laws of the State of Delaware and changed its name to Super League Gaming, Inc. on June 15, 2015, and to Super League Enterprise, Inc. on September 11, 2023. We are an “emerging growth company” as defined by the Jumpstart Our Business Startups Act of 2012, as amended. On May 30, 2023, the Company filed a Certificate of Amendment (the “2023 First Amendment”) to its Second Amended and Restated Certificate of Incorporation, as amended (the “Charter”), increasing the number of authorized shares of common stock, par value $ 0.001 per share (“common stock”) from 100,000,000 to 400,000,000 . The Company’s Board of Directors (the “Board”) previously approved the Amendment on March 17, 2023, and the Company obtained the approval of the First Amendment by written consent of its stockholders holding greater than 50% of the voting securities of the Company on April 5, 2023. On September 7, 2023, the Company filed a Certificate of Amendment (the “2023 Second Amendment”) to the Charter, which Second Amendment became effective as of 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 at a ratio of 1-for-20 (the “Reverse Split”). The Name Change and the Reverse Split were approved by the Company’s Board on July 5, 2023, and approved by the stockholders of the Company on September 7, 2023. Refer to Note 7 below 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 consolidated financial statements have been retroactively adjusted to reflect the effect of the Reverse Split for all periods presented. All references to “Note,” followed by a number reference from one to twelve herein, refer to the applicable corresponding numbered footnotes to these consolidated financial statements. In connection with the Name Change, the Company also changed its Nasdaq ticker symbol to “SLE” from “SLGG.” Refer to Note 12. “Restatement of Quarterly Financial Information (unaudited), for information about the restatement of the Company’s financial statements as of and for the three and nine months ended September 30, 2023, arising from the exclusion of the calculated noncash value of the effect of the down round feature on the Company’s Series AA Preferred stock, triggered in August 2023, which should have been recorded as a noncash charge directly to accumulated deficit and a noncash reduction to income available to common stockholders in the computation of earnings per share. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation The consolidated financial statements and accompanying notes have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). Principles of Consolidation The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation. Use of Estimates The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expense during the reporting period. Actual results could differ from these estimates. The Company believes that, of the significant accounting policies described herein, the accounting policies associated with revenue recognition, impairment of intangibles, stock-based compensation expense, capitalized internal-use-software costs, accounting for business combinations and related contingent consideration, accounting for convertible debt, including estimates and assumptions used to calculate the fair value of debt instruments, accounting for convertible preferred stock, including modifications and exchanges of equity and equity-linked instruments, accounting for warrant liabilities and accounting for income taxes and valuation allowances against net deferred tax assets, require its most difficult, subjective, or complex judgments. F-8 Table of Contents Going Concern The accompanying consolidated financial statements have been prepared assuming the Company will continue as a going concern, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. The Company incurred net losses of $ 30.3 million and $ 85.5 million for the years ended December 31, 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 the years ended December 31, 2023 and 2022 totaled $ 17.3 million and $ 60.1 million, respectively. For the years ended December 31, 2023 and 2022 net cash used in operating activities totaled $ 15.5 million and $ 19.8 million, respectively. The Company had cash and cash equivalents of $ 7.6 million and $ 2.5 million as of December 31, 2023 and 2022, respectively. To date, our principal sources of capital used to fund our operations and growth have been the net proceeds received from equity and debt financings. We have and will continue to use significant capital for the growth and development of our business, and, as such, we expect to seek additional capital either from operations, or that may be available from future issuance(s) of common stock, preferred stock and / or debt financings, to fund our planned operations. Accordingly, our results of operations and the implementation of our long-term business strategies have been and could continue to be adversely affected by general conditions in the global economy, including conditions that are outside of our control. The most recent global financial crisis caused by severe geopolitical conditions, including conflicts abroad, and the lingering effects of COVID-19 and the threat of other outbreaks, have resulted in extreme volatility, disruptions and downward pressure on stock prices and trading volumes across the capital and credit markets in which we traditionally operate. A severe or prolonged economic downturn could result in a variety of risks to our business and could have a material adverse effect on us, including limiting our ability to obtain additional funding from the capital and credit markets. In management’s judgement, these conditions raise substantial doubt about the ability of the Company to continue as a going concern as contemplated by ASC 205-40, “Going Concern,” (“ASC 205”). Management ’ s Plans The Company experienced significant growth in fiscal year 2023, 2022 and 2021 through organic and inorganic growth activities, including the expansion of our premium advertising inventory and quarter over quarter and year over year increases in recognized revenue across our primary revenue streams. In fiscal year 2023, we acquired Melon, as described below, 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 operating costs. Management continues to consider alternatives for raising capital to facilitate our growth and execute our business strategy, including strategic partnerships and or other forms of equity or debt financings. Refer to Note 7 for recent equity financing activities. The Company considers historical operating results, costs, capital resources and financial position, in combination with current projections and estimates, as part of its plan to fund operations over a reasonable period. Management’s considerations assume, among other things, that the Company will continue to be successful implementing its business strategy, that there will be no material adverse developments in the business, liquidity or capital requirements, and the Company will be able to raise additional equity and / or debt financing on acceptable terms. If one or more of these factors do not occur as expected, it could cause a reduction or delay of the Company’s business activities, sales of material assets, default on its obligations, or forced insolvency. The accompanying consolidated financial statements do not contain any adjustments which might be necessary if the Company were unable to continue as a going concern. No assurance can be given that any future financing will be available or, if available, that it will be on terms that are satisfactory to the Company. We may continue to evaluate potential strategic acquisitions. To finance such strategic acquisitions, we may find it necessary to raise additional equity capital, incur debt, or both. Any efforts to seek additional funding could be made through issuances of equity or debt, or other external financing. However, additional funding may not be available on favorable terms, or at all. The capital and credit markets have experienced extreme volatility and disruption periodically and such volatility and disruption may occur in the future. If we fail to obtain additional financing when needed, we may not be able to execute our business plans which, in turn, would have a material adverse impact on our financial condition, our ability to meet our obligations, and our ability to pursue our business strategies. Reclassifications Certain reclassifications to operating expense line items have been made to prior year amounts for consistency and comparability with the current year’s consolidated financial statement presentation. These reclassifications had no effect on the reported total revenue, operating expense, total assets, total liabilities, total stockholder’s equity, or net loss for the prior period presented. Revenue Recognition Revenue is recognized when the Company transfers promised goods or services to customers in an amount that reflects the consideration to which the Company expects to be entitled in exchange for those goods and services 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. F-9 Table of Contents Transaction prices are based on the amount of consideration to which we expect to be entitled in exchange for transferring promised goods or services to a customer, excluding amounts collected on behalf of third parties, if any. We consider the explicit terms of the revenue contract, which are typically written and executed by the parties, our customary business practices, the nature, timing, and the amount of consideration promised by a customer in connection with determining the transaction price for our revenue arrangements. Refunds and sales returns historically have not been material. The Company generates revenue from (i) innovative advertising including immersive game world and experience publishing and in-game media products, (ii) 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. The Company reports revenue on a gross or net basis based on management’s assessment of whether the Company acts as a principal or agent in the transaction and is evaluated on a transaction-by-transaction basis. To the extent the Company acts as the principal, revenue is reported on a gross basis net of any sales tax from customers, when applicable. The determination of whether the Company acts as a principal or an agent in a transaction is based on an evaluation of whether the Company controls the goods or services prior to transfer to the customer. Where applicable, the Company has determined that it acts as the principal in all of its media and advertising, publishing and content studio and direct to consumer revenue streams, except in situations where we utilize a reseller partner with respect to media and advertising sales arrangements. In the event a customer pays us consideration, or we have a right to an amount of consideration that is unconditional, prior to our transfer of a good or service to the customer, we reflect the contract as a contract liability when the payment is made or the payment is due, whichever is earlier. In the event we perform by transferring goods or services to a customer before the customer pays consideration or before payment is due, we reflect the contract as a contract asset, excluding any amounts reflected as a receivable. Media and Advertising Media and advertising revenue primarily consists of direct and reseller sales of our on-platform media and analytics products, and influencer marketing campaign sales to third-party brands and agencies (hereinafter, “Brands”). On Platform Media On platform media revenue is generated from third party Brands advertising in-game on Roblox, on our Minehut Minecraft platform, or other digital platforms. Media assets include static billboards, video billboards, portals, 3D characters, Pop Ups and other media products. We work with Brands to determine the specific campaign media to deploy, target ad units and target demographics. We customize the media advertising campaign and media products with applicable branding, images and design and place the media on the various digital platforms. Media is delivered via our Super Biz Roblox platform, the Roblox Immersive Ads platform, our owned and operated Minehut platform and others. Media placement can be based on a cost per thousand, other cost per measure, or a flat fee. Media and advertising arrangements typically include contract terms for time periods ranging from one week to two or three months in length. For on-platform media campaigns, we typically insert media products on-platform (in-game) to deliver to the Brand a predetermined number of impressions identified in the underlying contract. The benefit accrues to the Brand at the time that we deliver the impression on the platform, and the media product is viewed or interacted with by the on-platform user. The performance obligation for on-platform media campaigns is each impression that is guaranteed or required to be delivered per the underlying contract. Each impression is considered a good or service that is distinct under the revenue standard, and the performance obligation under our on-platform media contracts is the delivery of a series of impressions. Each impression required to be delivered in the series that we promise to transfer to the Brand meets the criteria to be a performance obligation satisfied over time, due to the fact that (1) our performance does not create an asset with an alternative use to the Company, and (2) we have an enforceable right to payment for performance completed to date per the terms of the contract. Further, the same method is used to measure our progress toward complete satisfaction of the performance obligation to transfer each distinct impression, as in the transfer of the series of impressions to the customer, which is based on actual delivery of impressions. As such, we account for the specified series of impressions as a single performance obligation. The delivery of the impression on platform represents the change in control of the good or service, and therefore, the Company satisfies its performance obligations and recognizes revenue based on the delivery of impressions under the contract. F-10 Table of Contents Influencer Marketing Influencer marketing revenue is generated in connection with the development, management and execution of influencer marketing campaigns on behalf of Brands, primarily on You Tube, Instagram and Tik Tok. Influencer marketing campaigns are collaborations between Super League, popular social-media influencers, and Brands, to promote a Brands’ products or services. Influencers are paid a flat rate per post to feature a Brand’s product or service on their respective social media outlets. For influencer marketing campaigns that include multiple influencers, the customer can benefit from the influencer posts either on its own or together with other resources that are readily available to the customer. Our influencer marketing campaigns for Brands (1) incorporate a significant service of integrating the goods or services with other goods or services promised in the contract (typically additional influencer posts) into a bundle of goods or services that represent the combined output that the customer has contracted for, and (2) the goods or services are interdependent in that each of the goods or services is affected by one or more of the other goods or services in the contract which combined, create an influencer marketing campaign to satisfy the Brand’s specific campaign objectives. The interdependency of the performance obligations is supported by an understanding of what a customer expects to receive as a final product with respect to an influencer marketing campaign, which is an integrated influencer marketing advertising campaign that the influencer posts create when they are combined into an overall integrated campaign. Our customers receive and consume the benefits of each influencer’s post as the content is posted on the influencers respective social media outlet. In addition, the influencer marketing campaigns and videos created by influencers are highly customized advertising engagements, where Brand specific assets and collateral are created for the customer based on specific and customized specifications, and therefore, does not create an asset with an alternative use. Further, based on contract terms, we typically have an enforceable right to payment for performance to date during the term of the arrangement. We recognize revenues for influencer marketing campaigns based on input methods which recognize revenue on the basis of the entity’s efforts or inputs to the satisfaction of a performance obligation relative to the total expected inputs to the satisfaction of that performance obligation. As such, revenues are recognized over the term of the campaign, as the influencer videos are posted, based on costs incurred to date relative to total costs for the influencer marketing campaign. Publishing and Content Studio Publishing and content studio revenue consists of revenue generated from immersive game development and custom game experiences within our owned and affiliate game worlds, and revenue generated in connection with our production, curation and distribution of entertainment content for our own network of digital channels and media and entertainment partner channels. Publishing Custom builds are highly customized branded game experiences created and built by Super League for customers on existing digital platforms such as Roblox, Fortnite, Decentraland and others. Custom builds often include the creation of highly customized and branded gaming experiences and other campaign specific media or products to create an overall customized immersive world campaign. Custom integrations are highly customized advertising campaigns that are integrated into and run on existing affiliate Roblox gaming experiences. Custom integrations will often include the creation of highly customized and branded game integration elements to be integrated into the existing Roblox gaming experience to the customers specifications and other campaign specific media or products. We also create custom integrations on our owned and operated digital property “Minehut” for Brands. Our custom builds and custom integration (hereinafter, “Custom Programs”) campaign revenue arrangements typically include multiple promises and performance obligations, including requirements to design, create and launch a platform game, customize and enhance an existing game, deploy media products, and related performance measurement. Custom Programs offer a strategically integrated advertising campaign with multiple integrated components, and we provide a significant service of integrating the goods or services with other goods or services promised in the contract into a bundle of goods or services that represent the combined output or outputs that the customer has contracted for. As such, Custom Program revenue arrangements are combined into a single performance unit, as our performance does not create an asset with an alternative use to the entity and we typically have an enforceable right to payment for performance to date during the term of the arrangement. We recognize revenues for Custom Programs based on input methods, that recognize revenue based upon estimates of progress toward complete satisfaction of the contract performance obligations, utilizing primarily costs or direct labor hours incurred to date to estimate progress towards completion. F-11 Table of Contents Content Production Content production revenue is generated in connection with our production, curation and distribution of 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. Content production arrangements typically involve promises to provide a distinct set of videos, creative, content creation and or other live or remote production services. These services can be one-off in nature (relatively short services periods of one day to one week) or can be specified as monthly services over a multi-month period. One-off and monthly content production services are distinct in that the customer can benefit from the service either on its own or together