Super League Enterprise, Inc. 10-K

ITEM 5. MARKET FOR REGISTRANT ’ S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES   Market Information and Holders   Our common stock is listed on the Nasdaq Capital Market under the ticker symbol “SLGG.”   As of March 29, 2022, we had 160 holders of record of our common stock based upon the records of our transfer agent, which do not include beneficial owners of common stock whose shares are held in the names of various securities brokers, dealers and registered clearing agencies.   Dividend Policy   We have never declared or paid cash dividends on our capital stock. We currently intend to retain all available funds and any future earnings for use in the operation of our business. Therefore, we do not currently expect to pay any cash dividends on our common stock for the foreseeable future. Any future determination to pay cash dividends will be at the discretion of our Board and will depend upon our results of operations, financial condition, capital requirements, general business conditions, and other factors that our board of directors deems relevant. Our ability to pay dividends may also be restricted by the terms of any future credit agreement or any future debt or preferred equity securities.   Recent Sales of Unregistered Equity Securities   No unregistered securities were issued during the years ended December 31, 2021 and 2020 that were not previously reported.   Use of Proceeds from Sales of Registered Securities   In January 2021, the Company issued 3,076,924 shares of common stock at a price of $2.60 per share, raising aggregate net proceeds of approximately $8.0 million, after deducting offering expenses totaling $73,000.   In February 2021, the Company issued 2,926,830 shares of common stock at a price of $4.10 per share, raising aggregate net proceeds of approximately $12.0 million, after deducting offering expenses totaling $70,000.   In March 2021, the Company issued 1,512,499 shares of common stock at a price of $9.00 per share, raising aggregate net proceeds of approximately $13.6 million, after deducting offering expenses totaling $72,000.   -31- Table of Contents   The offerings described above were made pursuant to an effective shelf Registration Statement on Form S-3, which was originally filed with the Securities and Exchange Commission on April 10, 2020 (File No. 333-237626). The net proceeds from these offerings were used for working capital and other general corporate purposes, including sales and marketing activities, product development and capital expenditures. The Company also used a portion of the net proceeds for the acquisition of, or investment in, technologies, solutions or businesses.   Equity Distribution Agreement.   On September 3, 2021, the Company entered into an Equity Distribution Agreement (the “Sales Agreement”) with two investment banks (the “Agents”), pursuant to which the Company may offer and sell, from time to time, through the Agents (the “Offering”), up to $75 million of its shares of common stock, par value $0.001 per share (the “Shares”). Any Shares offered and sold in the Offering will be issued pursuant to the Company’s Registration Statement on Form S-3 filed with the Securities and Exchange Commission (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.   Subject to the terms and conditions of the Sales Agreement, the Agents will use their commercially reasonable efforts to sell the Shares from time to time, based upon the Company’s instructions. Under the Sales Agreement, the Agents may sell the Shares by any method permitted by law deemed to be an “at-the-market” offering as defined in Rule 415 promulgated under the Securities Act 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 Agents may also sell Shares in privately negotiated transactions, provided that the Agents receive the Company’s prior written approval.   The Company has no obligation to sell any of the Shares, and may at any time suspend offers under the Sales Agreement. The Offering will terminate 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.   Under the terms of the Sales Agreement, the Agents will be entitled to an aggregate commission at a fixed rate of 3.0% of the gross sales price of Shares sold under the Sales Agreement.   The Company intends to use the net proceeds from any “at-the-market” offering primarily for working capital and general corporate purposes, including sales and marketing activities, product development and capital and acquisition related expenditures. The Company may also use a portion of the net proceeds for the acquisition of, or investment in, technologies, solutions or businesses.   In August 2020, the Company issued 4,540,541 shares of common stock at a price of $1.85 per share, raising aggregate net proceeds of approximately $7.6 million, after deducting placement agent fees of $588,000 and other offering expenses totaling $180,000. The offering was conducted pursuant to the Company’s effective Registration Statement on Form S-1 (File No. 333-248248), and a related registration statement filed pursuant to Rule 462(b) under the Securities Act. In addition, pursuant to the terms of the related underwriting agreement, the Company granted to the underwriter a 30-day over-allotment option to purchase up to an additional 681,081 Shares at the same public offering price per share, less discounts and commissions, which was partially exercised in September 2020, resulting in the issuance of 448,440 shares and net proceeds of $771,000, after deducting placement agent fees of $58,000. The net proceeds from this offering were for working capital and other general corporate purposes, including sales and marketing activities, product development and capital expenditures. Net proceeds from this offering were also intended to be available for acquisitions of, or investments in, technologies, solutions or businesses that may complement our business and or accelerate our growth.   In May 2020, the Company issued 1,825,000 shares of common stock at a price of $3.50 per share, raising aggregate net proceeds of approximately $6.0 million, after deducting placement agent fees of $319,000 and other offering expenses totaling $116,000, pursuant to a registered direct offering. The net proceeds from this offering were for working capital and other general corporate purposes, including sales and marketing activities, product development and capital expenditures. Net proceeds from this offering were also intended to be available for acquisitions of, or investments in, technologies, solutions or businesses that may complement our business and or accelerate our growth.   Performance Graph   As a smaller reporting company, we are not required to provide the performance graph required by Item 201(e) of Regulation S-K.   ITEM 6. SELECTED FINANCIAL DATA   We derived the selected financial data as of and for the years ended December 31, 2021 (“fiscal year 2021”) and 2020 (“fiscal year 2020”), set forth below, from our audited consolidated financial statements included elsewhere herein, and should be read in conjunction with those audited consolidated financial statements and related notes thereto, as well as the information found under the sections titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included elsewhere herein. Our historical results are not necessarily indicative of the results to be expected in future periods. All references to “Note,” followed by a number reference from one to eleven herein, refer to the applicable corresponding numbered footnotes to the consolidated financial statements contained elsewhere herein.   -32- Table of Contents       Fiscal Year       2021     2020   Statement of Operations Data:                 Revenues   $ 11,672,000     $ 2,064,000   Cost of revenues     6,547,000       856,000   Gross profit     5,125,000       1,208,000                     Operating expenses:                 Sales, marketing and advertising     9,670,000       5,490,000   Engineering, technology and development     11,100,000       6,821,000   General and administrative     9,435,000       7,640,000   Total operating expense     30,205,000       19,951,000   Loss from operations     (25,080,000 )     (18,743,000 ) Other income (expense), net     1,221,000       11,000   Loss before benefit from income taxes     (23,859,000 )     (18,732,000 ) Benefit from income taxes     3,111,000       -   Net loss   $ (20,748,000 )   $ (18,732,000 )             ​   Net loss per share:                 Basic and diluted   $ (0.69 )   $ (1.64 ) Weighted average common shares used to compute net loss per share:                 Basic and diluted     29,882,828       11,430,057         As of December 31,       2021     2020   Balance Sheet Data:                 Cash and cash equivalents   $ 14,533,000     $ 7,942,000   Accounts receivable     6,328,000       588,000   Prepaid expenses and other current assets     1,334,000       837,000   Property and equipment, net     104,000       138,000   Intangible and other assets, net     24,243,000       1,907,000   Goodwill     50,263,000       2,565,000   Accounts payable, accrued expenses and deferred revenue     (5,590,000 )     (1,829,000 ) Long-term note payable     -       (1,208,000 ) Deferred taxes     (518,000 )         Total stockholders’ equity     90,697,000       10,940,000     -33- Table of Contents   Factors Affecting Comparability:     ● Long-Term Note Payable. On May 4, 2020, the Company entered into a forgivable loan from the U.S. Small Business Administration (“SBA”) resulting in net proceeds of $1,200,047 pursuant to the Paycheck Protection Program enacted by Congress under the CARES Act administered by the SBA. In May 2021, the loan and accrued interest was forgiven pursuant to the terms and conditions of the underlying loan agreement. Upon forgiveness, and legal release, we reduced the liability by the amount forgiven, totaling $1,213,000 and recorded a gain on extinguishment in the accompanying statement of operations for fiscal year 2021. Refer to “Liquidity and Capital Resources” below.     ● Amortization Expense. Amortization expense for the periods presented was comprised of the following:       Fiscal Year       2021     2020                     Sales, marketing and advertising   $ 1,180,000     $ -   Engineering, technology and development     1,556,000       1,140,000   General and administrative     451,000       119,000   Total amortization expense   $ 3,187,000     $ 1,259,000     The increase in amortization expense primarily reflects the amortization of intangible assets acquired in connection with the 2021 Acquisitions described below.     ● Noncash Stock Compensation Expense. Noncash stock-based compensation expense for the periods presented was comprised of the following:       Fiscal Year       2021     2020                     Sales, marketing and advertising   $ 934,000     $ 849,000   Engineering, technology and development     288,000       254,000   General and administrative     1,159,000       901,000   Total noncash stock compensation expense   $ 2,381,000     $ 2,004,000       ● Acquisitions   Acquisition of Mobcrush. On June 1, 2021, we completed the acquisition of Mobcrush, a live streaming technology platform used by gaming influencers who generate and distribute original content to fans and subscribers across the most popular live streaming and social media platforms, including Twitch, YouTube, Facebook, Instagram, Twitter, and more (“Mobcrush Acquisition”). Mobcrush also operates Mineville and Pixel Paradise, two of seven official Minecraft servers in partnership with Microsoft. Refer to Note 5 for additional information.   Acquisition of Bannerfy, LTD. On August 24, 2021, we completed the acquisition of Bannerfy pursuant to which the Company acquired all of the issued and outstanding common shares of Bannerfy. Bannerfy is an intelligent technology platform that enables digital video and live streaming creators to collaborate with tier one sponsors on their social media channels including YouTube through scalable and custom premium placements. Refer to Note 5 for additional information.   Acquisition of Bloxbiz Co. On October 4, 2021, we acquired (i) substantially all of the assets of Bloxbiz and (ii) the personal goodwill of the Founders regarding Bloxbiz’s business. Bloxbiz is a dynamic ad platform designed specifically for metaverse environments. Bloxbiz’s initial deployment enables brands to advertise across popular Roblox game titles and helps Roblox creators with monetization and game analytics. Refer to Note 5 for additional information.   In accordance with the acquisition method of accounting, the financial results of Super League presented herein include the financial results of the acquisitions of Mobcrush, Bannerfy and Bloxbiz (“2021 Acquisitions”) for the period from the respective transaction closing dates to the end of the current period presented herein. Intangible assets and goodwill recorded in connection with the 2021 Acquisitions totaled $24,315,000 and $47,698,000, respectively. Intangible asset related amortization expense related to the 2021 Acquisitions during fiscal year 2021 totaled $2,128,000.   The net deferred tax liability resulting from the acquisition of Mobcrush created a source of income to utilize against our existing net deferred tax assets. Under the acquisition method of accounting, the impact on the acquiring company’s deferred tax assets is recorded outside of acquisition accounting. Accordingly, the valuation allowance on a portion of the Company’s net deferred tax assets was released, resulting in an income tax benefit of approximately $3,073,000, recorded as a credit to income tax expense for fiscal year 2021. Refer to Note 5 for additional information.   -34- Table of Contents   ITEM 7. MANAGEMENT ’ S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS   You should read the following discussion and analysis of our financial condition and results of our operations together with our consolidated financial statements and the notes thereto appearing elsewhere in this Report. This discussion contains forward-looking statements reflecting our current expectations, whose actual outcomes involve risks and uncertainties. Actual results and the timing of events may differ materially from those stated in or implied by these forward-looking statements due to a number of factors, including those discussed in the sections entitled “ Risk Factors, ” “ Special Note Regarding Forward-Looking Statements ” and elsewhere in this Report .   General   Super League Gaming, Inc. (Nasdaq: SLGG) builds and operates networks of games, monetization tools and content channels across open-world gaming platforms that empower developers, energize players, and entertain fans. Our solutions provide incomparable access to an audience consisting of players in the largest global metaverse environments, fans of hundreds of thousands of gaming influencers, and viewers of gameplay content across major social media and digital video platforms. Fueled by proprietary and patented technology systems, the company’s platform includes access to vibrant in-game communities, a leading metaverse advertising platform, a network of highly viewed channels and original shows on Instagram, TikTok, Snap, YouTube, and Twitch, cloud-based livestream production tools, and an award-winning esports invitational tournament series. Super League’s properties deliver powerful opportunities for brands and advertisers to achieve impactful insights and marketing outcomes with gamers of all ages.   We generate revenues from (i) advertising, serving as a marketing channel for brands and advertisers to reach their target audiences of gamers across our network, (ii) content, curating and distributing esports and gaming-centric entertainment content for our own network of digital channels and media and entertainment partner channels and (iii) direct to consumer offers, including digital subscriptions, in-game digital goods, and gameplay access fees. We operate in one reportable segment to reflect the way management and our chief operating decision maker review and assess the performance of the business.   Matters Affecting Comparability   During fiscal year 2021, we completed the acquisitions described below under the heading, “FY 2021 Acquisitions.”   Executive Summary   During fiscal year 2021, management continued to focus on monetization with respect to our three primary revenue streams: (1) advertising revenues, (2) content revenues, and (3) direct to consumer revenues. In addition to the strong key performance indicator (“KPI”) performance during the periods presented, as described below, we: (i) continued our focus on our premium advertising model and the monetization of our rapidly growing premium advertising inventory, and increased revenues generated from direct advertising sales, programmatic display and video advertising units; (ii) continued to focus on the monetization of our original and user generated content library and remote production and broadcast capabilities, which emerged as a component of revenue in 2020; (iii) continued to focus on the monetization of the gamer and creator through direct-to-consumer offers, including increases in sales of digital goods with our Minehut, Mineville and Pixel Paradise digital properties, and the continued rollout of our micro-transaction marketplace; and, (iv) continued to unlock new ways that our content production technology can extend beyond esports, into other entertainment formats representing revenue growth opportunities in the current and future periods. We expect to continue to grow our advertising pipeline across various verticals with the capability to provide brands and advertisers with targeted, high-quality integrations that warrant premium costs per impressions (“CPM”) advertising rates.   FY 2021 Acquisitions   Fiscal year 2021 acquisitions were comprised of the following:     ● We acquired Mobcrush, effective June 1, 2021, and in the fourth quarter of 2021, continued with the required integration activities, including integration of our sales, engineering and product teams. We believe the acquisition of Mobcrush will enable us to provide brands, advertisers, and other consumer facing businesses with significant audience reach across the most important engagement channels in video gaming – competitive events, social media and live streaming content, and in-game experiences. With the acquisition of Mobcrush we acquired the potential for a U.S. monthly viewing audience of 85 million, which would create a top 50 U.S. media property according to measurements used by Nielsen. In addition, annually, on a combined basis we have the potential to generate 7.7 billion U.S video views, annually, across live streaming platforms, two billion views on social media platforms, and enable 60 million hours of gameplay on owned and operated platforms.     ● In August 2021, we completed the acquisition of Bannerfy which reinforces our commitment to helping creators monetize their fan base as they seek to turn their passion into their livelihood and provides brands with access to additional premium inventory from creators through Super League, to establish organic connections with their fans and followers. Based in the United Kingdom, and having already onboarded a strong roster of European gaming creators and brand partners, and as the first international acquisition by Super League, Bannerfy represents another path to expansion of our advertising and sponsorship partner base.      ● On October, 4, 2021, we completed the acquisition of Bloxbiz, a dynamic advertising platform designed specifically for metaverse environments. Bloxbiz’s initial deployment enables brands to advertise across popular Roblox game titles and helps Roblox creators with monetization and game analytics. Bloxbiz’s advertising platform reaches more than 70 million monthly active Roblox users across a collection of more than 150 curated, brand-safe games. In-game ads take the form of creative billboards that complement the gaming experience, allowing for natural discovery without interrupting gameplay. The ads are measured through Bloxbiz’s advanced technology, which verifies viewability in a 3D space and provides aggregated audience geographic, language, and device data. The acquisition allows us to execute on our strategic plans to extend our existing and expanding presence and reach in the metaverse.   -35- Table of Contents   As a result of our organic growth and the impact of our 2021 Acquisitions, we have significantly enhanced our internal direct sales force and partnership leaders, with approximately 30% of our headcount revenue-facing, and we have deepened our product and engineering functions with specific expertise in metaverse game design, advertising technology, creator tool development, and data and analytics.   We believe we are one of the only companies operating at scale in Minehut and Roblox. In addition, we believe there are significant opportunities to port our products and know-how into other metaverse gaming platforms. Our consumer-facing reach now includes:        ● A library of dozens of our own Minecraft game engines that we leverage across our Minehut, Mineville and Pixel Paradise properties;     ● Game creator partnerships that provide us with access to 150 popular Roblox game worlds, which we expect to continue to expand as we increase our network participation; and     ● The ability to reach gaming audiences in the hundreds of millions through the combination of our own and our creators’ social media reach, enabled by our content capabilities, ranging from live gameplay and entertainment broadcasts to on-demand clips for social distribution and influencer partnerships.     Embedded in our consumer properties are a variety of innovative ad products, developer tools and analytics, as well as our technology to support content production and broadcasting and feed our content network and support a brand’s overall campaign objectives.     We offer a suite of metaverse gaming and content products from custom metaverse integrations inside existing games or the creation of new, bespoke worlds, supported by dynamic, in-game ad units and custom content to drive amplification and attract quality CPMs. Combined with our livestream and broadcast capabilities, we are able to deliver an end-to-end metaverse solution for advertisers and brands. Through our organic and inorganic growth in fiscal 2021, our premium advertising inventory and offer to brands has expanded significantly, which allows us to offer premium engagement with advertiser’s and brand’s targeted audiences, in a safe, trusted and measurable way, through deep, multi-faceted campaigns  leading to growth in the size and scope of our advertising deals to attract a larger share of advertisers’ wallets.   During the second half of fiscal 2021, we also focused on continuing to forge strategic partnerships to create a global reseller network to augment our direct salesforce efforts. These partners have breadth and depth across all of the significant industry verticals along with global geographic coverage, which we believe will facilitate the acceleration of the rollout and awareness for our innovative ad products and drive the acceleration of future monetization.    Other   In August 2021, we announced the launch of Pixel Paradise, the world’s first Minecraft Bedrock Server designed from the ground up to prioritize roleplaying while bringing your imagination to life with your friends. In Pixel Paradise, players take a vacation from player vs player competition and are whisked away to an island where creativity and resourcefulness are the most critical skills. Completing tasks will require players to learn how to manage their currency, optimize their resources, and pursue helpful communications with their existing and new friends. For players seeking a little more action, Pixel Paradise offers mini-games based on popular Minecraft game modes. Pixel Paradise is the newest release by InPvP, an official Microsoft Minecraft partner enjoyed by more than 22 million players annually.   -36- Table of Contents   Registered Direct Offerings .   During the first quarter of fiscal 2021, we offered and sold to certain institutional investors an aggregate total of 7,516,253 shares of common stock in registered direct offerings pursuant to our effective shelf registration statement on Form S-3, which was originally filed with the Securities and Exchange Commission on April 10, 2020 (File No. 333-237626). We received aggregate net proceeds of approximately $33.6 million, after deducting offering expenses.   Impact of COVID-19 Pandemic   The novel coronavirus and actions taken to mitigate the spread of it have had and are expected to continue to have an adverse impact on the economies and financial markets of many countries, including the geographical areas in which the Company operates. It is unknown how long the adverse conditions associated with the coronavirus will last and what the complete financial effect will be to the Company.   Commencing in the first quarter of 2020, in response to the COVID-19 pandemic and the related uncertainty, advertisers and sponsors across the board inevitably paused to reset their marketing strategies, and as a result, all companies with business models that include sponsorship and advertising revenues felt the impact of the pause in advertising spend industry-wide. In addition, in the first half of 2020, as a result of COVID-19, we felt the impact of the deferral of some of the programs in our pipeline and related revenues to future periods. The majority of our gameplay hours and other engagement occurs digitally, online, so while our “in real life” gaming is a premium and important aspect of our brand, the shift away from retail locations did not have a significant impact on our overall business model over time, which is largely digitally focused.   Although we were impacted by the general deferral in advertising spending by brands and sponsors resulting from the COVID-19 pandemic for a significant portion of fiscal year 2020, we reported significant quarter over quarter growth in revenues in the second half of fiscal 2020, and throughout 2021 and we expect to continue to expand our advertising revenue and revenue from the sale of our proprietary and third-party user generated content in future periods, as we continue to expand our advertising inventory, viewership and related sales activities.   Notwithstanding the growth in revenues and in user engagement metrics discussed herein, the broader impact of the ongoing COVID-19 pandemic on our results of operations and overall financial performance remains uncertain. The COVID-19 pandemic may continue to impact our revenue and revenue growth in future periods, and is likely to continue to adversely impact certain aspects of our business and our partners, including advertising demand, retail expansion plans and our in-person esports experiences.    Results of Operations for the Fiscal Years Ended December 31, 2021 and 2020   The following table sets forth a summary of our results of operations for the fiscal years ended December 31, 2021 and 2020:       Fiscal Year       2021     2020   REVENUES   $ 11,672,000     $ 2,064,000   COST OF REVENUES     6,547,000       856,000   GROSS PROFIT     5,125,000       1,208,000                     OPERATING EXPENSES                 Selling, marketing and advertising     9,670,000       5,490,000   Engineering, technology and development     11,100,000       6,821,000   General and administrative     9,435,000       7,640,000   Total operating expenses     30,205,000       19,951,000                     NET LOSS FROM OPERATIONS     (25,080,000 )     (18,743,000 ) OTHER INCOME (EXPENSE), NET     1,221,000       11,000   LOSS BEFORE BENEFIT FROM INCOME TAXES     (23,859,000 )         Benefit from income taxes     3,111,000       -   NET LOSS   $ (20,748,000 )   $ (18,732,000 )     -37- Table of Contents   Comparison of the Results of Operations for the Fiscal Years Ended December 31, 2021 and 2020   Revenue         Fiscal Year                       2021     2020     $ Change     % Change   Advertising and sponsorships   $ 8,005,000     $ 1,170,000     $ 6,835,000     584 % Content     2,264,000       735,000       1,529,000       208 % Direct to consumer     1,403,000       159,000       1,244,000       782 %     $ 11,672,000     $ 2,064,000     $ 9,608,000       466 %   Revenue for fiscal year 2021 increased $9,608,000 or 466%, compared to fiscal year 2020. For fiscal year 2021, one customer accounted for 12% (12% advertising and sponsorships) of revenues. For fiscal year 2020, four customers accounted for 49% (28% advertising and sponsorships; 21% content sales) of revenues.   The increase in revenues for fiscal year 2021 primarily reflects (1) significant increases in direct sales and programmatic advertising revenues, on our owned and operated, and our partner’s digital channels, reflecting increasing monetization of our expanding premium advertising inventory, relative to the prior year comparable period, (2) increases in revenues generated from our live stream, remote production and broadcast related content sales activities, and (3) increases in direct to consumer revenues, primarily driven by digital goods sales revenues from our Mobcrush acquisition related Mineville and Pixel Paradise Microsoft Minecraft server properties. The increase reflects partial fiscal year 2021 revenues related to our 2021 Acquisitions, from the respective closing dates of the applicable acquisition transactions to December 31, 2021, totaling approximately $5,733,000. Excluding the impact of 2021 Acquisitions, total revenues for fiscal year 2021 increased approximately $3,874,000, or 188%.   