with other resources that are readily available to the customer. Further, promises to provide one-off or monthly content production services are typically separately identifiable as the nature of the promises, within the context of the contract, is to transfer each of those goods or services individually. Each month’s content production services are separate and not integrated with a prior month’s or subsequent months services and do not represent a combined output; each months content production services do not modify any other prior period content production services, and the monthly services are not interdependent or highly interrelated. As a result, each one-off or monthly promise to provide content production services is a distinct good or service that we promise to transfer and are therefore performance obligations. In general, content production contracts do not meet the criteria for recognition of revenues over time as the customer typically does not simultaneously receive and consume the benefits provided by our performance as we perform, our performance does not typically create or enhance an asset that the customer controls, and while our performance does not create an asset with an alternative use, we typically have a right to payment upon completion of each distinct performance obligation. A performance obligation is satisfied at a point in time if none of the criteria for satisfying a performance obligation over time are met. For content production arrangements, we have a right to payment and the customer has control of the good or service at the time of completion and delivery of the one-off or monthly content production services in accordance with the terms of the underlying contract. As such, revenue is recognized at the time of completion of the one-off or monthly content production services. Direct to Consumer Direct to consumer revenue primarily consists of monthly digital subscription fees, and sales of in-game digital goods. Subscription revenue is recognized in the period the services are rendered. Payments are typically due from customers at the point of sale. InPvP Platform Generated Sales Transactions Through a relationship with Microsoft, the owner of Minecraft, we operate a Minecraft server world for players playing the game on consoles and tablets. We are one of seven partner servers with Microsoft that, while “free to play,” monetize the players through in-game micro transactions. We generate in-game platform sales revenue from the sale of digital goods, 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. InPvP revenues are generated from single transactions for various distinct digital goods sold to users in-game. Microsoft processes sales transactions and remits the applicable revenue share to us pursuant to the terms of the Microsoft agreement. Revenue for digital goods sold on the platform is recognized when Microsoft (our partner) collects the revenue and facilitates the transaction, including delivery of digital goods, on the platform. Revenue for such arrangements includes all revenue generated, make goods, and refunds of all transactions managed via the platform by Microsoft. Payments are made to the Company monthly based on the sales revenue generated on the platform. Minehut Our Minehut digital property provides various Minecraft server hosting services on primarily a monthly subscription basis, and other digital goods to the Minecraft gaming community. Minehut users purchase additional server space and other digital goods to enhance their Minehut/Minecraft playing experience. Users log on to Minehut and are able to play for free. Users are able to purchase expanded server space to enhance their game play experience for a fee. Minehut revenues are generated from single transactions for the sale of distinct digital goods on the platform. Subscription revenue is recognized generally over the short period of time over which the services are rendered. Digital goods revenue is recognized when delivery occurs and all other revenue recognition criteria are satisfied, which is typically at the point of sale. Payments are typically due from customers, and delivery of purchased digital goods occurs at the point of sale. F-12 Table of Contents Revenue was comprised of the following for the years ended December 31: 2023 2022 Media and advertising $ 10,919,000 $ 12,122,000 Publishing and content studio 12,732,000 5,744,000 Direct to consumer 1,428,000 1,811,000 $ 25,079,000 $ 19,677,000 For the fiscal years ended December 31, 2023 and 2022, 24 % and 32 % of revenues were recognized at a single point in time, and 76 % and 68 % of revenues were recognized over time, respectively. Contract assets totaled $ 546,000 at December 31, 2023, $ 1,013,000 at December 31, 2022 and $ 231,000 at December 31, 2021. Contract liabilities totaled $ 339,000 at December 31, 2023, $ 111,000 at December 31, 2022, and $ 47,000 at December 31, 2021. Revenue recognized during the year ended December 31, 2023 relating to contract liabilities as of December 31, 2022 totaled $ 111,000 . Revenue recognized during the year ended December 31, 2022 relating to contract liabilities as of December 31, 2021 totaled $ 47,000 . In accordance with ASC 606-10-50-13, the Company is required to include disclosure on its remaining performance obligations as of the end of the current reporting period. Due to the nature of the Company’s contracts with customers, these reporting requirements are not applicable as per ASC 606-10-50-14 as the performance obligation is part of a contract that has an original duration of one year or less. 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, internal and third-party game developers, content capture and production services, direct marketing, cloud services, software, prizing, and revenue sharing fees. Advertising Advertising costs include the cost of social digital media, marketing, and promotions. The Company expenses advertising costs as incurred. Advertising costs are included in selling, marketing and advertising expense in the consolidated statements of operations. Advertising expense for the fiscal years ended December 31, 2023 and 2022 was $ 134,000 and $ 507,000 , respectively. Engineering, Technology and Development Costs Components of our platform are available on a “free to use,” “always on basis,” and are utilized and offered as an audience acquisition tool, as a means of growing our audience, engagement, viewership, players and community. Engineering, technology and development related operating expense includes the costs described below, incurred in connection with our audience acquisition and viewership expansion activities. Engineering, technology and development related operating expense includes (i) allocated internal engineering personnel expense, including salaries, noncash stock compensation, taxes and benefits, (ii) third-party contract software development and engineering expense, (iii) internal use software cost amortization expense, and (iv) technology platform related cloud services, broadband and other platform expense, incurred in connection with our audience acquisition and viewership expansion activities, including tools and product offering development, testing, minor upgrades and features, free to use services, corporate information technology and general platform maintenance and support. Cash and Cash Equivalents The Company considers all highly-liquid, short-term investments with original maturities of three months or less when purchased to be cash equivalents. Accounts Receivable Accounts receivable are recorded at the invoice amount, less allowances for credit losses, if any, and do not bear interest. The Company provides an allowance for potential credit losses based on its evaluation of the collectability and the customers’ creditworthiness. Accounts receivable are written off when they are determined to be uncollectible. As of December 31, 2023 and 2022, no allowance for expected credit losses was deemed necessary. F-13 Table of Contents Fair Value Measurements Fair value is defined as the exchange price that would be received from selling an asset or paid to transfer a liability in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. The Company measures financial assets and liabilities at fair value at each reporting period using a fair value hierarchy which requires the Company to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. A financial instrument’s classification within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. Three levels of inputs may be used to measure fair value: Level 1. Quoted prices in active markets for identical assets or liabilities. Level 2 . Quoted prices for similar assets and liabilities in active markets or inputs other than quoted prices which are observable for the assets or liabilities, either directly or indirectly through market corroboration, for substantially the full term of the financial instruments. Level 3. Unobservable inputs which are supported by little or no market activity and which are significant to the fair value of the assets or liabilities. Certain assets and liabilities are required to be recorded at fair value on a recurring basis, including derivative financial instruments, contingent consideration and warrant liabilities recorded in accordance with ASC 480, “Distinguishing liabilities from equity,” (“ASC 480”), and convertible notes payable recorded at fair value. As described in the notes below, contingent consideration, convertible notes payable and warrant liabilities outstanding during the periods presented are recorded at fair value. Transfers to/from Levels 1, 2, and 3 are recognized at the beginning of the reporting period. There were no transfers to/from Levels 1, 2, and 3 during the periods presented. Certain long-lived assets may be periodically required to be measured at fair value on a nonrecurring basis, including long-lived assets that are impaired. The fair value for other assets and liabilities such as cash, restricted cash, accounts receivable, other receivables, prepaid expense and other current assets, accounts payable and accrued expense, and liabilities to customers have been determined to approximate carrying amounts due to the short maturities of these instruments. Derivative Financial Instruments The Company evaluates its financial instruments to determine if such instruments are derivatives or contain features that qualify as embedded derivatives. For derivative financial instruments that are accounted for as liabilities, the derivative instrument is initially recorded at its fair value and is then re-valued at each reporting date, with changes in the fair value reported in the consolidated statements of operations. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is reassessed at the end of each reporting period. Equity instruments that are initially classified as equity that become subject to reclassification are reclassified to a liability at the fair value of the instrument on the reclassification date. Derivative instrument liabilities are classified in the balance sheet as current or non-current based on whether or not net-cash settlement of the derivative instrument could be required within 12 months of the balance sheet date. In circumstances where the embedded conversion option in a convertible instrument is required to be bifurcated and there are also other embedded derivative instruments in the convertible instrument that are required to be bifurcated, the bifurcated derivative instruments are accounted for as a single, compound derivative instrument. Derivative liabilities are adjusted to reflect fair value at each period end, with any increase or decrease in the fair value being recorded in the statement of operations. Equity-linked instruments that are deemed to be freestanding instruments issued in conjunction with preferred stock are accounted for separately. For equity linked instruments classified as equity, the proceeds are allocated based on the relative fair values of the preferred stock and the equity-linked instrument following the guidance in ASC 470, “Debt,” (“ASC 470”). Property and Equipment Property and equipment are recorded at cost. Major additions and improvements that materially extend useful lives of property and equipment are capitalized. Maintenance and repairs are charged against the results of operations as incurred. When these assets are sold or otherwise disposed of, the asset and related depreciation are relieved, and any gain or loss is included in the statements of operations for the period of sale or disposal. Depreciation and amortization are computed on a straight-line basis over the estimated useful lives of the assets, typically over a three to five-year period. Acquisitions Acquisition Method. Acquisitions that meet the definition of a business under ASC 805 , “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. 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. F-14 Table of Contents 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. Intangible Assets Intangible assets primarily consist of (i) internal-use software development costs, (ii) domain name, copyright and patent registration costs, (iii) commercial licenses and branding rights, (iv) developed technology acquired, (v) partner, customer, creator and influencer related intangible assets acquired and (vi) other intangible assets, which are recorded at cost (or in accordance with the acquisition method or cost accumulation methods described above) and amortized using the straight-line method over the estimated useful lives of the assets, ranging from three to 10 years. Software development costs incurred to develop internal-use software during the application development stage are capitalized and amortized on a straight-line basis over the software’s estimated useful life, which is generally three years. Software development costs incurred during the preliminary stages of development are charged to expense as incurred. Maintenance and training costs are charged to expense as incurred. Upgrades or enhancements to existing internal-use software that result in additional functionality are capitalized and amortized on a straight-line basis over the applicable estimated useful life. Impairment of Long-Lived Assets The Company assesses the recoverability of long-lived assets whenever events or changes in circumstances indicate that their carrying value may not be recoverable. Factors we consider important, which could trigger an impairment review, include the following: significant underperformance relative to expected historical or projected future operating results; significant changes in the manner of our use of the acquired assets or the strategy for our overall business; significant negative industry or economic trends; significant adverse changes in legal factors or in the business climate, including adverse regulatory actions or assessments; and significant decline in our stock price for a sustained period. In the event the sum of the expected undiscounted future cash flows resulting from the use of the asset is less than the carrying amount of the asset, an impairment loss equal to the excess of the asset’s carrying value over its fair value is recorded. Other assets of a reporting unit that are held and used may be required to be tested for impairment when certain events trigger interim goodwill impairment tests. In such situations, other assets, or asset groups, are tested for impairment under their respective standards and the other assets’ or asset groups’ carrying amounts are adjusted for impairment before testing goodwill for impairment as described below. There can be no assurance, however, that market conditions or demand for the Company’s products or services will not change, which could result in long-lived asset impairment charges in the future. Goodwill The Company currently has one reporting unit. The following table presents the changes in the carrying amount of goodwill as of December 31: 2023 2022 Beginning Balance $ - $ 50,263,000 Acquisitions (See Note 5) 1,864,000 - Impairment charges (cumulative goodwill impairment losses to date) - ( 50,263,000 ) Ending Balance $ 1,864,000 $ - Goodwill represents the excess of the purchase price of the acquired business over the acquisition date fair value of the net assets acquired. Goodwill is tested for impairment at the reporting unit level (operating segment or one level below an operating segment) on an annual basis (December 31) and between annual tests if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying value. We consider our market capitalization and the carrying value of our assets and liabilities, including goodwill, when performing our goodwill impairment tests. We operate in one reporting segment. F-15 Table of Contents 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 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 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. 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 $ 50,263,000 . At September 30, 2022, from a qualitative standpoint, we considered the Company’s history of reported losses and negative cash flows from operating activities, and also considered the sustained downturn in industry and macroeconomic conditions, including inflationary pressures and potential reductions in advertising spending and the sustained downturn of the broader mid-cap and micro-cap equity markets in the third quarter of 2022. We also considered that the Company experienced significant inorganic and organic growth in fiscal 2021, including the impact of the acquisitions of Mobcrush, Bannerfy and Super Biz on our premium advertising inventory, product offerings to advertisers, 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 was consistent with the broader microcap market. As of September 30, 2022 the decline in our stock price and other factors were deemed to be sustained, and therefore a triggering event requiring a goodwill impairment test as of September 30, 2022 was deemed to have occurred. We utilized the market capitalization of the Company as of September 30, 2022, a Level 1 input as described above, to estimate the fair value of the Company’s single reporting unit. The estimated market capitalization was determined by multiplying our September 30, 2022 stock price and the common shares outstanding as of September 30, 2022. The market capitalization approach was utilized to estimate the fair value of our single reporting unit as of September 30, 2022, due to the significance of the decline in stock price as of September 30, 2022, resulting in a market capitalization that was 38 % of the net book value of our single reporting unit. Based on the analysis, the estimated fair value of our reporting unit was $ 25.2 million, compared to a carrying value of our single reporting unit of $ 67.3 million as of September 30, 2022. As such, the fair value of our single reporting unit was deemed to be below its carrying value as of September 30, 2022, resulting in a goodwill impairment charge of $ 42,000,000 in the third quarter of 2022, which is 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 $ 8,263,000 . 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 2022. Similarly, given the Company’s significant growth, management did not believe that the December 2022 market capitalization of the Company was indicative of any material fundamental change in the Company’s underlying business or future prospects as of the December 31, 2022 measurement date. The Company's stock price had been volatile, and the volatility continued during the three months ended December 31, 2022, declining approximately 50 % from the September 30, 2022 closing price to $ 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, 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 $ 8,263,000 for the year ended December 31, 2022, reflecting the write down of the remaining balance of goodwill for our single reporting unit. F-16 Table of Contents Stock-Based Compensation Compensation expense for stock-based awards is measured at the grant date, based on the estimated fair value of the award, and is recognized as an expense, typically on a straight-line basis over the employee’s requisite service period (generally the vesting period of the equity award) which is generally two to four years. Compensation expense for awards with performance conditions that affect vesting is recorded only for those awards expected to vest or when the performance criteria are met. The fair value of restricted stock and restricted stock unit awards is determined by the product of the number of shares or units granted and the grant date market price of the underlying common stock. The fair value of stock option and common stock purchase warrant awards is estimated on the date of grant utilizing the Black-Scholes-Merton option pricing model. The Company utilizes the simplified method for estimating the expected term for options granted to employees due to the lack of available or sufficient historical exercise data for the Company for the applicable options terms. The Company accounts for forfeitures of awards as they occur. Estimates of expected volatility of the underlying common stock for the expected term of the stock option used in the Black-Scholes-Merton option pricing model are determined by reference to historical volatilities of the Company’s common stock and historical volatilities of similar companies. Grants of equity-based awards (including warrants) to non-employees in exchange for consulting or other services are accounted for using the grant date fair value of the equity instruments issued. A condition affecting the exercisability or other pertinent factors used in determining the fair value of an award that is based on an entity achieving a specified share price constitutes a market condition pursuant to ASC 718, “Stock based Compensation,” (“ASC 718”). A market condition is reflected in the grant-date fair value of an award, and therefore, a Monte Carlo simulation model is utilized to determine the estimated fair value of the equity-based award. Compensation cost is recognized for awards with a market condition, provided the requisite service period is satisfied, regardless of whether the market condition is ever satisfied. Cancellation of an existing equity-classified award along with a concurrent grant of a replacement award is accounted for as a modification under ASC 718. Total compensation cost to be recognized in connection with a modification and concurrent grant of a replacement award is equal to the original grant date fair value plus any incremental fair value, calculated as the excess of the fair value of the replacement award over the fair value of the original awards on the cancellation date. Any incremental compensation cost related to vested awards is recognized immediately on the modification date. Any incremental compensation cost related to unvested awards is recognized prospectively over the remaining service period, in addition to the remaining unrecognized grant date fair value. Financing Costs Specific incremental costs directly attributable to a proposed or actual offering of securities are deferred and charged against the gross proceeds of the equity financing. In the event that the proposed or actual equity financing is not completed, or is deemed not likely to be completed, such costs are expensed in the period that such determination is made. Deferred equity financing costs, if any, are included in other current assets in the accompanying consolidated balance sheet. For the years ended December 31, 2023 and 2022, financing costs charged against gross proceeds in connection with equity financings totaled $ 2,735,000 and $ 1,397,000 , respectively. Deferred financing cost, included in prepaid expense and other current assets, at December 31, 2023 and 2022, totaled $ 282,000 and $ 374,000 , respectively. Specific incremental costs directly attributable to a proposed or actual debt offering are reported in the balance sheet as a direct deduction from the face amount of the debt instrument. In the event that the proposed or actual debt financing is not completed, or is deemed not likely to be completed, such costs are expensed in the period that such determination is made. In the event that the Company elects to use the fair value option to account for debt instruments, all costs directly attributable to the debt offering are expensed as incurred in the statement of operations. For the years ended December 31, 2023 and 2022, debt financing costs expensed as incurred in connection with debt financings totaled $ 0 and $ 123,000 , respectively. Convertible Debt The Company evaluates convertible notes outstanding to determine if those contracts or embedded components of those contracts qualify as derivatives under ASC 815, “Derivatives and Hedging,” (“ASC 815”). ASC 815 requires conversion, redemption options, call options and other features (hereinafter, “Embedded Instruments”) contained in the Company’s convertible debt instruments that meet certain criteria to be bifurcated and separately accounted for as an embedded derivative. In circumstances where the embedded conversion option in a convertible instrument is required to be bifurcated and there are also other embedded derivative instruments in the convertible instrument that are required to be bifurcated, the bifurcated derivative instruments are accounted for as a single, compound derivative instrument. F-17 Table of Contents In the event that the fair value option election is not made, as described below, the Company evaluates the balance sheet classification for convertible debt instruments issued to determine whether the instrument should be classified as debt or equity, and whether the Embedded Instruments should be accounted for separately from the host instrument. Embedded Instruments of a convertible debt instrument would be separated from the convertible instrument and classified as a derivative liability if the feature, were it a standalone instrument, meets the definition of an “embedded derivative.” Generally, characteristics that require derivative treatment include, among others, when the conversion feature is not indexed to the Company’s equity, or when it must be settled either in cash or by issuing stock that is readily convertible to cash. When a conversion feature meets the definition of an embedded derivative, it is required to be separated from the host instrument and classified as a derivative liability carried on the balance sheet at fair value, with any changes in its fair value recognized currently in the consolidated statements of operations. Fair Value Option (“ FVO ” ) Election. The Company accounted for certain convertible notes issued, as described at Note 6, under the fair value option election pursuant to ASC 825, “Financial Instruments,” (“ASC 825”) as discussed below. The convertible notes accounted for under the FVO election are each debt host financial instruments containing embedded features which would otherwise be required to be bifurcated from the debt-host and recognized as separate derivative liabilities subject to initial and subsequent periodic estimated fair value measurements under ASC 815. Notwithstanding, ASC 825 provides for the “fair value option” election, to the extent not otherwise prohibited by ASC 825, to be afforded to financial instruments, wherein bifurcation of an embedded derivative is not necessary, and the financial instrument is initially measured at its issue-date estimated fair value and then subsequently remeasured at estimated fair value on a recurring basis at each reporting period date. The estimated fair value adjustment, as required by ASC 825, is recognized as a component of other comprehensive income (“OCI”) with respect to the portion of the fair value adjustment attributed to a change in the instrument-specific credit risk, with the remaining amount of the fair value adjustment recognized as other income (expense) in the accompanying consolidated statement of operations. With respect to the note described at Note 6, as provided for by ASC 825, the estimated fair value adjustment is presented in a respective single line item within other income (expense) in the accompanying consolidated statements of operations, since the change in fair value of the convertible notes payable was not attributable to instrument specific credit risk. The estimated fair value adjustment is included in interest expense in the accompanying consolidated statement of operations. Transfers of Financial Assets The Company accounts for transfers of financial assets as sales when it has surrendered control over the related assets. Whether control has been relinquished requires, among other things, an evaluation of relevant legal considerations and an assessment of the nature and extent of the Company’s continuing involvement with the assets transferred. Gains and losses stemming from transfers reported as sales, if any, are included in the statements of income. Assets obtained and liabilities incurred in connection with transfers reported as sales are initially recognized in the balance sheet at fair value. Transfers of financial assets that do not qualify for sale accounting are reported as collateralized borrowings. Accordingly, the related assets remain on the Company’s balance sheet and continue to be reported and accounted for as if the transfer had not occurred. Cash proceeds from these transfers are reported as liabilities, with attributable interest expense recognized over the life of the related transactions. Commitment fees charged irrespective of drawdown activity are recognized as expense on a straight line basis over the commitment period and included in other income (expense) in the consolidated statements of operations. Refer to Note 6 for additional information. Reportable Segments The Company utilizes the management approach to identify the Company’s operating segments and measure the financial information disclosed, based on information reported internally to the Chief Operating Decision Maker (“CODM”) to make resource allocation and performance assessment decisions. An operating segment of a public entity has all the following characteristics: (1) it engages in business activities from which it may earn revenues and incur expense; (2) its operating results are regularly reviewed by the public entity’s CODM to make decisions about resources to be allocated to the segment and assess its performance: and (3) its discrete financial information is available. Based on the applicable criteria under the standard, the components of the Company’s operations are its: (1) advertising and sponsorship component, including content sales component; and (2) the Company’s direct-to-consumer component. A reportable segment is an identified operating segment that also exceeds the quantitative thresholds described in the applicable standard. Based on the applicable criteria under the standard, including quantitative thresholds, management has determined that the Company has one reportable segment that operated primarily in domestic markets during the periods presented herein. Concentration of Credit Risks Financial instruments that potentially subject the Company to concentrations of credit risk are cash equivalents, investments and accounts receivable. The Company places its cash equivalents and investments primarily in highly rated money market funds. Cash equivalents are also invested in deposits with certain financial institutions and may, at times, exceed federally insured limits. Any loss incurred or a lack of access to such funds could have a significant adverse impact on the Company's financial condition, results of operations, and cash flows. F-18 Table of Contents Risks and Uncertainties Concentrations . The Company had certain customers whose revenue individually represented 10% or more of the Company’s total revenue, or whose accounts receivable balances individually represented 10% or more of the Company’s total accounts receivable, and vendors whose accounts payable balances individually represented 10% or more of the Company’s total accounts payable, as follows: Year Ended December 31, 2023 2022 Number of customers > 10% of revenues / percent of revenues One / 14 % - / - Revenue concentrations were comprised of the following revenue categories: Year Ended December 31, 2023 2022 Advertising and sponsorships 3 % - Publishing and content studio 11 % - 14 % - December 31, 2023 December 31, 2022 Number of customers > 10% of accounts receivable / percent of accounts receivable Three / 55 % Two / 25 % Number of vendors > 10% of accounts payable / percent of accounts payable Two / 37 % One / 10 % Earnings (Loss) Per Share Basic earnings (loss) per share is computed by dividing the income or loss by the weighted-average number of outstanding shares of common stock for the applicable period. Diluted earnings per share is computed by dividing the income or loss by the weighted-average number of outstanding shares of common stock for the applicable period, including the dilutive effect of common stock equivalents. Potentially dilutive common stock equivalents primarily consist of common stock potentially issuable in connection with the conversion of outstanding preferred stock, convertible notes payable, employee stock options, warrants issued to employees and non-employees in exchange for services and warrants issued in connection with financings. Common stock underlying all outstanding stock options, restricted stock units and warrants, totaling 2,250,000 and 359,000 at December 31, 2023 and 2022, respectively, have been excluded from the computation of diluted loss per share because the effect of inclusion would have been anti-dilutive. Common stock potentially issuable in connection with the conversion of outstanding preferred stock totaling 12,127,000 and 913,000 at December 31, 2023 and 2022, respectively, have been excluded from the computation of diluted loss per share because the effect of inclusion would have been anti-dilutive. Common stock potentially issuable in connection with the conversion of outstanding convertible notes payable totaling zero and 7,000 at December 31, 2023 and 2022, respectively, have been excluded from the computation of diluted loss per share because the effect of inclusion would have been anti-dilutive. A reconciliation of net loss to net loss attributable to common stockholders is as follows as of December 31: 2023 2022 Net loss $ ( 30,330,000 ) $ ( 85,451,000 ) Deemed dividend on Series AA Preferred Stock – down round feature ( 7,567,000 ) - Preferred Dividends paid in shares of common stock ( 374,000 ) - Net loss attributable to common stockholders $ ( 38,271,000 ) $ ( 85,451,000 ) Modifications and Exchanges of Preferred Stock and Preferred Stock Instruments Preferred Stock Changes to the terms of the Company’s preferred stock or exchanges of shares of the Company’s preferred stock for another, are assessed to determine whether the changes or exchange should be accounted for as either a modification or an extinguishment. This assessment can be done either qualitatively or quantitatively based upon the significance of the change. When preferred stock is modified in a manner that cannot be reliably assessed qualitatively, the Company performs a quantitative test to determine whether the modification or exchange should be accounted for as a modification or an extinguishment. The Company applies the cash flow model used to assess debt modifications in ASC 470-50, Debt – Modifications and Extinguishments, to determine whether a modification or exchange of preferred stock should be accounted for as a modification or extinguishment. Under that model, the present value of the contractual cash flows is compared before and after a modification or exchange. If the present value of the contractual cash flows is ten percent or more, the modification or exchange is accounted for as an extinguishment; if the present value of the contractual cash flows differs by less than ten percent, the modification or exchange is accounted for as a modification. F-19 Table of Contents If the assessment results in an extinguishment, then the difference between the fair value of the new or modified preferred stock and the carrying value of the original preferred stock is recognized as a reduction of, or increase to, retained earnings, as a deemed dividend. The difference is also recognized as an adjustment to earnings available to common shareholders for purposes of calculating earnings per share. If the assessment results in a modification, the Company measures any transfer of value between preferred shareholders and common shareholders as the difference between the fair value of the preferred stock before and after the modification or exchange, measured on the modification or exchange date. Transfers of value are recorded as a reduction of, or increase to, retained earnings as a deemed dividend. In addition, transfers of value are recognized as an adjustment to earnings available to common shareholders for purposes of calculating earnings per share. In December 2023, the Company entered into certain Series A Exchange Agreements (the “ Series A Agreements ”) and Series AA Exchange Agreements (the “Series AA Agreements”, and collectively with the Series A Agreement, the “Exchange Agreements”), with certain holders (the “Holders”) of the Company’s Series A Preferred Stock, and Series AA Preferred Stock. The difference between the fair value of the new or modified preferred stock and the carrying value of the original preferred stock totaled $ 0 , resulting in no impact on retained earnings for the periods presented. Refer to Note 7 for additional information. Preferred Stock Instruments For preferred stock instruments classified as liabilities under ASC 480 (see placement agent warrants described at Note 7), the Company follows the accounting models for the modification or extinguishment of debt, which require that modifications or exchanges of preferred stock instruments classified as liabilities are considered extinguishments, with gains or losses recognized in current earnings if the terms of the new instrument and original instrument are substantially different. Dividends Dividends on preferred stock paid in another class of stock are recorded at the fair value of the shares issued as a charge to retained earnings. Dividends declared on preferred stock that are payable in the Company’s common shares are deducted from earnings available to common shareholders when computing earnings per share. Certain of the Company’s outstanding preferred stock contain a conversion price down round feature subject to a contractual floor pursuant to the underlying rights in the applicable certificate of designation. Upon the occurrence of a triggering event that results in a reduction of the conversion price for an equity-classified convertible preferred stock, the Company measures the value of the effect of the feature as the difference between the fair value of the financial instrument without the down round feature, with a conversion price corresponding to the currently stated conversion price of the issued instrument, and the fair value of the financial instrument without the down round feature with a conversion price corresponding to the reduced conversion price upon the down round feature being triggered. The value of the effect of a down round feature that is triggered is recognized as a charge to retained earnings and a reduction to income available to common stockholders in the computation of earnings per share. For the year ended December 31, 2023, total charges to retained earnings as a result of the triggering of down round features related to Series AA Preferred stock totaled $ 7,567,000 . Refer to Note 7 for additional information. Income Taxes Income taxes are accounted for using an asset and liability approach that requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been recognized in the Company’s consolidated financial statements or income tax returns. A valuation allowance is established to reduce deferred tax assets if all, or some portion, of such assets will more than likely not be realized, or if it is determined that there is uncertainty regarding future realization of such assets. Under U.S. GAAP, a tax position is a position in a previously filed tax return, or a position expected to be taken in a future tax filing that is reflected in measuring current or deferred income tax assets and liabilities. Tax positions are recognized only when it is more likely than not, based on technical merits, that the position will be sustained upon examination. Tax positions that meet the more likely than not thresholds are measured using a probability weighted approach as the largest amount of tax benefit being realized upon settlement. The Company considers many factors when evaluating and estimating its tax positions and tax benefits, which may require periodic adjustments, and which may not accurately forecast actual outcomes. Management believes the Company has no uncertain tax positions for the years ended December 31, 2023 and 2022. The Company has elected to include interest and penalties related to its tax contingences as a component of income tax expense. There were no accruals for interest and penalties related to uncertain tax positions for the periods presented. Income tax returns remain open for examination by applicable authorities, generally three years from filing for federal and four years for state. The Company is not currently under examination by any taxing authority nor has it been notified of an impending examination. Contingencies 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. Loss contingencies considered remote are generally not disclosed unless they involve guarantees, in which case the guarantees would be disclosed. F-20 Table of Contents Recent Accounting Guidance Recent Accounting Pronouncements – Adopted. In October 2021, the FASB issued ASU No. 