Advertising and sponsorship revenues for fiscal year 2021 increased $6,835,000, or 584%, primarily due to a 95% increase in our direct sales advertising revenue generating advertisers, driven in part by partial fiscal year 2021 revenue from 2021 Acquisition related direct advertising sales, from the respective closing dates of the applicable acquisition transactions to December 31, 2021, and a 250% increase in the average revenue per advertiser recognized during fiscal year 2021, as compared to the prior year. Advertising and sponsorship revenues for fiscal year 2021 included 2021 Acquisition related advertising and sponsorship revenues totaling approximately $4,207,000.   The increase in advertising and sponsorship revenues for fiscal year 2021 also reflected an increase in programmatic display and video advertising revenues primarily within our Minecraft digital property, Minehut, of $212,000, or 111% compared to the prior year.   Content-related revenues for fiscal year 2021 increased $1,529,000, or 208%. The change was primarily driven by an increase in our live stream, remote production, broadcast and gameplay related content sales activities during fiscal year 2021, including broadcast and/or gameplay related projects with TikTok, Twitch Interactive, Inc., Endemol Shine North America (a division of Banijay), AVY Entertainment (DBA Tempo Storm), Aftershock Media Group, Topgolf Entertainment Group, Inc., Hitbox, LLC d/b/a Next Generation Esports, and the professional esports organization, Gen.G. The increase in live stream, remote production, broadcast and gameplay related revenues reflects a 90% increase in the number of related customers and a 206% increase in revenue per customer for fiscal year 2021, compared to the prior year.   Direct to consumer revenues for fiscal year 2021 increased $1,244,000, or 782% compared to the prior year.   Direct to consumer revenues, prior to the acquisition of Mobcrush, were primarily comprised of revenues generated from our Minehut digital property, which provides various Minecraft server hosting services on a subscription basis and other digital goods to the Minecraft gaming community. Minehut revenues, while in the early stages of development, continue to expand, increasing $204,000, or 128%, in fiscal year 2021, compared to the prior year.   Our Mobcrush subsidiary generates direct to consumer in-game platform sales revenues through the sale of digital goods, including cosmetic items, durable goods, player ranks and game modes, within our Mineville and Pixel Paradise gaming servers, which leverage the flexibility of the Microsoft Minecraft Bedrock platform, are powered by our InPvP cloud architecture technology, and represent two of the seven official Microsoft Minecraft partner servers. Revenue is generated when transactions are facilitated between Microsoft and the end user, either via in-game currency or cash. Direct to consumer revenues for fiscal year 2021 included Mineville and Pixel Paradise revenues totaling $1,040,000.   -38- Table of Contents   Although we were impacted by the general deferral in advertising spending by brands and sponsors resulting from the COVID-19 pandemic throughout fiscal year 2020, we reported significant quarterly revenue growth in the second half of fiscal 2020 and throughout 2021, compared to the comparable prior year periods, and we expect to continue to expand our advertising revenue and revenue from the sale of our proprietary and user generated content in future periods, as we continue to expand our premium advertising inventory, viewership and related direct sales activities.   Cost of Revenues       Fiscal Year                       2021     2020     $ Change     % Change   Cost of revenue   $ 6,547,000     $ 856,000     $ 5,691,000       665 %   Cost of revenues for fiscal year 2021 increased $5,691,000, or 665% compared to the $9,608,000, or 466% increase in related revenues, respectively, over the same period. The increase in cost of revenues was primarily due to the significant increase in related revenues for the periods presented. The greater-than-proportionate increase in cost of revenues was primarily due to the inclusion of seven months of Mobcrush-related direct sales advertising revenues with higher direct cost profiles during fiscal year 2021.   Cost of revenues includes direct costs incurred in connection with the satisfaction of performance obligations under our revenue arrangements including internal and third-party engineering, creative, content, broadcast and other personnel, talent and influencers, developers, content capture and production services, direct marketing, cloud services, software, prizing, and revenue sharing fees. Cost of revenues fluctuate period to period based on the specific programs and revenue streams contributing to revenue each period and the related cost profile of our physical and digital experiences, and advertising and content sales activities occurring each period.   Operating Expenses       Fiscal Year                       2021     2020     $ Change     % Change   Selling, marketing and advertising   $ 9,670,000     $ 5,490,000     $ 4,180,000       76 % Engineering, technology and development     11,100,000       6,821,000       4,279,000       63 % General and administrative     9,435,000       7,640,000       1,795,000       23 % Total operating expenses   $ 30,205,000     $ 19,951,000     $ 10,254,000       51 %   Amortization expense for the periods presented was included in the following operating expense line items:       Fiscal Year                       2021     2020     $ Change     % Change   Sales, marketing and advertising   $ 1,180,000     $ -     $ 1,180,000       100 % Engineering, technology and development     1,556,000       1,140,000       416,000       36 % General and administrative     451,000       119,000       332,000       279 % Total amortization expense   $ 3,187,000     $ 1,259,000     $ 1,928,000       153 %   Noncash stock-based compensation expense for the periods presented was included in the following operating expense line items:       Fiscal Year                       2021     2020     $ Change     % Change   Selling, marketing and advertising   $ 934,000     $ 849,000     $ 85,000       10 % Engineering, technology and development     288,000       254,000       34,000       13 % General and administrative     1,159,000       901,000       258,000       29 % Total noncash stock-based compensation expense   $ 2,381,000     $ 2,004,000     $ 377,000       19 %   Selling, Marketing and Advertising . The increase in selling, marketing and advertising expense for fiscal year 2021 was primarily due to an increase in personnel costs associated with the acquisition of Mobcrush and the integration of a total of 26 former Mobcrush employees, effective June 1, 2021, eleven of which are included in our sales and marketing functions. In addition to the impact on personnel costs arising from the acquisition of Mobcrush, the change reflects a net increase since the end of the prior year of approximately five net full-time employees in connection with the increase in our in-house direct sales and marketing team, focused on monetization and personnel in our creative and content functions. The increase in selling, marketing and advertising expense also included the amortization of partner, customer, and advertiser-related intangible assets acquired in connection with the 2021 Acquisitions, totaling $1,180,000. The change also reflects an increase of $377,000 in digital marketing expense for fiscal year 2021, compared to the prior year, during which lower marketing costs were incurred due to the impact of the COVID-19 pandemic.   -39- Table of Contents   Engineering, Technology and Development.  Components of our platform are available on a “free to use,” “always on basis,” and are utilized and offered as an audience acquisition tool, as a means of growing our audience, engagement, viewership, players and community. Engineering, technology and development related operating expenses includes the costs described below, incurred in connection with our audience acquisition and viewership expansion activities. Engineering, technology and development related operating expenses include (i) allocated internal engineering personnel expenses, including salaries, noncash stock compensation, taxes and benefits, (ii) third-party contract software development and engineering expenses, (iii) internal use software cost amortization expense, and (iv) technology platform related cloud services, broadband and other platform expenses, incurred in connection with our audience acquisition and viewership expansion activities, including tools and product offering development, testing, minor upgrades and features, free to use services, corporate information technology and general platform maintenance and support. Capitalized internal use software development costs are amortized on a straight-line basis over the software’s estimated useful life.    The net increase in engineering, technology and development costs for fiscal year 2021 was due to an increase in cloud services and other technology platform costs totaling $1,412,000, which primarily reflects the impact of the surge in engagement across our digital properties occurring subsequent to the first quarter of 2020 and continuing into fiscal year 2021. The change also reflects an increase in engineering, technology and development costs related to the 2021 Acquisitions totaling $1,244,000, primarily comprised of cloud services and platform consulting services costs. The change also reflects the impact of the increase in product and engineering personnel, totaling 18 full-time employees, primarily in connection with our 2021 Acquisitions, as described elsewhere herein. The increase also included the amortization of developed technology-related intangible assets acquired in connection with the 2021 Acquisitions, totaling $631,000. Fiscal year 2020 engineering, technology and development costs included the acceleration of amortization, totaling $413,000, related to the termination of a license agreement in the first quarter of 2020.   