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers , which requires entities to recognize and measure contract assets and contract liabilities acquired in a business combination in accordance with ASC Topic 606, Revenue from Contracts with Customers , in order to align the recognition of a contract liability with the definition of a performance obligation. This standard became effective for the Company and was adopted beginning in the first quarter of fiscal year 2023. The adoption of this standard did not have a material impact on the Company's consolidated financial statements and related disclosures. On August 5, 2020, the FASB issued ASU No. 2020-06, Debt – Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging – Contracts in Entity ’ s Own Equity (Subtopic 815-40) . The guidance in this update eliminates the beneficial conversion and cash conversion accounting models for convertible instruments. It also amends the accounting for certain contracts in an entity’s own equity that are currently accounted for as derivatives because of specific settlement provisions. In addition, the new guidance modifies how particular convertible instruments and certain contracts that may be settled in cash or shares impact the diluted EPS computation. The guidance was required to be applied retrospectively with the cumulative effect recognized as of the date of adoption. The guidance became effective for the Company and was adopted at the beginning of the first quarter of the fiscal year ending December 31, 2023. The adoption of this standard did not have a material impact on the Company's consolidated financial statements and related disclosures. In June 2016, the FASB issued ASU No. 2016-13, “Financial Instruments—Credit Losses, ASC 326, Measuring Credit Losses on Financial Instruments.” The standard provides guidance on the measurement and recognition of credit losses on most financial assets. For trade receivables, loans, and held-to-maturity debt securities, the current probable loss recognition methodology was replaced by an expected credit loss model. For available-for-sale debt securities, the recognition model on credit losses is generally unchanged, except the losses are required to be presented as an adjustable allowance. The guidance will be applied retrospectively with the cumulative effect recognized as of the date of adoption. The guidance became effective for the Company and was adopted at the beginning of the first quarter of the fiscal year ended December 31, 2023. The adoption of this standard did not have a material impact on the Company's consolidated financial statements and related disclosures. 3. PROPERTY AND EQUIPMENT Property and equipment consisted of the following at December 31: 2023 2022 Computer hardware $ 3,322,000 $ 3,314,000 Furniture and fixtures 356,000 356,000 3,678,000 3,670,000 Less: accumulated depreciation and amortization ( 3,608,000 ) ( 3,523,000 ) $ 70,000 $ 147,000 Depreciation and amortization expense for property and equipment was $ 85,000 and $ 106,000 for the years ended December 31, 2023 and 2022, respectively. 4. INTANGIBLE AND OTHER ASSETS Intangible and other assets consisted of the following as of December 31: 2023 2022 Weighted Average Amortization Period (Years) Partner and customer relationships $ 7,645,000 $ 13,376,000 6.5 Capitalized software development costs 5,912,000 5,262,000 3.0 Capitalized third-party game property costs 500,000 500,000 5.0 Developed technology 3,931,000 7,880,000 5.0 Influencers/content creators 2,559,000 2,559,000 4.5 Trade name 209,000 189,000 5.0 Domain 68,000 68,000 10.0 Copyrights and other 825,000 760,000 5.5 21,649,000 30,594,000 5.0 Less: accumulated amortization ( 15,013,000 ) ( 10,528,000 ) Intangible and other assets, net $ 6,636,000 $ 20,066,000 F-21 Table of Contents Intangible assets as of December 31, 2023 reflected in the table above include the intangible assets acquired in connection with the Melon Acquisition totaling $ 510,000 , as described at Note 5 below. Total amortization expense included in operating expense for the fiscal years ended December 31, 2023 and 2022 totaled $ 5,238,000 and $ 5,207,000 , respectively. Amortization expense included in cost of revenues for the fiscal years ended December 31, 2023 and 2022 totaled $ 53,000 and $ 90,000 , respectively. In the fourth quarter of 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. 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 intangible assets was less than the carrying amount of the assets, resulting in an impairment loss totaling $ 7,052,000 , which is recorded in the consolidated statement of operations for the year ended December 31, 2023. The fair value was determined using a discounted cash flow approach (using Level 3 inputs), with cash flow projections over the remaining life of the intangible assets of 5 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. 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. Developed technology related intangibles asset acquisition costs were reduced $ 3,069,000 , and related accumulated depreciation was reduced $ 785,000 , in connection with the disposal of the intangible asset. 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. During the third quarter of 2022 , the Company rebranded certain products acquired in connection with the acquisition of Mobcrush. As a result, the Company recorded a write down of trademark related intangible assets acquired in connection with the acquisition of Mobcrush totaling $ 423,000 , which is included as a component of amortization expense in general and administrative expense in the accompanying consolidated statement of operations for the year ended December 31, 2023. The Company expects to record aggregate amortization expense for each of the five succeeding fiscal years as follows: For the years ending December 31, 2024 $ 2,725,000 2025 2,102,000 2026 1,113,000 2027 446,000 2028 237,000 Thereafter 13,000 $ 6,636,000 5. ACQUISITIONS Acquisition of Melon, Inc. On May 4, 2023 (“Melon Acquisition Date”), Super League entered into an Asset Purchase Agreement (the “Melon 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 Acquisition (the “Melon 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. The acquisition of Melon further strengthens the Company’s position as a one-stop solutions provider and strategic operating partner for brands and businesses seeking to expand and activate communities throughout the gaming metaverse. F-22 Table of Contents At the Melon Closing, the Company paid an aggregate total of $ 900,000 to Melon (the “Melon 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 VWAP, as quoted on the Nasdaq Capital Market, for the five (5) trading days immediately preceding May 4, 2023. Refer to the table below 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 “Melon Contingent Consideration”) will be payable to Melon in connection with the achievement of certain revenue milestones for the period from the Melon 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 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. Additionally, pursuant to the Melon 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 the Company’s common stock. The awards were granted pursuant to terms and conditions fixed by the Compensation Committee of the Board and as an inducement material to each new employee entering employment with Super League in accordance with Nasdaq Listing Rule 5635I(4). Of the 103,780 RSUs: (A) 41,512 of the RSUs will vest in 25 equal monthly installments beginning on May 4, 2023, and on the first of each calendar month, subject to the applicable employee’s continued service with Super League on each such vesting date; and (B) 62,268 of the RSUs will vest as follows: (i) 25 % will vest upon the achievement of certain net revenue targets for the fiscal year ending December 31, 2024, to be determined by the Board in its discretion; (ii) 25 % upon the achievement of certain net revenue targets for the fiscal year ending December 31, 2025, to be determined by the Board in its sole discretion; (iii) 25 % upon Super League’s common stock maintaining a minimum closing price of at least $ 30.00 over a rolling 30 consecutive trading day period, as quoted on the Nasdaq Capital Market; and (iv) 25 % upon Super League’s common stock maintaining a minimum closing price of at least $ 50.00 over a rolling 30 consecutive trading day period, as quoted on the Nasdaq Capital Market. The vesting of the RSUs will accelerate upon a change of control of the Company. In addition, upon (Y) the Company’s termination of the employment of the respective employee without cause, or (Z) the respective employees resignation for good reason, the RSUs will continue to vest as if (Y) or (Z) had not occurred. The RSUs are subject to the terms and conditions of the RSU agreement covering each grant. The Acquisition was approved by the board of directors of each of the Company and Melon and was approved by the sole stockholder of Melon. 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, as of the Melon Closing Date: Cash consideration $ 150,000 Equity consideration– shares of common stock 77,833 Super League closing stock price per share on the Melon Closing Date $ 9.28 Fair value of equity consideration issued $ 722,000 722,000 Fair value of contingent consideration 1,350,000 Fair value of total consideration paid $ 2,222,000 F-23 Table of Contents 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 of the Melon Closing Date, as follows: Amount Assets Acquired and Liabilities Assumed: Accounts receivable and other assets $ 36,000 Liabilities assumed ( 188,000 ) Identifiable intangible assets 510,000 Identifiable net assets acquired 358,000 Goodwill 1,864,000 Total purchase price $ 2,222,000 The following table presents details of the fair values of the acquired intangible assets of Melon: Estimated Useful Life (in years) Amount Developed technology 5 $ 250,000 Developer relationships 2 50,000 Customer relationships 6 190,000 Trade names / trademarks 0.5 20,000 Total intangible assets acquired $ 510,000 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 discount rate of 30 %. The change in fair value, which is included in contingent consideration expense in the statement of operations for the year ended December 31, 2023, was comprised of the following: 2023 Beginning balance $ 1,350,000 Change in fair value ( 682,000 ) Current period accrued contingent consideration 61,000 Post closing adjustments (2) ( 191,000 ) Accrued contingent consideration (1) $ 538,000 (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. (2) 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. Aggregated amortization expense for the period from the Melon Acquisition Date to December 31, 2023, related to intangible assets acquired in connection with the Melon Acquisition, totaled $ 90,000 . Goodwill represents the excess of the purchase price of the acquired business over the acquisition date fair value of the net assets acquired. Goodwill recorded in connection with the Melon Acquisition is primarily attributable to expected synergies from combining the operations and assets of Super League and Melon, and also includes residual value attributable to the assembled and trained workforce acquired in the acquisition. Management is primarily responsible for determining the fair value of the tangible and identifiable intangible assets acquired and liabilities assumed as of the Melon Closing Date. Management considered a number of factors, including reference to a preliminary independent analysis of estimated fair values solely for the purpose of allocating the purchase price to the assets acquired and liabilities assumed. The analysis included a preliminary discounted cash flow analysis which estimated the future net cash flows expected to result from the respective assets acquired as of the Melon Closing Date. A discount rate consistent with the risks associated with achieving the estimated net cash flows was used to estimate the present value of future estimated net cash flows. The Company is in the process of finalizing the estimates and assumptions developed in connection with the independent analysis of estimated fair values of intangible assets acquired solely for the purpose of allocating the purchase price to the assets acquired and liabilities assumed. Any adjustments to the fair values of intangible assets acquired, or estimates of economic useful lives of the intangible assets acquired, could impact the carrying value of those assets and related goodwill, as well as the estimates of periodic amortization of intangible assets acquired to be reflected in the statement of operations. F-24 Table of Contents The fair values of the acquired intangible assets, as described above, was determined using the following methods: Description Valuation Method Applied Valuation Method Description Assumptions Customer relationships Multi-Period Excess Earnings Method “MPEE”) under the Income Approach MPEEM is an application of the DCF Method, whereby revenue derived from the intangible asset is estimated using the overall business revenue, adjusted for attrition, obsolescence, cost of goods sold, operating expense, and taxes. Required returns attributable to other assets employed in the business are subtracted. The “excess” earnings are attributable to the intangible asset and are discounted to present value at a rate of return to estimate the fair value of the intangible asset. Discount rate: 30.0 %; Forecast period: 6.7 years; Attrition Rate: 30.0 %. Trade names / trademarks Relief-from-Royalty Method under the Income Approach Under the Relief-from-Royalty method, the royalty savings is calculated by estimating a reasonable royalty rate that a third-party would negotiate in a licensing agreement. Such royalties are most commonly expressed as a percentage of total revenue involving the technology. Forecast period: 8.0 months; Royalty Rate: 1.0 %; Discount Rate: 30.0 %. Non-Compete agreements Differential Cash Flows The Differential Cash Flows Approach is a version of the income approach that values an intangible asset as the present value of the cash flows that a company would lose if they did not have the asset in place. The differential cash flow is calculated as the difference between the cash flow assuming competition and the cash flow without competition. Competition Probability: 30.0 %; Revenue impact: 20.0 %; Discount Rate: 30.0 %; Term 2.16 years. Developed technology Replacement Cost Method In the Replacement Cost Method, value is estimated by determining the current cost of replacing an asset with one of equivalent economic utility. The premise of the approach is that a prudent investor would pay no more for an asset than the amount for which the utility of the asset could be replaced. Rate of Return: 30.0 %; Discount rate: 30.0 %; Replacement period: 3.0 months. For tax purposes, consistent with the accounting for book purposes, the Melon Closing Consideration was allocated to the assets acquired and liabilities assumed based on their estimated fair values as of the acquisition date, with the excess purchase price allocated to goodwill. As a result, no deferred tax assets or liabilities were recorded with the acquisition and all of the goodwill is expected to be deductible for tax purposes. The following unaudited pro forma combined results of operations for the periods presented are provided for illustrative purposes only. The unaudited pro forma combined statements of operations assume the acquisition occurred as of January 1, 2022. The unaudited pro forma combined financial results do not purport to be indicative of the results of operations for future periods or the results that actually would have been realized had the entities been a single entity during these periods. 2023 2022 Revenue $ 25,794,000 $ 22,451,000 Net Loss ( 31,178,000 ) ( 88,463,000 ) Pro forma adjustments primarily relate to the amortization of identifiable intangible assets acquired over the estimated economic useful life as described above, the exclusion of nonrecurring transaction costs, the exclusion of depreciation related to tangible and intangible assets of Melon existing immediately prior to the Melon Acquisition Date, and adjustments related to administrative redundancies. Acquisition of Super Biz – Contingent Consideration On October 4, 2021 (“Super Biz Closing Date”), the Company entered into an Asset Purchase Agreement (the “Super Biz Purchase Agreement”) with Super Biz Co. and the founders of Super Biz (the “Founders”), pursuant to which the Company acquired (i) substantially all of the assets of Super Biz (the “Super Biz Assets”), and (ii) the personal goodwill of the Founders regarding Super Biz’s business, (the “Super Biz Acquisition”). The consummation of the Super Biz Acquisition (the “Super Biz Closing”) occurred simultaneously with the execution of the Super Biz Purchase Agreement on the Super Biz Closing Date. F-25 Table of Contents Pursuant to the terms and subject to the conditions of the Super Biz Purchase Agreement, up to an aggregate amount $ 11.5 million would be payable to Super Biz and the Founders in connection with the achievement of certain revenue milestones for the period from the Super Biz Closing Date until December 31, 2022 (“Initial Earn Out Period”) and for the fiscal year ending December 31, 2023 (the “Super Biz Contingent Consideration”) (“Super Biz Earn Out Periods”). The Super Biz Contingent Consideration is payable in the form of both cash and shares of the Company’s common stock, in equal amounts, as more specifically set forth in the Super Biz Purchase Agreement. The Company hired the Founders of Super Biz in connection with the Super Biz Acquisition. Pursuant to the provisions of the Super Biz Purchase Agreement, in the event that a Founder ceases to be an employee during any of the Super Biz Earn Out Periods, as a consequence of his resignation without good cause, or termination for cause, the Super Biz Contingent Consideration will be reduced by one-half ( 50 %) for the respective Super Biz Earn Out Periods, if and when earned. Under ASC 805, a contingent consideration arrangement in which the payments are automatically forfeited if employment terminates is considered to be compensation for post-combination services, and not acquisition consideration. As such, the Super Biz 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 the year ended December 31, 2022, the Company determined that it was probable that the contingency associated with 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 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 income statement impact was comprised of the following for the years ended December 31: 2023 2022 Beginning balance $ 3,206,000 $ - Change in fair value 137,000 ( 174,000 ) Current period accrued contingent consideration 1,750,000 3,380,000 Contingent consideration payments (2) ( 3,423,000 ) - Accrued contingent consideration (1) $ 1,670,000 $ 3,206,000 (1) As of December 31, 2023, included 27,968 shares of common stock valued at $ 1.52 , the closing price of our common stock as of December 31, 2023. 