General and Administrative. General and administrative expense for the periods presented was comprised of the following:       Fiscal Year                       2021     2020     $ Change     % Change   Personnel costs   $ 2,460,000     $ 2,280,000     $ 180,000       8 % Office and facilities     175,000       247,000       (72,000 )     (29 )% Professional fees     1,330,000       704,000       626,000       89 % Stock-based compensation     1,158,000       901,000       257,000       29 % Depreciation and amortization     524,000       229,000       295,000       129 % Other     3,788,000       3,366,000       422,000       13 % Total general and administrative expense   $ 9,435,000     $ 7,727,000     $ 1,708,000       22 %   A summary of the main drivers of the change in general and administrative expenses for the periods presented is as follows:     ● Office and facilities costs decreased due to the termination of the leases for 75% of our office space in Santa Monica, California, and converting to a fully-remote work structure as of June 2020.     ● Professional fees costs increased $626,000 or 89%, primarily due to legal, audit, advisory and financial and tax due diligence professional fees, totaling $512,000, incurred in connection with our 2021 Acquisitions, as described elsewhere herein. In accordance with the acquisition method of accounting, direct acquisition-related costs incurred are expensed as incurred in the period that the services are performed.     ● Noncash stock compensation expense included in general and administrative expense increased primarily due to the net annual and discretionary grant of incentive equity-based awards to employees during fiscal year 2021, in connection with our board-approved compensation and retention programs. The increase was partially offset by the completion of the vesting and related expensing of certain previously-granted nonemployee common stock purchase warrants and other fiscal year 2019 acquisition related equity-based compensation in the second quarter of 2020, resulting in a decrease in warrant related stock compensation of $424,000 for fiscal year 2021, compared to the prior fiscal year.     ● Depreciation and amortization expense increased due primarily to the amortization of trademark, influencer and developer related intangible assets acquired in connection with the acquisitions of Mobcrush and Bloxbiz in fiscal year 2021, totaling $318,000.     ● Other general and administrative expenses increased $422,000, or 13%, primarily due to an increase in proxy and annual shareholder meeting expenses, including legal, proxy solicitation, printing and mailing costs, totaling $241,000, incurred in connection with our 2021 Annual Shareholders Meeting, which included, among other proposals, our proposal requesting stockholder approval of the issuance of Common Stock to Mobcrush in connection with the acquisition of Mobcrush. The increase also reflects an increase in general and administrative software costs, including Mobcrush-related general and administrative software costs totaling $224,000. The increase was partially offset by a slight decrease in D&O insurance premiums for the 2021-2022 policy period.   Other Income (Expense)   In May 2020, we entered into a forgivable loan from the U. S. Small Business Administration (“SBA”) resulting in net proceeds of approximately $1.2 million pursuant to the Paycheck Protection Program (“PPP”) enacted by Congress under the Coronavirus Aid, Relief, and Economic Security Act (15 U.S.C. 636(a)(36)) (the “CARES Act”) administered by the SBA (the “PPP Loan”). To facilitate the PPP Loan, we entered into a note payable agreement with a third-party lender (the “PPP Loan Agreement”). In May 2021, the PPP loan and accrued interest was forgiven pursuant to the terms and conditions of the PPP Loan Agreement and the provision of the Cares Act. Upon forgiveness, and legal release, we reduced the liability by the amount forgiven, totaling $1,213,000 and recorded a gain on extinguishment in the accompanying statement of operations for fiscal year 2021.   Benefit for Income Taxes   Release of Valuation Allowance . Since inception, we have maintained a full valuation allowance against our net deferred tax assets. The net deferred tax liability resulting from the acquisition of Mobcrush created a source of income to utilize against our existing net deferred tax assets. Under the acquisition method of accounting, the impact on the acquiring company’s deferred tax assets is recorded outside of acquisition accounting. Accordingly, the valuation allowance on a portion of the Company’s net deferred tax assets was released, resulting in an income tax benefit of approximately $3,073,000, recorded as a credit to income tax expense for fiscal year 2021. The offsetting amounts reduced net deferred tax liabilities, $3,073,000 of which reduced the net deferred tax liability established in connection with the application of the acquisition method of accounting for the acquisition of Mobcrush.   -40- Table of Contents   Liquidity and Capital Resources   General   Cash and cash equivalents totaled approximately $14.5 million and $7.9 million at December 31, 2021 and 2020, respectively. The change in cash and cash equivalents for the periods presented reflects the impact of operating, investing and financing cash flow related activities as described below.   To date, our principal sources of capital used to fund our operations have been the net proceeds we received from sales of equity securities. Our management believes that our cash balances and capital raising facilities in place, as described below, will be sufficient to meet our cash requirements through at least March 2023. We may, however, encounter unforeseen difficulties that may deplete our capital resources more rapidly than anticipated.   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 $20.7 million and $18.7 million during the years ended December 31, 2021 and 2020, respectively, and had an accumulated deficit of $125.3 million as of December 31, 2021. For the years ended December 31, 2021 and 2020, net cash used in operating activities totaled $22.7 million and $14.9 million, respectively.   As of December 31, 2021, the Company had cash and cash equivalents of approximately $14.5 million. In addition, as further described below under the heading “Recent Developments,” as well as Item 9B, “Other Information” and  at Note 11 to the consolidated financial statements contained elsewhere in this Report, on March 25, 2022, we entered into a common stock purchase agreement (the “Purchase Agreement”) with Tumim Stone Capital, LLC (“Tumim”). Pursuant to the Purchase Agreement, the Company has the right, but not the obligation, to sell to Tumim, and Tumim is obligated to purchase, up to $10,000,000 of newly issued shares (the “Total Commitment”) of the Company’s common stock, from time to time during the term of the Purchase Agreement, subject to certain limitations and conditions (the “Tumim Offering”).   The Company has used and will continue to use significant capital for the growth and development of its business. The Company has grown significantly in fiscal year 2021 through organic and inorganic growth activities, including the expansion of our premium advertising inventory and year over year increases in recognized revenues across our three primary revenue streams, as reflected elsewhere herein. In 2022, we are focused on the continued expansion of our service offerings and revenue growth opportunities through internal development, collaborations, and through potential strategic acquisitions.   The Company considers historical operating results, 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, if necessary, the Company will be able to raise additional equity or debt financing on acceptable terms. If one or more of these factors do not occur as expected, it could cause a reduction or delay of its business activities, sales of material assets, default on its obligations, or forced insolvency. The accompanying financial statements do not contain any adjustments which might be necessary if the Company were unable to continue as a going concern. Excluding the funding facilities described herein, 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 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.   Recent Developments   Common Stock Purchase Agreement   On March 25, 2022, we entered into the Purchase Agreement with Tumim, pursuant to which we have the right, but not the obligation, to sell to Tumim, and Tumim is obligated to purchase up to the Total Commitment from time to time during the term of the Purchase Agreement. As consideration for Tumim’s commitment to purchase shares of common stock under the Purchase Agreement, we issued to Tumim 50,000 shares of common stock, valued at $100,000, following the execution of the Purchase Agreement (the “Commitment Shares”).   The Purchase Agreement initially precludes us from issuing and selling more than 7,361,833 shares of our common stock, including the Commitment Shares, which number equals 19.99% of our common stock issued and outstanding as of March 25, 2022, unless we obtain stockholder approval to issue additional shares, or unless certain exceptions apply. In addition, a beneficial ownership limitation in the agreement initially limits us from directing Tumim to purchase shares of common stock if such purchases would result in Tumim beneficially owning more than 4.99% of the then-outstanding shares of our common stock (subject to an increase to 9.99% at Tumim’s option upon at least 61 calendar days’ notice). See Item 9B, “Other Information” below and Note 11 to the consolidated financial statements contained elsewhere in this Report for additional information about the Tumim Offering.   -41- Table of Contents   Equity Distribution Agreement   On September 3, 2021, we entered into an Equity Distribution Agreement (the “Sales Agreement”) with two investment banks (the “Agents”), pursuant to which we may offer and sell, from time to time, through the Agents (the “ATM Offering”), up to $75 million of its shares of our common stock (the “Shares”). Any Shares offered and sold in the ATM Offering will be issued pursuant to our Registration Statement on Form S-3 filed with the Securities and Exchange Commission (the “SEC”) on September 7, 2021.   Subject to the terms and conditions of the Sales Agreement, the Agents will use their commercially reasonable efforts to sell the Shares from time to time, based upon our instructions. Under the Sales Agreement, the Agents may sell the Shares by any method permitted by law deemed to be an “at-the-market” offering as defined in Rule 415 promulgated under the Securities Act 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 our common stock or to or through a market maker. The Agents may also sell Shares in privately negotiated transactions, provided that the Agents receive our prior written approval.   We have no obligation to sell any of the Shares, and may at any time suspend offers under the Sales Agreement. The ATM Offering will terminate 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) November 16, 2022, one year from the date that the Form S-3 was declared effective by the SEC.   Under the terms of the Sales Agreement, the Agents will be entitled to an aggregate commission at a fixed rate of 3.0% of the gross sales price of Shares sold under the Sales Agreement.   We intent to use the net proceeds from any “at-the-market” offering, if any, primarily for working capital and general corporate purposes, including sales and marketing activities, product development and capital and acquisition related expenditures. We may also use a portion of the net proceeds for the acquisition of, or investment in, technologies, solutions or businesses. As of the date of this Report, there have been no sales of any Shares in connection with the ATM Offering.     Cash Flows for the Fiscal Years Ended December 31, 2021 and 2020   The following table summarizes the change in cash and cash equivalents for the periods presented:       Fiscal Year       2021     2020                     Net cash used in operating activities   $ (22,707,000 )   $ (14,876,000 ) Net cash used in investing activities     (4,203,000 )     (1,190,000 ) Net cash provided by financing activities     33,501,000       15,566,000   Increase (decrease) in cash and cash equivalents     6,591,000       (500,000 ) Cash and cash equivalents, at beginning of period     7,942,000       8,442,000   Cash and cash equivalents, at end of period   $ 14,533,000     $ 7,942,000     Cash Flows from Operating Activities. Net cash used in operating activities for fiscal year 2021 primarily reflected our net GAAP loss for fiscal year 2021 of $(20,748,000), net of adjustments to reconcile net GAAP loss to net cash used in operating activities of $1,959,000, which included $2,381,000 of noncash stock compensation charges, depreciation and amortization of $3,323,000, a noncash gain totaling $1,213,000 in connection with the forgiveness of our PPP Loan in May 2021 and changes in valuation allowance and deferred income taxes totaling $3,073,000. Changes in working capital primarily reflected the impact of the settlement of receivables and payables in the ordinary course.   Net cash used in operating activities for fiscal year 2020 primarily reflected our net GAAP loss for fiscal year 2020 of $(18,732,000), net of adjustments to reconcile net GAAP loss to net cash used in operating activities of $3,856,000, which included $2,004,000 of noncash stock compensation charges and depreciation and amortization of $1,368,000. Changes in working capital primarily reflected the impact of the settlement of receivables and payables in the ordinary course.   Cash Flows from Investing Activities. Cash flows from investing activities were comprised of the following for the periods presented:       Fiscal Year       2021     2020   Cash acquired in connection with Mobcrush Acquisition, net   $ 586,000     $ -   Cash paid in connection with Bannerfy Acquisition, net     (497,000 )     -   Cash paid in connection with Bloxbiz Acquisition, net     (3,000,000 )     -   Purchase of property and equipment     (22,000 )     (9,000 ) Capitalization of software development costs     (1,065,000 )     (1,035,000 ) Acquisition of other intangible and other assets     (205,000 )     (146,000 ) Net cash used in investing activities   $ (4,203,000 )   $ (1,190,000 )   -42- Table of Contents   Acquisition of Mobcrush.   On June 1, 2021, we completed the acquisition of Mobcrush, in an all-common stock transaction, pursuant to which we acquired all of the issued and outstanding shares of Mobcrush. At closing, the Company issued to the former stockholders of Mobcrush an aggregate total of 12,067,571 shares of Company common stock and reserved an aggregate total of 514,633 shares of our common stock for issuance pursuant to stock options to be granted to Mobcrush employees retained in connection with the acquisition of Mobcrush, resulting in a total of 12,582,204 shares of Company common stock issued and reserved as consideration for the acquisition of Mobcrush. Upon completion of the merger, Mobcrush became a wholly-owned subsidiary of the Company. Refer to Note 5 to the consolidated financial statements herein for additional information.   Acquisition of Bannerfy, LTD.   On August 24, 2021, the Company completed the acquisition of Bannerfy, pursuant to which the Company acquired all of the issued and outstanding common shares of Bannerfy. Pursuant to the Share Purchase Agreement, dated August 11, 2021 (the “Bannerfy Purchase Agreement”), the Company paid initial  consideration of $2.45 million (the “Bannerfy Closing Consideration”), as follows: (i) $525,000 in the form of a cash payment, and (ii) $1.925 million in the form of shares of the Company’s common stock at a price per share of $4.10, the closing price of the Company’s common stock on the date of the Bannerfy Purchase Agreement, as reported on the Nasdaq Capital Market. Pursuant to the terms of the Bannerfy Purchase Agreement, $275,000 of the Bannerfy Closing Consideration (the “Holdback Amount”), was withheld from the Bannerfy Closing Consideration to satisfy any indemnifiable Losses incurred by the Company (as defined in the Bannerfy Purchase Agreement) prior to the first anniversary of the Bannerfy Closing Date. In the event the Company incurs no indemnifiable Losses prior to the first anniversary of the Bannerfy Closing Date, the Company will pay the selling parties the Holdback Amount as follows: (i) $55,000 payable in the form of cash, and (ii) approximately $220,000 in the form of shares of the Company’s common stock at $4.10 per share.   In accordance with the Bannerfy Purchase Agreement, all remaining portions of the Bannerfy Purchase Price subsequent to the payment of the Bannerfy Closing Consideration, up to approximately $4.55 million, is payable upon the achievement of certain revenue and gross profit thresholds for the remainder of the 2021 fiscal year, and each of the fiscal years ending December 31, 2022, and December 31, 2023.    Acquisition of Bloxbiz Co.   On October 4, 2021 (“Bloxbiz Closing Date”), the Company entered into an Asset Purchase Agreement (the “Bloxbiz Purchase Agreement”) with Bloxbiz Co. and the founders of Bloxbiz (the “Founders”), pursuant to which the Company acquired (i) substantially all of the assets of Bloxbiz, and (ii) the personal goodwill of the Founders regarding Bloxbiz’s business, (the “Bloxbiz Acquisition”). The consummation of the Bloxbiz Acquisition (the “Bloxbiz Closing”) occurred simultaneously with the execution of the Bloxbiz Purchase Agreement on the Bloxbiz Closing Date.   At closing, the Company paid an aggregate total of $6.0 million to Bloxbiz and the Founders, of which $3.0 million was paid in the form of cash and $3.0 million was paid in the form of shares of the Company’s common stock, at a per share price of $2.91, the closing price of the Company’s common stock on the Bloxbiz Closing Date, as reported on the Nasdaq Capital Market.   Pursuant to the terms and subject to the conditions of the Bloxbiz Purchase Agreement, up to aggregate amount $11.5 million will be payable to Bloxbiz and the Founders in connection with the achievement of certain revenue milestones for the period from the Bloxbiz Closing Date until December 31, 2022 and for the fiscal year ending December 31, 2023 (the “Bloxbiz Contingent Consideration”). The Bloxbiz 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 Bloxbiz Purchase Agreement.   Capitalized Internal Use Software Costs . Software development costs incurred to develop internal-use software during the application development stage are capitalized and amortized on a straight-line basis over the software’s estimated useful life, which is generally three years. Software development costs incurred during the preliminary stages of development are charged to expense as incurred. 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.   -43- Table of Contents   Cash Flows from Financing Activities . Cash flows from financing activities were comprised of the following for the periods presented:       Fiscal Year       2021     2020                     Proceeds from issuance of common stock, net of issuance costs   $ 33,390,000     $ 14,356,000   Proceeds from notes payable     -       1,200,000   Proceeds from common stock options and purchase warrant exercises     111,000       10,000   Net cash provided by financing activities   $ 33,501,000     $ 15,566,000     Equity Financings   In January 2021, the Company issued 3,076,924 shares of common stock at a price of $2.60 per share, raising aggregate net proceeds of approximately $8.0 million, after deducting offering expenses totaling $73,000.   