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. (2) 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 . Other In September 2022, the Company released a holdback amount related to a fiscal year 2021 acquisition as follows: (i) $ 55,000 payable in the form of cash, and (ii) approximately $ 220,000 in the form of shares of the Company’s common stock, at a price per share of $ 82.00 . 6. DEBT Account Receivable Financing Facility Super League Enterprise, Inc. and certain of 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 “Facility 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”)(collectively, the “AR 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 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. F-26 Table of Contents 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 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. 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. 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 and included in other income (expense) in the consolidated statement of operations. 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. Convertible Notes Payable at Fair Value On May 16, 2022, the Company entered into a Securities Purchase Agreement (the “SPA”) with three institutional investors (collectively, the “Note Holders”) providing for the sale and issuance of a series of senior convertible notes in the aggregate original principal amount of $ 4,320,000 , of which 8 % is an original issue discount (“OID”) (each, a “Note,” and, collectively, the “Notes,” and such financing, the “Note Offering”). The Notes accrued interest at a guaranteed annual rate of 9 % per annum, were set to mature 12 months from the date of issuance, and were 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 $ 80.00 (the “Conversion Price”), subject to adjustment upon the occurrence of certain events as more specifically set forth in the Note, as amended. In the event of the occurrence of an event of default, the Note Holders may, at the Note Holder’s option, convert all, or any part of, the Conversion Amount into shares of common stock at 90 % of the lowest volume weighted average price of the ten trading days preceding the date for which the price is being calculated. In addition, the Company was required to redeem all or a portion of the Notes under certain circumstances, and, in the event (A) the Company sold Company common stock pursuant to the March 25, 2022 Purchase Agreement, described below, or (B) consummated a subsequent equity financing, then the Note Holders had the right, but not the obligation, to require the Company to use 50 % of the gross proceeds raised from such sale to redeem all or any portion of the Conversion Amount then remaining under the Notes, in cash, at a price equal to the Conversion Amount being redeemed. The Notes were issued with an original issue discount of $ 320,000 , or 8 %, which was recorded as an adjustment to the carrying amount of the Notes. The original issue discount was amortized using the interest method over the contractual term of the Notes and reflected as interest expense in the statement of operations. At December 31, 2022, the balance of the original issue discount was $ 40,000 , which is included in “Convertible note payable and accrued interest” in the accompanying consolidated balance sheet. Amortization of original issue discount for the years ended December 31, 2023 and 2022 totaled $ 40,000 and $ 280,000 , respectively. The Company elected to utilize the FVO to account for the Notes, which are included in current liabilities at December 31, 2022. Interest paid during the years ended December 31, 2023 and 2022 totaled $ 180,000 and $ 209,000 , respectively. At December 31, 2022, the remaining principal balance of the Notes totaled $ 539,000 , and accrued interest totaled $ 180,000 , both of which were paid in full during the three months ended March 31, 2023. As of March 31, 2023, all amounts of principal and interest under the Notes were fully paid, resulting in a Convertible note payable and accrued interest balance of $ 0 . F-27 Table of Contents 7. STOCKHOLDERS ’ EQUITY AND EQUITY-LINKED INSTRUMENTS Reverse Stock Split On September 7, 2023, the Company filed the 2023 Second Amendment to the Company’s Charter, to effect a reverse stock split of the Company’s issued and outstanding shares of common stock at a ratio of 1-for- 20 (the “Reverse Split”). The Reverse Split was approved by the Company’s Board of Directors on July 5, 2023, and approved by the stockholders of the Company on September 7, 2023. The 2023 Second Amendment became effective on September 11, 2023. The Company’s shares began trading on a Reverse Split-adjusted basis on the Nasdaq Capital Market on September 11, 2023. As a result of the Reverse Split, every 20 shares of the Company’s issued and outstanding common stock was automatically combined and converted into one issued and outstanding share of common stock. No fractional shares of common stock were issued as a result of the Reverse Split. Instead, in lieu of any fractional shares to which a stockholder of record would otherwise be entitled as a result of the Reverse Split, the Company paid cash (without interest) equal to the value of such fractional share. The Reverse Split did not modify the rights or preferences of the common stock. 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. Preferred Stock The Company’s initial certificate of incorporation authorized 5,000,000 shares of preferred stock, par value $ 0.001 per share. In October 2016, the Company’s Board of Directors and a majority of the holders of the Company’s common stock approved an amendment and restatement of the certificate of incorporation which, in part, eliminated the authorized preferred stock. In August 2018, the Board of Directors approved a second amendment and restatement of the Company’s amended and restated certificate of incorporation (the “Amended and Restated Charter”) to, in part, increase the Company’s authorized capital to a total of 110.0 million shares, including 10.0 million shares of newly created preferred stock, par value $ 0.001 per share (“Preferred Stock”), authorize the Board of Directors to fix the designation and number of each series of Preferred Stock, and to determine or change the designation, relative rights, preferences, and limitations of any series of Preferred Stock. The Amended and Restated Charter was approved by a majority of the Company’s stockholders in September 2018, and was filed with the State of Delaware in November 2018. All references in the accompanying consolidated financial statements to Preferred Stock have been restated to reflect the Amended and Restated Charter. Common Stock The Amended and Restated Charter also increased the Company’s authorized capital to include 100.0 million shares of common stock, par value $ 0.001 , and removed the deemed liquidation provision, as such term is defined in the Amended and Restated Charter. Each holder of common stock is entitled to one vote for each share of common stock held at all meetings of stockholders. On May 30, 2023, the Company filed the 2023 First Amendment to its Charter, increasing the number of authorized shares of common stock from 100,000,000 to 400,000,000 . The Company’s Board of Directors approved the 2023 First Amendment on March 17, 2023, and the Company obtained the approval of the 2023 First Amendment by written consent of its stockholders holding greater than 50% of the voting securities of the Company on April 5, 2023. Equity Financings Convertible Preferred Stock Issuances 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 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: Date Series Design- ation Conversion Price – At Issuance Shares Gross Proceeds Fees Net Proceeds Conversion Shares – At Issuance Placement Agent Warrants (1) November 30, 2023 Series AAA $ 1.674 5,377 $ 5,377,000 $ 645,000 $ 4,732,000 3,212,000 466,000 December 22, 2023 Series AAA-2 $ 1.71 2,978 2,978,000 357,000 2,621,000 1,742,000 253,000 Total 8,355 $ 8,355,000 $ 1,002,000 $ 7,353,000 4,954,000 719,000 (1) Issued upon final closing of the Series AAA Preferred Stock offering, effective as of the respective closing dates. F-28 Table of Contents In connection with the Series AAA Offerings, the Company filed a Certificate of Designation of Preferences, Rights and Limitations of the Series AAA Preferred Stock (the “Series AAA Certificates of Designation”) with the State of Delaware. 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. Each share of Series AAA Preferred is convertible at the option of the holder, subject to certain beneficial ownership limitations and primary market limitations as set forth in the Series AAA Certificates of Designation, into such number of shares of the Company’s common stock equal to the number of Series AAA Preferred to be converted, multiplied by the stated value of $ 1,000 (the “AAA Stated Value ”), divided by the conversion price in effect at the time of the conversion, subject to adjustment in the event of stock splits, stock dividends, certain fundamental transactions and future issuances of equity securities as described below. In addition, subject to beneficial ownership and primary market limitations, on the one year anniversary of the respective filing date, the Company may, in its discretion, convert (y) 50 % of the outstanding shares of Series AAA Preferred into the Company’s common stock if the volume-weighted average price of such common stock over the previous 10 days as reported on the NASDAQ Capital Market (the “ VWAP ”), equals at least 250% of the conversion price, or (z) 100 % of the outstanding shares of Series AAA Preferred into the Company’s common stock if the VWAP equals at least 300% of the conversion price. The Series AAA Preferred shall vote together with the common stock on an as-converted basis, and not as a separate class, subject to the primary market limitations, except that holders of Series AAA Preferred shall vote as a separate class with respect to (a) amending, altering, or repealing any provision of the Series AAA Certificates of Designation in a manner that adversely affects the powers, preferences or rights of the Series AAA Preferred, (b) increasing the number of authorized shares of Series AAA Preferred, (c) authorizing or issuing an additional class or series of capital stock that ranks senior to or pari passu with the Series AAA Preferred with respect to the distribution of assets on liquidation, (d) authorizing, creating, incurring, assuming, guaranteeing or suffering to exist any indebtedness for borrowed money of any kind outside of certain loans not to exceed $ 5,000,000 and accounts payable in the ordinary course of business, or (e) entering into any agreement with respect to the foregoing. In addition, no holder of Series AAA Preferred shall be entitled to vote on any matter presented to the Company’s stockholders relating to approving the conversion of such holder’s Series AAA Preferred into an amount in excess of the primary market limitations. Upon any dissolution, liquidation or winding up, whether voluntary or involuntary, holders of Series AAA Preferred (together with any Parity Securities (as defined in the Series AAA Certificate of Designations) will be entitled to first receive distributions out of the Company’s assets in an amount per share equal to the Stated Value plus all accrued and unpaid dividends, whether capital or surplus before any distributions shall be made on any shares of common stock (after the payment to any senior security, if any). Holders of the Series AAA Preferred will be entitled to receive dividends, subject to the beneficial ownership and primary market limitations, payable in the form of that number of shares of common stock equal to 20 % of the shares of common stock underlying the Series AAA Preferred then held by such holder on each of the 12- and 24-month anniversaries of the Filing Date. In addition, subject to the beneficial ownership and primary market limitations, holders of Series AAA Preferred will be entitled to receive dividends equal, on an as-if-converted to shares of Common Stock basis, and in the same form as dividends actually paid on shares of the common stock when, as, and if such dividends are paid on shares of the common stock. Notwithstanding the foregoing, to the extent that a holder’s right to participate in any dividend in shares of common stock to which such holder is entitled would result in such holder exceeding the beneficial ownership and/or primary market limitations, then such holder shall not be entitled to participate in any such dividend to such extent and the portion of such shares that would cause such holder to exceed the beneficial ownership and/or primary market limitations shall be held in abeyance for the benefit of such holder until such time, if ever, as such holder’s beneficial ownership thereof would not result in such holder exceeding the beneficial ownership and primary market limitations. Subject to the approval by a majority of the voting securities of the Company (the “Stockholder Approval”), pursuant to the Subscription Agreements, Series AAA Preferred holders shall have the right to purchase shares of a newly designated series of Preferred Stock of the Company containing comparable terms (except for adjustments to the Conversion Price based on future equity issuances) as the Series AAA Preferred (the “Series AAA Additional Investment Right”) from the date the SEC declares the related registration statement to be filed with the SEC pursuant to the applicable Registration Rights Agreement (as defined below) effective, to the date that is 18 months thereafter, for an additional dollar amount equal to the applicable initial investment amount at $ 1,000 per share (the “Original Issue Price”), with a conversion price equal to the original conversion price of the Series AAA Preferred. No further additional investment rights shall be granted to investors that exercise the Series AAA Additional Investment Rights. Further, subject to the effectiveness of the Stockholder Approval, for twenty-four (24) months after the Filing Date, and subject to certain carveouts as described in the Series AAA Certificates of Designations, if the Company conducts an offering at a price per share less than the then effective conversion price (the “Future Offering Price”) consisting of common stock, convertible or derivative instruments, then in such event the conversion price of the Series AAA Preferred shall be adjusted to the Future Offering Price, but not less than the Conversion Price Floor (as defined in the Series AAA Certificate of Designations). F-29 Table of Contents Exchange Agreements In connection with the closing of the Series AAA Preferred rounds described above, the Company entered into certain Series A Exchange Agreements (the “Series A Agreements”) and Series AA Exchange Agreements (the “Series AA Agreements”, and collectively with the Series A Agreements, the “Exchange Agreements”), with certain holders (the “Holders”) of the Company’s Series A Preferred Stock, and Series AA Preferred Stock, pursuant to which the Holders exchanged an aggregate of 6,367 shares of Series A Preferred and/or Series AA Preferred, for an aggregate of 6,367 shares of Series AAA Preferred (the “Exchange”). The Exchange closed concurrently with the closing of the Series AAA Preferred Offerings. The Company and the investors in the Series AAA Preferred Offering and the Exchange also executed a registration rights agreement (the “Registration Rights Agreement”), pursuant to which the Company agreed to use its best efforts to file a registration statement covering the resale of the shares of common stock issuable upon conversion of the Series AAA Preferred within 45 days, but in no event later than 60 days, following the final closing of the Series AAA Preferred Offering and to use its best efforts to cause such registration statement to become effective within 90 days of the filing date. The Company sold and/or exchanged the shares of Series AAA Preferred pursuant to a Placement Agency Agreement (the “Series AAA Placement Agency Agreement”) with Aegis Capital Corporation, a registered broker dealer, which acted as the Company’s exclusive placement agent (the “Series AAA Placement Agent”) for the Offering and the Exchange. Pursuant to the terms of the Placement Agency Agreement, in connection with the Series AAA Preferred Offerings and the Exchange, the Company paid the Placement Agent an aggregate cash fee and non-accountable expense allowance as described in the table above, and will issue to the Placement Agent or its designees warrants (the “Placement Agent Warrants”) to purchase common stock at the conversion prices disclosed in the table above. The Company also granted the Placement Agent the right of first refusal, for a period of six (6) months after the final closing of the Offering, to serve as the Company’s lead or co-placement agent for any private placement of the Company’s securities (equity or debt) that is proposed to be consummated with the assistance of a registered broker dealer. In addition, with respect to shares of Series AAA Preferred Stock issued in 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 Series A and Series AA Preferred Stock financings of the Company, 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. At December 31, 2023, Series AAA Preferred stock outstanding was comprised of the following, including Series AAA Preferred stock issued in connection with the Exchange Agreements and conversions of Series AAA Preferred stock into shares of the Company’s common stock for the applicable periods presented: Series Conversion Preferred Shares Conversion Shares Designation Price Series Preferred AAA Series Preferred AAA Additional Conversion Shares - Adjusted Issued Converted Outstanding Original Conversion Shares Conversions During the Period Adjusted Conversion Price (1) Conversion Shares At End of Period Sales: Series AAA $ 1.674 5,377 - 5,377 3,212,000 - - 3,212,000 Series AAA-2 $ 1.71 2,978 - 2,978 1,742,000 - - 1,742,000 Subtotal 8,355 - 8,355 4,954,000 - - 4,954,000 Exchanges: Series AAA $ 1.674 4,011 ( 125 ) 3,886 2,396,000 ( 75,000 ) - 2,321,000 Series AAA-2 $ 1.71 2,356 ( 100 ) 2,256 1,378,000 ( 58,000 ) - 1,320,000 Subtotal 6,367 ( 225 ) 6,142 3,774,000 ( 133,000 ) - 3,641,000 Total 14,722 ( 225 ) 14,497 8,728,000 ( 133,000 ) - 8,595,000 F-30 Table of Contents Series AA 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 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, as follows: Date Series Design- ation Original Conversion Price – At Issuance (2) Shares Gross Proceeds Fees Net Proceeds Conversion Shares – At Issuance Placement Agent Warrants (1) April 19, 2023 Series AA $ 9.43 7,680 $ 7,680,000 $ 966,000 $ 6,714,000 814,000 114,000 April 20, 2023 Series AA-2 $ 10.43 1,500 1,500,000 130,000 1,370,000 144,000 13,000 April 28, 2023 Series AA-3 $ 9.50 1,025 1,025,000 133,000 892,000 108,000 15,000 May 5, 2023 Series AA-4 $ 9.28 1,026 1,026,000 133,000 893,000 111,000 16,000 May 26, 2023 Series AA-5 $ 10.60 550 550,000 72,000 478,000 52,000 7,000 Total 11,781 $ 11,781,000 $ 1,434,000 $ 10,347,000 1,229,000 165,000 (1) Issued on May 26, 2023, effective as of the applicable closing date, upon final closing of the Series AA Preferred Stock offering. (2) The Conversion price for Series AA Preferred stock outstanding