In February 2021, the Company issued 2,926,830 shares of common stock at a price of $4.10 per share, raising aggregate net proceeds of approximately $12.0 million, after deducting offering expenses totaling $70,000.   In March 2021, the Company issued 1,512,499 shares of common stock at a price of $9.00 per share, raising aggregate net proceeds of approximately $13.6 million, after deducting offering expenses totaling $72,000.   The offerings described above were made pursuant to an effective shelf Registration Statement on Form S-3, which was originally filed with the SEC on April 10, 2020 (File No. 333-237626). The net proceeds from these offerings are intended to be used for working capital and other general corporate purposes, including sales and marketing activities, product development and capital expenditures. The Company may also use a portion of the net proceeds for the acquisition of, or investment in, technologies, solutions or businesses.   In August 2020, the Company issued 4,540,541 shares of common stock at a price of $1.85 per share, raising aggregate net proceeds of approximately $7.6 million, after deducting placement agent fees of $588,000 and other offering expenses totaling $180,000. The offering was conducted pursuant to the Company’s effective Registration Statement on Form S-1 (File No. 333-248248), and a related registration statement filed pursuant to Rule 462(b) under the Securities Act. In addition, pursuant to the terms of the related underwriting agreement, the Company granted to the underwriter a 30-day over-allotment option to purchase up to an additional 681,081 shares of common stock at the same public offering price per share, less discounts and commissions, which was partially exercised in September 2020, resulting in the issuance of 448,440 shares and net proceeds of $771,000, after deducting placement agent fees of $58,000.    In May 2020, the Company issued 1,825,000 shares of common stock at a price of $3.50 per share, raising aggregate net proceeds of approximately $6.0 million, after deducting placement agent fees of $319,000 and other offering expenses totaling $116,000, pursuant to a registered direct offering.   On May 4, 2020, we entered into a forgivable loan from the SBA resulting in net proceeds of approximately $1.2 million pursuant to the PPP enacted by Congress under the CARES Act administered by the SBA. To facilitate the PPP Loan, we entered into a note payable agreement with a third-party lender. In May 2021, the PPP loan was forgiven pursuant to the terms and conditions of the PPP Loan Agreement and the provision of the CARES Act. Upon forgiveness, and legal release, we reduced the liability by the amount forgiven, totaling $1,213,000 and recorded a gain on extinguishment in the accompanying statement of operations for fiscal year 2021.   -44- Table of Contents   Key Performance Indicators.   The primary KPIs used by management on a consolidated basis to assess our progress and drive revenue growth, which is also a key performance indicator, are as follows:     2020 2021 Growth Views and impressions (1) 2.0 billion 11.2 billon 5.5x Increase Registered users (2) 2.9 million 5.0 million 1.7x Increase Engagement hours (3) 72.2 million 105.0 million 1.5x Increase ____________________   (1)  Views and impressions represent number of views of our video content which is distributed across multiple platforms. (2)  Registered users represent individuals who have registered on our platform, providing applicable identifying information, that have engaged with our platform at some point. (3)  Engagement hours represent time spent engaging with Super League in the form of participating in our experiences, viewing our content, and/or spending time on our website.   The growth in KPI’s in fiscal year 2021 reflects the impact of the inorganic growth resulting from our 2021 Acquisitions, as well as organic growth associated with our previously existing digital properties. This continued growth in KPIs results in the growth of our total and monetizable advertising inventory, which we believe will drive an increasing number of brands and advertisers to our audience and platform.    Contractual Obligations   As of December 31, 2021, except as described below, we had no significant commitments for capital expenditures, nor do we have any committed lines of credit,  other committed funding or long-term debt, and no guarantees.   In June 2020, we terminated the lease for the majority of our corporate headquarters (approximately 4,965 square feet). As of December 31, 2021 we maintain approximately 3,200 square feet of office space, 1,650 square feet of which is on a month-to-month basis, and 1,550 square feet of which is subject to a two-year lease, commencing on August 1, 2021, at a combined rate of approximately $11,800 per month.   Off-Balance Sheet Commitments and Arrangements   We have not entered into any off-balance sheet financial guarantees or other off-balance sheet commitments to guarantee the payment obligations of any third parties. We have not entered into any derivative contracts that are indexed to our shares and classified as stockholder’s equity or that are not reflected in our consolidated financial statements included elsewhere herein. Furthermore, we do not have any retained or contingent interest in assets transferred to an unconsolidated entity that serves as credit, liquidity or market risk support to such entity. We do not have any variable interest in any unconsolidated entity that provides financing, liquidity, market risk or credit support to us or engages in leasing, hedging or product development services with us.   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.   Recent Accounting Pronouncements   Refer to Note 2 to the accompany consolidated financial statements contained elsewhere in this Report.   -45- Table of Contents   Critical Accounting Estimates   Our consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America. Preparation of our financial statements requires management to make judgments and estimates. Some accounting policies have a significant impact on amounts reported in our financial statements. The SEC has defined a company’s critical accounting policies as the ones that are most important to the portrayal of a company’s financial condition and results of operations, and which require a company to make its most difficult and subjective judgments. A summary of significant accounting policies and a description of accounting policies that are considered critical may be found in the audited financial statements and notes thereto included elsewhere herein. The following accounting policies were identified during the periods presented, based on activities occurring during the periods presented, as critical and requiring significant judgments and estimates.   Revenue Recognition   Revenue is recognized when we transfer promised goods or services to customers in an amount that reflects the consideration to which we expect to be entitled in exchange for those goods and services. In this regard, revenue is recognized when: (i) the parties to the contract have approved the contract (in writing, orally, or in accordance with other customary business practices) and are committed to perform their respective obligations; (ii) the entity can identify each party’s rights regarding the goods or services to be transferred; (iii) the entity can identify the payment terms for the goods or services to be transferred; (iv) the contract has commercial substance (that is, the risk, timing, or amount of the entity’s future cash flows is expected to change as a result of the contract);and (v) it is probable that the entity will collect substantially all of the consideration to which it will be entitled in exchange for the goods or services that will be transferred to the customer.   Transaction prices are based on the amount of consideration to which we expect to be entitled in exchange for transferring promised goods or services to a customer, excluding amounts collected on behalf of third parties, if any. We consider the explicit terms of the revenue contract, which are typically written and executed by the parties, our customary business practices, the nature, timing, and the amount of consideration promised by a customer, in connection with determining the transaction price for our revenue arrangements.   We report revenue on a gross or net basis based on management’s assessment of whether we act as a principal or agent in the transaction and is evaluated on a transaction by transaction basis. To the extent we act as the principal, revenue is reported on a gross basis net of any sales tax from customers, when applicable. The determination of whether we act as a principal or an agent in a transaction is based on an evaluation of whether we control the good or service prior to transfer to the customer. Where applicable, we have determined that it acts as the principal in all of its advertising and sponsorships, content and direct to consumer revenue streams, except in situations where we utilize a reseller partner with respect to direct advertising sales arrangements.   We generate revenues from (i) advertising, serving as a marketing channel for brands and advertisers to reach their target audiences of gamers across our network, (ii) content, curating and distributing esports and gaming-centric entertainment content for our own network of digital channels and media and entertainment partner channels and (iii) direct to consumer offers including digital subscriptions, in-game digital goods, and gameplay access fees.   Revenue billed or collected in advance is recorded as deferred revenue until the event occurs or until applicable performance obligations are satisfied.   