as of August 23, 2023, totaling 10,706 shares of Series AA Preferred stock, was adjusted to $ 2.60 as a result of the Series AA Down Round Feature described below. The Conversion price for Series AA Preferred stock outstanding as of November 30, 2023, totaling 7,322 shares of Series AA Preferred stock, was adjusted as described in the table below as a result of the Series AA Down Round Feature described below. At December 31, 2023, Series AA Preferred stock outstanding was comprised of the following, including conversions of Series AA Preferred stock into shares of the Company’s common stock for the applicable periods presented: Series Designation Conversion Price As Adjusted (1) Preferred Shares Series Preferred AA Conversion Shares Series Preferred AA Additional Conversion Shares - Issued Exchanged/ Converted Outstanding as of December 31, 2023 Original Conversion Shares Exchanges/ Conversions During the Period Adjusted Conversion Price (1) Adjusted Conversion Shares as of December 31, 2023 Series AA $ 1.89 7,680 ( 2,926 ) 4,754 814,000 ( 1,336,000 ) 3,043,000 2,521,000 Series AA-2 $ 2.09 1,500 ( 1,500 ) - 144,000 ( 274,000 ) 130,000 - Series AA-3 $ 1.90 1,025 ( 634 ) 391 108,000 ( 334,000 ) 432,000 206,000 Series AA-4 $ 1.86 1,026 ( 511 ) 515 109,000 ( 275,000 ) 443,000 277,000 Series AA-5 $ 2.12 550 - 550 58,000 - 201,000 259,000 Total 11,781 ( 5,571 ) 6,210 1,233,000 ( 2,219,000 ) 4,249,000 3,263,000 (1) The Conversion prices for the Series AA Preferred stock outstanding as of November 30, 2023, totaling 7,322 shares of Series AA Preferred stock, were adjusted to the conversion prices shown in the table above, as a result of the Series AA Down Round Feature described below. The original conversion prices for the Series AA Preferred, as of the respective issuance dates, were as follows: Series AA - $ 9.43 ; Series AA-2 - $ 10.43 ; Series AA-3 - $ 9.50 ; Series AA-4 - $ 9.28 ; Series AA-5 - $ 10.60 . In connection with the Series AA Offerings, the Company filed Certificates of Designation of Preferences, Rights and Limitations of the Series AA Preferred Stock (the “Series AA Certificates of Designation”) with the State of Delaware. Use of net proceeds from the Series AA Offerings for the periods presented included working capital and general corporate purposes, including sales and marketing activities and product development. F-31 Table of Contents Each share of Series AA Preferred is convertible at the option of the holder, subject to certain beneficial ownership limitations and primary market limitations as set forth in each Series AA Certificates of Designation, into such number of shares of the Company’s common stock equal to the number of Series AA Preferred to be converted, multiplied by the stated value of $ 1,000 (the “AA Stated Value”), divided by the applicable conversion price (refer to table above), subject to adjustment in the event of stock splits, stock dividends, and similar transactions. The conversion price is equal to the “Minimum Price,” as defined in NASDAQ Rule 5635(d)(1)). In addition, subject to beneficial ownership and primary market limitations, on the one year anniversary of the respective filing date, the Company may, in its discretion, convert (y) 50 % of the outstanding shares of Series AA Preferred if the VWAP of the Company’s common stock over the previous ten days as reported on the NASDAQ Capital Market (the “Series AA VWAP”), equals at least 250% of the Conversion Price, or (z) 100 % of the outstanding shares of Series AA Preferred if the Series AA VWAP equals at least 300% of the respective conversion price. The Series AA Preferred shall vote together with the common stock on an as-converted basis, and not as a separate class, subject to the primary market limitations, except that holders of Series AA Preferred shall vote as a separate class with respect to (a) amending, altering, or repealing any provision of the Series AA Certificates of Designation in a manner that adversely affects the powers, preferences or rights of the Series AA Preferred, (b) increasing the number of authorized shares of Series AA Preferred, (c) authorizing or issuing an additional class or series of capital stock that ranks senior to or pari passu with the Series AA Preferred with respect to the distribution of assets on liquidation, (d) authorizing, creating, incurring, assuming, guaranteeing or suffering to exist any indebtedness for borrowed money of any kind outside of accounts payable in the ordinary course of business, (e) entering into any agreement with respect to the foregoing; or (f) approving the issuance of common stock below the Conversion Price Floor (as defined in the AA Certificate of Designations). In addition, no holder of Series AA Preferred shall be entitled to vote on any matter presented to the Company’s stockholders relating to approving the conversion of such holder’s Series AA Preferred into an amount in excess of the primary market limitations. Upon any dissolution, liquidation or winding up, whether voluntary or involuntary, holders of Series AA Preferred (together with any Parity Securities (as defined in the Series AA Certificate of Designations)) will be entitled to first receive distributions out of the Company’s assets in an amount per share equal to the AA Stated Value plus all accrued and unpaid dividends, whether capital or surplus before any distributions shall be made on any shares of common stock (after the payment to any senior security, if any). Holders of the Series AA Preferred will be entitled to receive dividends, subject to the beneficial ownership and primary market limitations, payable in the form of that number of shares of common stock equal to 20 % of the shares of common stock underlying the Series AA Preferred then held by such holder on the 12 and 24 month anniversaries of the respective filing date. In addition, subject to the beneficial ownership and primary market limitations, holders of Series AA Preferred will be entitled to receive dividends equal, on an as-if-converted to shares of common stock basis, and in the same form as dividends actually paid on shares of the common stock when, as, and if such dividends are paid on shares of the common stock. Notwithstanding the foregoing, to the extent that a holder’s right to participate in any dividend in shares of common stock to which such holder is entitled would result in such holder exceeding the beneficial ownership and primary market limitations, then such holder shall not be entitled to participate in any such dividend to such extent and the portion of such shares that would cause such holder to exceed the beneficial ownership and primary market limitations shall be held in abeyance for the benefit of such holder until such time, if ever, as such holder’s beneficial ownership thereof would not result in such holder exceeding the beneficial ownership and primary market limitations. Pursuant to the Subscription Agreements, purchasers that (a) previously held shares of the Company’s Series A Preferred Stock, par value $0.001 per share, or (b) purchased at least $ 3.5 million in shares of Series AA Preferred (subject to the acceptance of such lesser amounts in the Company’s sole discretion), shall have the right to purchase shares of a newly designated series of Preferred Stock of the Company containing comparable terms as the Series AA Preferred (the “Series AA Additional Investment Right”) from the date of each respective closing through the date that is 18 months thereafter as follows: (i) such investor may purchase an additional dollar amount equal to its initial investment amount at $ 1,000 per share (the “AA Original Issue Price”), with a conversion price equal to the conversion price in effect on the date of original purchase; and (ii) such investor may purchase an additional dollar amount equal to its initial investment amount at the AA Original Issue Price, with a conversion price equal to 125 % of the respective conversion price in effect on the date of original purchase. Pursuant to the Series AA Certificate of Designations: (i) for as long as Series AA Preferred remains outstanding and subject to certain carveouts as described in the Series AA Certificates of Designations, if the Company conducts an offering at a price per share less than the then current conversion price (the “Future Offering Price”) consisting of common stock, convertible or derivative instruments, and undertaken in an arms-length third party transaction, then in such event the conversion price of the Series AA Preferred shall be adjusted to the greater of: (a) the Future Offering Price and (b) the Conversion Price Floor (“ Series AA Down Round Feature”); and (ii) if as of the 24-month anniversary date of April 19, 2023, the VWAP (as defined in the Series AA Certificates of Designation) for the five trading days immediately prior to such 24-month anniversary date is below the then current conversion price, the holder will receive a corresponding adjustment to the then conversion price, such adjustment not to exceed the Conversion Price Floor. The Company and the investors in the Offering also executed a registration rights agreement (the “AA Registration Rights Agreement”), pursuant to which the Company filed a registration statement on Form S-3 (File No. 333-273282), covering the resale of the shares of common stock issuable upon conversion of the Series AA Preferred, which was declared effective on August 1, 2023. F-32 Table of Contents The Company sold the shares of Series AA Preferred pursuant to a placement agency agreement (the “Series AA Placement Agency Agreement”) with a registered broker dealer, which acted as the Company’s exclusive placement agent (the “Series AA Placement Agent”) for the Offering. Pursuant to the terms of the Series AA Placement Agency Agreement, in connection with the closings of the Series AA Offerings, the Company paid the Series AA Placement Agent aggregate cash fees, and non-accountable expense allowances as disclosed in the table above, and will issue to the Series AA Placement Agent or its designees warrants (the “Series AA Placement Agent Warrants”) to purchase shares of common stock as disclosed in the table above at the conversion prices disclosed above. The Series AA Placement Agent shall also earn fees and be issued additional Series AA Placement Agent Warrants with respect to any securities issued pursuant to the Additional Investment Rights. The Company also granted the Series AA Placement Agent the right of first refusal, for a twelve (12) month period after the final closing of the Offering, to serve as the Company’s lead or co-placement agent for any private placement of the Company’s securities (equity or debt) that is proposed to be consummated with the assistance of a registered broker dealer. The triggering of the Down Round Feature for the Series AA Preferred stock resulted in a deemed dividend totaling $ 7,567,000 , which was charged to retained earnings in the consolidated balance sheet. The amount was calculated based upon the difference between the fair value of the financial instrument without the down round feature, with a conversion price corresponding to the stated conversion price of the issued instrument immediately prior to the triggering event, and the fair value of the financial instrument without the down round feature with a conversion price corresponding to the reduced conversion price upon the down round feature being triggered. Series A 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 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, as follows: Date Series Design- ation Conversion Price Shares Gross Proceeds Fees Net Proceeds Conversion Shares Placement Agent Warrants (1) November 22, 2022 Series A $ 12.40 5,359 $ 5,359,000 $ 752,000 $ 4,607,000 432,000 62,000 November 28, 2022 Series A-2 $ 13.29 1,297 1,297,000 169,000 1,128,000 98,000 14,000 November 30, 2022 Series A-3 $ 13.41 1,733 1,733,000 225,000 1,508,000 129,000 18,000 December 22, 2022 Series A-4 $ 7.60 1,934 1,934,000 251,000 1,683,000 254,000 36,000 January 31, 2023 Series A-5 $ 11.09 2,299 2,299,000 299,000 2,000,000 207,000 30,000 Total 12,622 $ 12,622,000 $ 1,696,000 $ 10,926,000 1,120,000 160,000 (1) Issued on May 26, 2023, effective as of the applicable closing date, upon final closing of the Series A Preferred Stock offering Use of net proceeds from the Series A Offerings for the periods presented 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 the years ended December 31, 2023 and 2022, $ 719,000 and $ 3,621,000 of the net proceeds from the Series A Offerings were utilized in connection with the redemption of the Notes and related accrued interest, respectively. On the respective effective dates, the Company filed certificates of designation of preferences, rights and limitations of the Series A Preferred with the State of Delaware, respectively. Each share of Series A Preferred is convertible at the option of the holder, subject to certain beneficial ownership limitations and primary market limitations as set forth in each Series A Certificate of Designation, into such number of shares of the Company’s common stock, equal to the number of Series A Preferred to be converted, multiplied by the stated value of $ 1,000 (the “Stated Value”), divided by the applicable conversion price (refer to the table above), subject to adjustment in the event of stock splits, stock dividends, and similar transactions. The conversion price is equal to the “Minimum Price,” as defined in NASDAQ Rule 5635(d)(1)) on the date of closing. In addition, subject to beneficial ownership and primary market limitations: (1) the Series A Preferred will automatically convert into shares of common stock at the Conversion Price upon the earlier of (a) the 24-month anniversary of the Effective Date or (b) the consent to conversion by holders of at least 51 % of the outstanding shares of Series A Preferred; and (2) on the one year anniversary of the Effective Date, the Company may, in its discretion, convert (y) 50 % of the outstanding shares of Series A Preferred if the VWAP of the Company’s common stock over the previous 10 days as reported on the NASDAQ Capital Market (the “Series A VWAP”), equals at least 250% of the Conversion Price, or (z) 100 % of the outstanding shares of Series A Preferred if and only if the Series A VWAP equals at least 300% of the Conversion Price. F-33 Table of Contents During the applicable periods presented, conversions of Series A Preferred stock into shares of the Company’s common stock were comprised of the following: Preferred Shares Conversion Shares Series Preferred A Series Preferred A Series Designation Conversion Price Issued Exchanged/ Converted Outstanding as of December 31, 2023 Original Conversion Shares Exchanges/ Conversions During the Period Conversion Shares as of December 31, 2023 Series A $ 12.40 5,359 ( 4,551 ) 808 432,000 ( 367,000 ) 65,000 Series A-2 $ 13.29 1,297 ( 834 ) 463 98,000 ( 63,000 ) 35,000 Series A-3 $ 13.41 1,733 ( 1,418 ) 315 129,000 ( 106,000 ) 23,000 Series A-4 $ 7.60 1,934 ( 1,383 ) 551 254,000 ( 182,000 ) 72,000 Series A-5 $ 11.09 2,299 ( 1,487 ) 812 207,000 ( 134,000 ) 73,000 Total 12,622 ( 9,673 ) 2,949 1,120,000 ( 852,000 ) 268,000 The Series A Preferred shall vote together with the common stock on an as-converted basis, and not as a separate class, subject to the primary market limitations, except that holders of Series A Preferred shall vote as a separate class with respect to (a) amending, altering, or repealing any provision of the Series A Certificate of Designation in a manner that adversely affects the powers, preferences or rights of the Series A Preferred, (b) increasing the number of authorized shares of Series A Preferred, (c) authorizing or issuing an additional class or series of capital stock that ranks senior to or pari passu with the Series A Preferred with respect to the distribution of assets on liquidation, (d) authorizing, creating, incurring, assuming, guaranteeing or suffering to exist any indebtedness for borrowed money of any kind in excess of $ 5 million, or I entering into any agreement with respect to the foregoing. In addition, no holder of Series A Preferred shall be entitled to vote on any matter presented to the Company’s stockholders relating to approving the conversion of such holder’s Series A Preferred into an amount in excess of the primary market limitations. Upon any dissolution, liquidation or winding up, whether voluntary or involuntary, holders of Series A Preferred will be entitled to first receive distributions out of the Company’s assets in an amount per share equal to the Stated Value plus all accrued and unpaid dividends, whether capital or surplus before any distributions shall be made on any shares of common stock (after the payment to any senior security, if any). Holders of the Series A Preferred will be entitled to receive dividends, subject to the beneficial ownership and primary market limitations, payable in the form of that number of shares of common stock equal to 20 % of the shares of common stock underlying the Series A Preferred then held by such holder on the 12 and 24-month anniversaries of the respective filing date. In addition, subject to the beneficial ownership and primary market limitations, holders of Series A Preferred will be entitled to receive dividends equal, on an as-if-converted to shares of common stock basis, and in the same form as dividends actually paid on shares of the common stock when, as, and if such dividends are paid on shares of the common stock. Notwithstanding the foregoing, to the extent that a holder’s right to participate in any dividend in shares of common stock to which such holder is entitled would result in such holder exceeding the beneficial ownership and primary market limitations, then such holder shall not be entitled to participate in any such dividend to such extent and the portion of such shares that would cause such holder to exceed the beneficial ownership and primary market limitations shall be held in abeyance for the benefit of such holder until such time, if ever, as such holder’s beneficial ownership thereof would not result in such holder exceeding the beneficial ownership and primary market limitations. The Company and the investors in the Series A Offerings also executed a registration rights agreement (the “Registration Rights Agreement”), pursuant to which the Company filed registration statement on Form S-3 (File No. 333-271424), covering the resale of the shares of common stock issuable upon conversion of the Series A Preferred, which was declared on June 5, 2023. 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 Series A Offerings. Pursuant to the terms of the Placement Agency Agreement, the Company agreed to pay to the Placement Agent at each Closing a cash fee equal to 10 % of the gross proceeds raised in the Series A Offerings and (ii) a non-accountable expense allowance equal to 3 % of the gross proceeds of the Series A Offerings. In addition, we agreed to issue to the Placement Agent or its designees for nominal consideration and following the final closing under the Series A Offerings, five-year warrants to purchase 14.5 % of the shares of common stock issuable upon conversion of the Series A Preferred shares sold in the Series A Offerings, at an exercise price equal to the applicable conversion price. The Placement Agent Warrants provide for a cashless exercise feature and are exercisable for a period of five years from the Effective Date. In addition, the Company agreed to grant the Placement Agent the right to appoint, subject to the Company’s approval, one representative to serve as a member of the Company’s Board of Directors upon the closing of at least $ 10 million in aggregate in connection with the Series A Offerings. 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. F-34 Table of Contents 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 Series AA Offerings for the periods presented included working capital and general corporate purposes, including sales and marketing activities and product development. 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 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. The Underwriting Agreement includes customary representations, warranties, and agreements by the Company, customary conditions to closing, indemnification obligations of the Company and the Underwriter, including for liabilities under the Securities Act, other obligations of the parties and termination provisions. The representations, warranties and covenants contained in the Underwriting Agreement were made only for purposes of the Underwriting Agreement and as of the specific applicable dates contained in the Underwriting Agreement, were solely for the benefit of the parties to the Underwriting Agreement and were subject to limitations agreed upon by the contracting parties. Placement Agent Warrants The Placement Agent Warrants issued in connection with the Series A Preferred, Series AA Preferred and Series AAA Preferred (including the Exchange), described above, 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 above, 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, 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 fair value and change in the fair value of the warrant liability, measured using Level 3 inputs, and the related income statement impact was comprised of the following as of December 31, 2023: 2023 Beginning balance $ - Initial fair value of Series A and AA Preferred warrant liability – grant date 2,804,000 Initial fair value of Series AAA Preferred (including warrants issued in connection with the Exchange) warrant liability – grant date 1,665,000 Change in fair value ( 2,898,000 ) Fair value of warrant liability $ 1,571,000 F-35 Table of Contents The fair value of the Placement Agent Warrants was estimated using the Black-Scholes-Merton option pricing model and the following weighted-average assumptions for the applicable dates: May 26, December 22, December 31, 2023 2023 2023 Expected Volatility 95 % 98 % 98 % Risk–free interest rate 3.88 % 3.87 % 3.84 % Dividend yield -% -% -% Expected life of options (in years) 5 - 5.19 5 4.5 - 5 In December 2023, as described above, with respect to shares of Series AAA Preferred Stock issued in 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 Series A and Series AA Preferred Stock financings of the Company, 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 were 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 . Preferred Stock Dividends During the fourth quarter of 2023, the Company paid dividends on Series A Preferred stock, in the form of shares of common stock, as follows: Series Designation Dividend Shares Fair Value of Shares Issued Series A 87,643 $ 142,000 Series A-2 29,690 48,000 Series A-3 16,200 27,000 Series A-4 84,641 135,000 Series A-5 14,807 22,000 Total 232,981 $ 374,000 In December 2023, certain Series A Preferred stockholder year two dividends, as described above, were accelerated and paid in shares of the Company’s common stock, pursuant to consent related dividend acceleration agreements executed during the period. A total of 114,452 shares of common stock (included in the table above) were paid on an accelerated basis with a fair value of $ 174,000 (included in the table above), which is reflected in accumulated deficit. Common Stock Purchase Agreement On March 25, 2022, we entered into a common stock purchase agreement (the “Purchase Agreement”) with Tumim Stone Capital, LLC (“Tumim”). Pursuant to the Purchase Agreement, the Company had the right, but not the obligation, to sell to Tumim, and Tumim was obligated to purchase, up to $ 10,000,000 of newly issued shares (the “Total Commitment”) of the Company’s common stock from time to time during the term of the Purchase Agreement (the “Tumim Offering”), subject to certain limitations and conditions. As consideration for Tumim’s commitment to purchase shares of common stock under the Purchase Agreement, the Company issued to Tumim 2,500 shares of common stock, valued at $ 100,000 , following the execution of the Purchase Agreement (the “Commitment Shares”). During the year ended December 31, 2022, we issued 371 shares of common stock at an average price of $ 22.20 , raising net proceeds of approximately $ 8,000 , under the Purchase Agreement. The Purchase Agreement initially precluded the Company from issuing and selling more than 368,091 shares of its common stock, including the Commitment Shares, which number equals 19.99 % of the common stock issued and outstanding as of March 25, 2022, unless the Company obtains stockholder approval to issue additional shares, or unless certain exceptions apply. In addition, a beneficial ownership limitation in the agreement initially limited the Company from directing Tumim to purchase shares of common stock if such purchases would result in Tumim beneficially owning more than 4.99 % of the then-outstanding shares of common stock (subject to an increase to 9.99 % at Tumim’s option upon at least 61 calendar days’ notice). From and after the initial satisfaction of the conditions to the Company’s right to commence sales of common stock to Tumim (such event, the “Commencement,” and the date of initial satisfaction of all such conditions, the “Commencement Date”), the Company was able to direct Tumim to purchase shares of common stock at a purchase price per share equal to 95 % of the average daily dollar volume-weighted average price for the common stock during the three consecutive trading day period immediately following the date on which the Company delivers to Tumim a notice for such purchase. The Company controlled the timing and amount of any such sales of common stock to Tumim. Actual sales of shares of common stock to Tumim depended on a variety of factors to be determined by the Company from time to time, including, among other things, market conditions, the trading price of the common stock, and determinations by the Company as to the appropriate sources of funding for the Company and its operations. F-36 Table of Contents The Commencement Date of the Tumim Offering was March 25, 2022. Unless earlier terminated, the Purchase Agreement automatically terminated upon the earliest of (i) the expiration of the 18-month period following the Commencement Date, (ii) Tumim’s purchase or receipt of the Total Commitment worth of common stock, or (iii) the occurrence of certain other events set forth in the Purchase Agreement. The Tumim Offering expired in September 2023. Equity Distribution Agreement On September 3, 2021, the Company entered into an Equity Distribution Agreement (the “Sales Agreement”) with two investment banks (the “Agents”), pursuant to which the Company could offer and sell, from time to time, through the Agents (the “ATM Offering”), up to $ 75 million of its shares of common stock (the “Shares”). Any Shares offered and sold in the Offering were issued pursuant to the Company’s Registration Statement on Form S-3 filed with the SEC on September 3, 2021 (the “Form S-3”) and the prospectus relating to the Offering that forms a part of the Form S-3, following such time as the Form S-3 is declared effective by the SEC. During the year ended December 31, 2022, the Company issued 16,182 shares of common stock, at an average price of $ 19.80 , raising net proceeds of $ 312,000 , under the Sales Agreement. Subject to the terms and conditions of the Sales Agreement, the Agents used their commercially reasonable efforts to sell the Shares from time to time, based upon the Company’s instructions. Under the Sales Agreement, the Agents sold the Shares by any method permitted by law deemed to be an “at-the-market” offering as defined in Rule 415 promulgated under the Securities Act of 1933, as amended (the “Securities Act”), including, without limitation, sales made directly on the Nasdaq Capital Market, on any other existing trading market for the Company’s common stock or to or through a market maker. The Company had no obligation to sell any of the Shares and could at any time suspend offers under the Sales Agreement. The Offering terminated upon the earlier of (a) the sale of all of the Shares, (b) the termination by the mutual written agreement of the managing agent and the Company, or (c) one year from the date that the Form S-3 is declared effective by the SEC, or November 16, 2022. Under the terms of the Sales Agreement, the Agents were entitled to an aggregate commission at a fixed rate of 3.0 % of the gross sales price of Shares sold under the Sales Agreement. Use of proceeds from “at-the-market” offerings included working capital and general corporate purposes, including sales and marketing activities, product development and capital and acquisition related expenditures. 8. STOCK-BASED INCENTIVE PLANS The Super League 2014 Stock Option and Incentive Plan (the “Plan”) was approved by the Board of Directors and the stockholders of Super League in October 2014. The Plan was subsequently amended in May 2015, and as further described below. The Plan allows grants of stock options, stock awards and performance shares with respect to common stock of the Company to eligible individuals, which generally includes directors, officers, employees, advisors and consultants. The Plan provides for both the direct award and sale of shares of common stock and for the grant of options to purchase shares of common stock. Options granted under the Plan include non-statutory options as well as incentive options intended to qualify under Section 422 of the Internal Revenue Code of 1986, as amended. The Board of Directors administers the Plan and determines which eligible individuals are to receive option grants or stock issuances under the Plan, the times when the grants or issuances are to be made, the number of shares of common stock subject to each grant or issuance, the status of any granted option as either an incentive stock option or a non-statutory stock option under the federal tax laws, the vesting schedule to be in effect for the option grant or stock issuance and the maximum term for which any granted option is to remain outstanding. The exercise price of options is generally equal to the fair market value of common stock of the Company on the date of grant. Options generally begin to be exercisable six months to one year after grant and typically expire 10 years after grant. Stock options and restricted shares generally vest over two to four years (generally representing the requisite service period). The Plan terminates automatically on July 1, 2027. The Plan provides for the following programs: ● Option Grants Under the discretionary option grant program, the Company’s compensation committee of the Board of Directors may grant (1) non-statutory options to purchase shares of common stock to eligible individuals in the employ or service of Super League or its affiliates (including employees, non-employee members of the Board of Directors and consultants) at an exercise price not less than 85 % of the fair market value of such shares on the grant date, and (2) incentive stock options to purchase shares of common stock to eligible employees at an exercise price not less than 100 % of the fair market value of such shares on the grant date (not less than 110 % of fair market value if such employee actually or constructively owns more than 10% of Super League’s voting stock or the voting stock of any of its subsidiaries). F-37 Table of Contents ● Stock Awards or Sales Under the stock award or sales program, eligible individuals may be issued shares of common stock of the Company directly, upon the attainment of performance milestones or the completion of a specified period of service or as a bonus for past services. Under this program, the purchase price for the shares will not be less than 100 % of the fair market value of the shares on the date of issuance, and payment may be in the form of cash or past services rendered. Eligible individuals will have no stockholder rights with respect to any unvested restricted shares or restricted stock units issued to them under the stock award or sales program; however, eligible individuals will have the right to receive any regular cash dividends paid on such shares. The initial reserve under the Plan was 29,167 shares of common stock, which reserve was subsequently increased to 50,000 shares upon stockholders’ approval in May 2016. In July 2017, the Company amended and restated the Plan to increase the number of shares of common stock reserved thereunder from 50,000 shares to 75,000 shares. In October 2018, the Company amended and restated the Plan to increase the number of shares of common stock reserved thereunder from 75,000 shares to 91,667 shares. In July 2020, the Company’s shareholders approved an amendment to the Plan to increase the number of shares authorized for issuance from 91,667 to 129,167 . In May 2021, the Company’s shareholders approved an amendment to the Plan to increase the number of shares authorized for issuance from 129,167 to 250,000 . In June 2022, the Company’s shareholders approved an amendment to the Plan to increase the number of shares authorized for issuance from 250,000 to 312,500 . In September 2023, the Company’s shareholders approved an amendment to the Plan to increase the number of shares authorized for issuance from 312,500 to 750,000 . As of December 31, 2023, 117,000 shares remained available for issuance under the Plan. All 2014 Plan share reserve and other share amounts reflected herein have been retroactively adjusted to reflect the effect of the Reverse Split for all periods presented. Super League issues new shares of common stock upon the exercise of stock options, the grant of restricted stock, or the delivery of shares pursuant to vested restricted stock units. The compensation committee of the Board of Directors may amend or modify the Plan at any time, subject to any required approval by the stockholders of the Company, pursuant to the terms therein. In the event that any outstanding option or other right for any reason expires or is canceled or otherwise terminated, the shares allocable to the unexercised portion of such option or other right is returned and available for the purposes of this Plan. Stock Options The fair value of stock options granted was estimated on their respective grant dates using the Black-Scholes-Merton option pricing model and the following weighted-average assumptions for the years ended December 31: 2023 2022 Expected Volatility 95 % 95 % Risk–free interest rate 4.18 % 2.89 % Dividend yield - % - % Expected life of options (in years) 5.35 6.08 The expected volatility assumption for purposes of determining the fair value of stock options for the periods presented was estimated based on reference to the historical stock price volatility of the Company and a representative peer group for the applicable estimated term. A summary of stock option activity for the year ended December 31, 2023 is as follows: Weighted-Average Options (#) Exercise Price Per Share ($) Remaining Contractual Term (Years) Aggregate Intrinsic Value ($) Outstanding at December 31, 2022 124,000 $ 97.95 $ 4,000 Granted 388,000 $ 9.78 - Exercised - $ - Canceled / forfeited ( 116,000 ) $ 83.89 Outstanding at December 31, 2023 396,000 $ 15.70 8.97 $ - Vested and exercisable at December 31, 2023 163,000 $ 24.17 8.46 $ - The weighted-average grant date fair value of stock options granted during the years ended December 31, 2023 and 2022 was $ 5.39 and $ 23.40 , respectively. The aggregate fair value of stock options that vested during the years ended December 31, 2023 and 2022 was $ 1,078,986 and $ 1,726,000 , respectively. As of December 31, 2023, the total unrecognized compensation expense related to non-vested stock option awards was $ 1,453,000 , which is expected to be recognized over a weighted-average term of approximately 3 years. F-38 Table of Contents Restricted Stock Units The following table summarizes non-vested restricted stock unit activity for the year ended December 31, 2023: 2014 Plan Activity Outside of the 2014 Plan Activity Totals Restricted Stock Units (#) Weighted Average Grant Date Fair Value ($) Restricted Stock Units (#) Weighted Average Grant Date Fair Value ($) Restricted Stock Units (#) Weighted Average Grant Date Fair Value ($) At December 31, 2022 101,000 $ 35.64 1,000 $ 18.19 102,000 $ 35.34 Granted 177,000 $ 9.25 143,000 $ 5.97 320,000 $ 7.78 Vested ( 21,000 ) $ 30.94 ( 54,000 ) $ 3.80 ( 75,000 ) $ 11.39 Canceled ( 71,000 ) $ 35.95 - $ - ( 71,000 ) $ 35.95 At December 31, 2023 186,000 $ 10.87 90,000 $ 7.50 276,000 $ 9.76 As of December 31, 2023, the total unrecognized compensation expense related to non-vested restricted stock units was $ 743,000 which will be recognized over a weighted-average term of approximately one year. During the year ended December 31, 2023 and 2022, the Company issued 39,000 and 9,000 , respectively, restricted stock units (included in the table above) to nonemployees for services (“Nonemployee RSUs”). The weighted average grant date fair value of the Nonemployee RSUs granted during the year ended December 31, 2023 and 2022 was $ 1.67 and $ 18.20 , respectively. Compensation expense for Nonemployee RSUs for the year ended December 31, 2023 and 2022 totaled $ 89,000 and $ 131,000 , respectively. As of December 31, 2023, the total unrecognized compensation expense related to Nonemployee RSUs was $ 0 . Warrants Issued to Employees and Nonemployees for Services A summary of employee and nonemployee warrant activity (outside of the Plan) for the year ended December 31, 2023 is as follows: Weighted-Average Warrants (#) Exercise Price Per Share ($) Remaining Contractual Term (Years) Aggregate Intrinsic Value ($) Outstanding at December 31, 2022 58,000 $ 121.80 - $ - Granted - $ - - $ - Expired ( 27,000 ) $ 204.39 - $ - Outstanding at December 31, 2023 31,000 $ 49.21 3.70 $ - Vested and exercisable as of December 31, 2023 31,000 $ 49.21 3.70 $ - The weighted-average grant date fair value of common stock purchase warrants (“Warrants”) granted during the year ended December 31, 2022 was $ 10.00 . The aggregate fair value of Warrants that vested during the years ended December 31, 2023 and 2022 was $ 249,000 and $ 0 , respectively. As of December 31, 2023, the total unrecognized compensation expense related to Warrants was $ 0 . In December 2022, the Company issued 25,000 warrants (included in the table above) to a third-party for nonemployee investor relations services. The warrants have an exercise price of $ 13.40 , a grant date fair value of $ 10.00 , vest in twelve equal monthly installments commencing on the grant date and expire five years from the grant date. Compensation expense included in the statement of operations for the year ended December 31, 2023 and 2022 totaled $ 228,000 and $ 20,000 , respectively. F-39 Table of Contents Noncash Stock Compensation Expense Noncash stock-based compensation expense was comprised of the following as of December 31: 2023 2022 Stock options $ 1,014,000 $ 1,278,000 Warrants 228,000 20,000 Restricted stock units 1,493,000 2,965,000 Total noncash stock compensation expense $ 2,735,000 $ 4,263,000 Noncash stock-based compensation expense was included in the following financial statement line items as of December 31: 2023 2022 Sales, marketing and advertising $ 879,000 $ 1,079,000 Engineering, technology and development 219,000 389,000 General and administrative 1,637,000 2,795,000 Total noncash stock compensation expense $ 2,735,000 $ 4,263,000 Modifications to Equity-Based Awards On January 1, 2022, the Company issued 67,500 performance stock units (“Original PSUs”) under the Company’s 2014 Amended and Restated Stock Option and Incentive Plan, which vest in five equal increments of 13,500 PSUs, based on satisfaction of the following vesting conditions during the three-year period commencing on January 1, 2022: (i) the Company’s stock price equaling $ 95.00 per share based on 60-day volume weighted average price (“VWAP”); (ii) the Company’s stock price equaling $ 120.00 per share based on 60-day VWAP; (iii) the Company’s stock price equaling $ 140.00 per share based on 60-day VWAP; (iv) the Company’s stock price equaling $ 160.00 per share based on 60-day VWAP; and (v) the Company’s stock price equaling $ 180.00 per share based on 60-day VWAP. Noncash stock compensation expense related to the Original PSUs totaled $ 299,000 and $ 2,142,000 for the years ended December 31, 2023 and 2022, respectively. On April 30, 2023, the Board approved the cancellation of the 67,500 Original PSUs previously granted to certain executives (four plan participants in total) under the 2014 Plan (as described above). In exchange for the cancelled Original 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 prospectively over the 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, included in the consolidated statement of operations for the year ended December 31, 2023, totaled $ 351,000 . 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 (six plan participants in total) under the Company’s 2014 Amended and Restated Employee Stock Option and Incentive Plan (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 (68 plan participants in total) 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. F-40 Table of Contents 9. INCOME TAXES The components of loss before income taxes consisted of the following for the years ended December 31: 2023 2022 United States $ ( 30,455,000 ) $ ( 84,575,000 ) Foreign ( 188,000 ) ( 1,081,000 ) Loss from operations before income taxes $ ( 30,643,000 ) $ ( 85,656,000 ) The Company’s provision for income taxes consisted of the following for the years ended December 31: 2023 2022 Current: Federal taxes $ - $ - State taxes - - Foreign taxes - - Total current $ - $ - Deferred: Federal taxes $ - $ - State taxes - - Foreign taxes ( 313,000 ) ( 205,000 ) Total deferred ( 313,000 ) ( 205,000 ) Net provision for income taxes $ ( 313,000 ) $ ( 205,000 ) The tax effects of temporary differences and carryforwards that give rise to significant portions of deferred tax assets and liabilities consist of the following as of December 31: 2023 2022 Deferred tax assets: Net operating loss and credits $ 35,453,000 $ 32,098,000 Intangibles 1,899,000 - Stock compensation 1,776,000 3,026,000 Accrued liabilities 1,133,000 504,000 State taxes 12,000 11,000 Capitalized research and development costs 2,659,000 2,002,000 Total deferred tax assets 42,932,000 37,641,000 Deferred tax liabilities: Fixed assets ( 69,000 ) ( 94,000 ) Intangibles - ( 2,137,000 ) Contract liabilities ( 8,000 ) - Total deferred tax liabilities ( 77,000 ) ( 2,231,000 ) Valuation allowance ( 42,855,000 ) ( 35,723,000 ) Total net deferred tax assets (liabilities), net of valuation allowance $ - $ ( 313,000 ) A reconciliation of the federal statutory income tax rate and the effective income tax rate is as follows: 2023 2022 Statutory federal– tax rate - (benefit) expense 21 % 21 % State tax, net 5 6 Non-deductible permanent items ( 2 ) ( 15 ) Change in tax rate - ( 1 ) Foreign taxes 1 - Other ( 2 ) - Valuation allowance ( 22 ) ( 11 ) 1 % - % F-41 Table of Contents For the years ended December 31, 2023 and 2022, the Company recorded full valuation allowances against its domestic net deferred tax assets due to uncertainty regarding future realizability pursuant to guidance set forth in the FASB’s Accounting Standards Codification Topic No. 740, Income Taxes. In future periods, if the Company determines it will more likely than not be able to realize these amounts, the applicable portion of the benefit from the release of the valuation allowance will generally be recognized in the statements of operations in the period the determination is made. The Company did not maintain a valuation allowance on the activity in the United Kingdom (“UK”) from its acquisition of Bannerfy Ltd due to the deferred tax liability position. During the year ended December 31, 2023, Bannerfy Ltd sold all of its asset back to the original sellers and ceased operations as described below. As such, a full valuation was recorded against the remaining foreign deferred tax assets. Components of net loss before income tax attributable to foreign entities totaled $ 187,000 and $ 1.1 million for the years ended December 31, 2023 and 2022, respectively. The Company assesses whether a valuation allowance should be recorded against its deferred tax assets based on the consideration of all available evidence, using a “more likely than not” realization standard. The four sources of taxable income that must be considered in determining whether deferred tax assets will be realized are: (1) future reversals of existing taxable temporary differences (i.e., offset of gross deferred tax assets against gross deferred tax liabilities); (2) taxable income in prior carryback years, if carryback is permitted under the applicable tax law; (3) tax planning strategies and (4) future taxable income exclusive of reversing temporary differences and carryforwards. In assessing whether a valuation allowance is required, significant weight is to be given to evidence that can be objectively verified. A significant factor in the Company’s assessment is that the Company has been in a three-year historical cumulative loss position as of the end of December 31, 2023. After a review of the four sources of taxable income (as described above) and after consideration of the Company's continuing cumulative loss position as of December 31, 2023, the Company has recorded a valuation allowance on its deferred tax assets. As of December 31, 2023, 2022 and 2021, the total valuation allowance was $ 42.9 million, $ 35.7 million and $ 26.5 million, respectively. At December 31, 2023, the Company had U.S. federal, state income tax, and foreign net operating loss carryforwards of approximately $ 130.1 million, $ 117.5 million and $ 1.1 million, respectively, expiring through 2043. Of the federal net operating losses, $ 24.5 million will expire from 2034 to 2037, and $ 105.6 million will carry over indefinitely. Federal net operating loss carryforwards generated in 2018 or after do not expire, however, they can only be used to offset 80% of taxable income in a given year. Of the state net operating losses, $ 115.8 million will expire from 2034-2043, and $ 1.6 million will carry over indefinitely. The $ 1.1 million of foreign net operating losses will carry over indefinitely. Utilization of the net operating loss carryforwards may be subject to a substantial annual limitation due to ownership change limitations that may have occurred or that could occur in the future, as required by Section 382 of the Internal Revenue Code of 1986, as amended, as well as similar state provisions. The Company has not completed a study to assess whether an ownership change has occurred or whether there have been multiple ownership changes since the Company’s formation due to the complexity and cost associated with such a study, and the fact that there may be additional such ownership changes in the future. A provision enacted in the Tax Cuts and Jobs Act of 2017 related to the capitalization for tax purposes of research and experimental expenditures became effective January 1, 2022. This provision requires us to capitalize research and experimental expenditures and amortize them on the U.S. tax return over five or fifteen years, depending upon where the research is conducted. This provision did not have a material impact on our fiscal year 2022 effective tax rate on a net basis or our cash paid for taxes due to our net operating loss position. ASC 740 clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements and prescribes a recognition threshold and measurement process for financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. The Topic also provides guidance on de-recognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. The Topic requires an entity to recognize the financial statement impact of a tax position when it is more likely than not that the position will be sustained upon examination. The amount recognized is measured as the largest amount of benefit that is greater than fifty percent likely of being realized upon ultimate settlement. In addition, the Topic permits an entity to recognize interest and penalties related to tax uncertainties either as income tax expense or operating expenses. The Company will recognize interest and penalties related to tax uncertainties as income tax expense. There were no uncertain tax positions as of December 31, 2023. The Company is subject to taxation in the United States, various state and local jurisdictions, as well as foreign jurisdictions (primarily the UK) where the Company conducts business. As of December 31, 2023, the company had no outstanding tax audits. Currently there are no audits in process or pending from Federal, state or foreign tax authorities. Federal and state income tax returns are subject to examination for a period of three to four years after filing. UK income tax returns are subject to examination for a period of four years after filing. 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, 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 ASC 805, a difference between the book and tax bases of the assets arises. ASC 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 recognized 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. F-42 Table of Contents 10. COMMITMENTS AND CONTINGENCIES Operating Leases 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 expires on August 1, 2023, at a combined rate of approximately $ 12,000 per month. The adoption of ASC 842, “Leases” (“ASC 842”), did not have a material impact on the Company's consolidated financial statements and related disclosures. Rent expense for the years ended December 31, 2023 and 2022 was approximately $ 163,000 and $ 168,000 , respectively, and is included in general and administrative expense in the accompanying statements of operations. Rental payments are expensed in the statements of operations in the period to which they relate. Scheduled rent increases, if any, are amortized on a straight-line basis over the lease term. Settlement of Pending or Threatened Claims As described above, the Note Holders made a series of investments in the Company during the period commencing January 2021 and culminating in the issuance of the Notes, which were paid in full in the first quarter of 2023. During the fourth quarter of 2023, the Note Holders made certain claims arising from an interpretation of certain rights that the Note Holders had pursuant to the terms of SPA. 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 (based on the closing price of the Company’s common stock on 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. Related Party Transactions In May 2018, the Company entered into a consulting agreement with a member of the Board of Directors, pursuant to which the board member provides the Company with strategic advice and planning services for which he receives a cash payment of $ 7,500 per month from the Company. The consulting agreement had an initial term ending December 31, 2019, and was extended for successive one-year periods upon mutual agreement of the board member and the Company through to fiscal year 2023. Total consulting expense under the agreement totaled $ 90,000 for each of the years ended December 31, 2023 and 2022. 11. SUBSEQUENT EVENTS The Company evaluated subsequent events for their potential impact on the consolidated financial statements and disclosures through April 12, 2024, the date the consolidated financial statements were available to be issued, and determined that, except as set forth below, no subsequent events occurred that were reasonably expected to impact the consolidated financial statements presented herein. 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 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 the Company’s cost improvement initiatives. Super League and GamerSafer will maintain a commercial relationship which ensures that Minehut can remain an ongoing destination available to Super League’s partners. The carrying value of Minehut related assets totaled $ 644,000 as of December 31, 2023, and are included in intangible assets, net in the consolidated balance sheet. Equity-Based Compensation On March 19, 2024, the Board approved that an equity pool consisting of (i) 1,692,606 shares of common stock, collectively, which amount is equivalent to ten percent of the then existing and outstanding common stock of the Company on an as-converted basis, be issued to executives of the Company in the following form, amounts and vesting conditions: (a) stock options to purchase 846,303 shares of common stock, with vesting at the rate of 1/36 th per month in arrears, and exercisable at a price per share of $ 1.85 (collectively, the “2024 Options”); and (b) restricted stock units consisting of 846,303 shares of common stock with vesting of (i) fifty percent in equal one-third increments on the first, second and third anniversaries of the restricted stock unit grant issuances, and (ii) fifty percent to be allocated equally between (a) achievement of a profitable fiscal quarter, on a net income basis, in accordance with U.S. GAAP, (b) achievement of 85 % of EBITDA target for fiscal year 2024, and (c) achievement of 85 % of EBITDA target for fiscal year 2025 (with such fiscal year 2025 target to be approved by the Board as part of the fiscal year 2025 financial plan)(collectively, the “2024 RSUs”). The issuance of the 2024 Options and 2024 RSUs, as described above, is contingent upon the Company receiving approval from its stockholders to increase the number of shares available under the 2014 Plan at the Company’s 2024 annual meeting of stockholders, and will be subject to cancellation in the event stockholder approval is not obtained. Other Refer to Note 10 , “ Settlement of Pending or Threatened Claims ” F-43 Table of Contents 12. RESTATEMENT OF QUARTERLY FINANCIAL INFORMATION (UNAUDITED) The following tables contain unaudited quarterly financial information for the quarterly period ended September 30, 2023 that has been updated to reflect the restatement of the Company’s financial statements as of and for the three and nine months ended September 30, 2023, arising from the exclusion of the calculated noncash value of the effect of the down round feature on the Company’s Series AA Preferred stock, triggered in August 2023, which should have been recorded as a noncash charge directly to accumulated deficit and a noncash reduction to income available to common stockholders in the computation of earnings per share. In connection with the Company’s year-end 2023 closing procedures, management reassessed the guidance set forth in ASC 260, “Earnings Per Share” and determined that the noncash value of the effect of a down round feature that is triggered on preferred stock should be recognized as a noncash charge to accumulated deficit and a noncash reduction to income available to common stockholders in the computation of earnings per share, in the period that the down round feature is triggered. As a result: (i) management has noted an error affecting additional paid in capital and accumulated deficit, with no impact to total equity, and a noncash error with respect to the computation of loss per share as reported in the Company’s Quarterly Report on Form 10-Q for the three and nine months ended September 30, 2023 (“2023 Third Quarter 10-Q”); and (ii) in connection with the Company’s 2023 year-end closing procedures, on March 26, 2024, due to the material error to loss per share originally reported in the 2023 Third Quarter 10-Q, the Company’s management and the Audit Committee determined that the Company’s consolidated interim financial statements for the three and nine months ended September 30, 2023 should be restated to reflect the modifications described above. The changes described above did not have any impact on total assets, total liabilities, total equity, revenues, cost of revenues, operating expense, net loss or cash flows as reported for the three and nine months ended September 30, 2023. No financial statements or disclosures prior to the financial statements for the quarterly periods ended September 30, 2023 were affected by the changes described above. The Company has not amended its previously filed Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2023. The financial information that has been previously filed or otherwise reported for the quarterly periods ended September 30, 2023 is superseded by the information in this Annual Report, and the consolidated financial statements and related financial information for the quarterly periods ended September 30, 2023 contained in such previously filed report should no longer be relied upon. The Company filed a current report on form 8-K pursuant to Item 4.02 on May 27, 2024, disclosing the matter described above. As of September 30, 2023 As Previously Restatement Reported Adjustment As Restated Unaudited Condensed Balance Sheet Total assets $ 27,242,000 - $ 27,242,000 Liabilities and shareholders ’ equity (deficit) Total liabilities 10,627,000 - 10,627,000 Preferred stock, par value $ 0.001 per share; - - - Common stock, par value $ 0.001 per share; 81,000 - 81,000 Additional paid-in-capital 244,333,000 6,446,000 (1) 250,779,000 Accumulated deficit ( 227,799,000 ) ( 6,446,000 ) (1) ( 234,245,000 ) Total shareholders ’ equity (deficit) 16,615,000 - 16,615,000 Total liabilities and shareholders ’ equity (deficit) $ 27,242,000 $ - $ 27,242,000 Three Months Ended September 30, 2023 As Previously Restatement Reported Adjustment As Restated Unaudited Condensed Statement of Operations Net loss attributable to common stockholders used in computation of loss per share – basic and diluted $ ( 2,984,000 ) $ ( 6,446,000 ) (1) $ ( 9,430,000 ) Basic and diluted net loss per common share $ ( 1.01 ) $ ( 2.18 ) $ ( 3.19 ) Weighted-average number of shares outstanding, basic and diluted 2,957,271 2,957,271 2,957,271 Nine Months Ended September 30, 2023 As Previously Restatement Reported Adjustment As Restated Unaudited Condensed Statement of Operations Net loss attributable to common stockholders used in computation of loss per share – basic and diluted $ ( 17,056,000 ) $ ( 6,446,000 ) (1) $ ( 23,502,000 ) Basic and diluted net loss per common share $ ( 7.44 ) ( 2.81 ) $ ( 10.25 ) Weighted-average number of shares outstanding, basic and diluted 2,293,191 2,293,191 2,293,191 Three and Nine Months Ended September 30, 2023 As Previously Restatement Reported Adjustment As Restated Statement of Changes in Shareholders ’ Equity (Deficit) Additional paid-in-capital: $ 244,333,000 $ 6,446,000 (1) $ 250,779,000 Accumulated Deficit: $ ( 227,799,000 ) $ ( 6,446,000 ) (1) $ ( 234,245,000 ) (1) Represents noncash value of the effect of the down round feature on the Company’s Series AA Preferred stock, triggered in August 2023, and the related adjustments to additional paid in capital and accumulated deficit, with no impact to total equity, and a noncash adjustment to the computation of loss per share as reported in the Company’s 2023 Third Quarter 10-Q. The adjustments did not have any impact on total assets, total liabilities, total equity, revenues, cost of revenues, operating expense, net loss or cash flows as reported for the three and nine months ended September 30, 2023, as reported in the 2023 Third Quarter 10-Q. F-44 Table of Contents SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. SUPER LEAGUE ENTERPRISE, INC. Date: April 12, 2024 By: /s/ Ann Hand Ann Hand President and Chief Executive Officer (Principal Executive Officer) SUPER LEAGUE ENTERPRISE, INC. Date: April 12, 2024 By: /s/ Clayton Haynes Clayton Haynes Chief Financial Officer (Principal Financial and Accounting Officer) Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. Signature Title Date /s/ Ann Hand Chief Executive Officer April 12, 2024 Ann Hand and Chair of the Board (Principal Executive Officer) /s/ Clayton Haynes Chief Financial Officer April 12, 2024 Clayton Haynes (Principal Financial and Accounting Officer) /s/ David Steigelfest Director April 12, 2024 David Steigelfest /s/ Jeff Gehl Director April 12, 2024 Jeff Gehl /s/ Kristin Patrick Director April 12, 2024 Kristin Patrick /s/ Mark Jung Director April 12, 2024 Mark Jung /s/ Michael Keller Director April 12, 2024 Michael Keller F-45