Advertising and Sponsorships:   Advertising revenue primarily consists of direct sales activity along with sales of programmatic display and video advertising units to third-party advertisers and exchanges. Advertising arrangements typically include contract terms for time periods ranging from several days to several weeks in length.   For advertising arrangements that include performance obligations satisfied over time, customers typically simultaneously receive and consume the benefits under the arrangement as we satisfy our performance obligations, over the applicable contract term. As such, revenue is recognized over the contract term based upon estimates of progress toward complete satisfaction of the contract performance obligations (typically utilizing a time, effort or delivery-based method of estimation). Revenue from shorter term advertising arrangements that provide for a contractual delivery or performance date is recognized when performance is substantially complete and or delivery occurs. Payments are typically due from customers during the term of the arrangement for longer-term campaigns, and once delivery is complete for shorter-term campaigns.   Sponsorship revenue arrangements may include: exclusive or non-exclusive title sponsorships, marketing benefits, official product status exclusivity, product visibly and additional infrastructure placement, social media rights, rights to on-screen activations and promotions, display material rights, media rights, hospitality and tickets and merchandising rights. Sponsorship revenues also include revenues pursuant to arrangements with brand and media partners, retail venues, game publishers and broadcasters that allow our partners to run amateur esports experiences, and or capture specifically curated gameplay content that is customized for our partners’ distribution channels. Sponsorship arrangements typically include contract terms for time periods ranging from several weeks or months to terms of twelve months in length.   -46- Table of Contents   For sponsorship arrangements that include performance obligations satisfied over time, customers typically simultaneously receive and consume the benefits under the agreement as we satisfy our performance obligations, over the applicable contract term. As such, revenue is recognized over the contract term based upon estimates of progress toward complete satisfaction of the contract performance obligations (typically utilizing a time, effort or delivery-based method of estimation). Payments are typically due from customers during the term of the arrangement.   Revenue from sponsorship arrangements for one-off branded experiences and/or the development of content tailored specifically for our partners’ distribution channels that provide for a contractual delivery or performance date, is recognized at a point in time, when performance is substantially complete and or delivery occurs.   Content:   Content-related revenues are generated in connection with our curation and distribution of esports and entertainment content for our own network of digital channels and media and entertainment partner channels. We distribute three primary types of content for syndication and licensing, including: (1) our own original programming content, (2) user generated content (“UGC”), including online gameplay and gameplay highlights, and (3) the creation of content for third parties utilizing our remote production and broadcast technology.   For content arrangements that include performance obligations satisfied over time, customers typically simultaneously receive and consume the benefits under the arrangement as we satisfy our performance obligations, over the applicable contract term. As such, revenue is recognized over the contract term based upon estimates of progress toward complete satisfaction of the contract performance obligations (typically utilizing a time, effort or delivery-based method of estimation). Revenue from shorter-term content sales arrangements that provide for a contractual delivery or performance date is recognized when performance is substantially complete and or delivery occurs. Payments are typically due from customers during the term of the arrangement for longer-term campaigns, and once delivery is complete for shorter-term campaigns.   Direct to Consumer:   Direct to consumer revenues primarily consist of digital subscription fees, in-game digital goods, and gameplay access fees. Subscription revenue is recognized in the period the services are rendered. Payments are typically due from customers at the point of sale.   Platform Generated Sales Transactions . Our Mobcrush subsidiary generates in-game Platform sales revenues via digital goods sold within the platform, including cosmetic items, durable goods, player ranks and game modes, leveraging the flexibility of the Microsoft Minecraft Bedrock platform, and powered by the InPvP cloud architecture technology platform. Revenue is generated when transactions are facilitated between Microsoft and the end user, either via in-game currency or cash.   Revenue for digital goods sold on the platform is recognized when Microsoft (our partner) collects the revenue and facilitates the transaction on the platform. Revenue for such arrangements includes all revenue generated, bad debt, make goods, and refunds of all transactions managed via the platform by Microsoft. The revenue is recognized on a monthly basis. Payments are made to the Company monthly based on the reconciled sales revenue generated.   We make estimates and judgments when determining whether we will collect substantially all of the consideration to which we will be entitled in exchange for the goods or services that will be transferred to the customer. We assess the collectability of receivables based on several factors, including past transaction history and the creditworthiness of our customers. If it is determined that collection is not reasonably assured, amounts due are recognized when collectability becomes reasonably assured, assuming all other revenue recognition criteria have been met, which is generally upon receipt of cash for transactions where collectability may have been an issue. Management’s estimates regarding collectability impact the actual revenues recognized each period and the timing of the recognition of revenues. Our assumptions and judgments regarding future collectability could differ from actual events and thus materially impact our financial position and results of operations.   -47- Table of Contents   Depending on the complexity of the underlying revenue arrangement and related terms and conditions, significant judgments, assumptions and estimates may be required to determine each parties rights regarding the goods or services to be transferred, each parties performance obligations, whether performance obligations are satisfied at a point in time or over time, estimates of completion methodologies, the timing of satisfaction of performance obligations, and the appropriate period or periods in which, or during which, the completion of the earnings process occurs. Depending on the magnitude of specific revenue arrangements, if different judgments, assumptions and estimates are made regarding revenue arrangements in any specific period, our periodic financial results may be materially affected.   Accounting for Business Combinations   Acquisition Method.  Acquisitions that meet the definition of a business under ASC 805, “Business Combinations,” (“ASC 805”) are accounted for using the acquisition method of accounting. Under the acquisition method of accounting, assets acquired, liabilities assumed, contractual contingencies, and contingent consideration, when applicable, are recorded at fair value at the acquisition date. Any excess of the purchase price over the fair value of the net assets acquired is recorded as goodwill. The application of the acquisition method of accounting requires management to make significant estimates and assumptions in the determination of the fair value of assets acquired and liabilities assumed in connection with the allocation of the purchase price consideration to the assets acquired and liabilities assumed. Transaction costs associated with business combinations are expensed as incurred and are included in general and administrative expenses in the consolidated statements of operations. Contingent consideration, if any, is recognized and measured at fair value as of the acquisition date.   Cost Accumulation Model.  Acquisitions that do not meet the definition of a business under ASC 805 are accounted for as an asset acquisition, utilizing a cost accumulation model. Assets acquired and liabilities assumed are recognized at cost, which is the consideration the acquirer transfers to the seller, including direct transaction costs, on the acquisition date. The cost of the acquisition is then allocated to the assets acquired based on their relative fair values. Goodwill is not recognized in an asset acquisition. Direct transaction costs include those third-party costs that can be directly attributable to the asset acquisition and would not have been incurred absent the acquisition transaction.   Contingent consideration, representing an obligation of the acquirer to transfer additional assets or equity interests to the seller if future events occur or conditions are met, is recognized when probable and reasonably estimable. Contingent consideration recognized is included in the initial cost of the assets acquired, with subsequent changes in the recorded amount of contingent consideration recognized as an adjustment to the cost basis of the acquired assets. Subsequent changes are allocated to the acquired assets based on their relative fair value. Depreciation and/or amortization of adjusted assets are recognized as a cumulative catch-up adjustment, as if the additional amount of consideration that is no longer contingent had been accrued from the outset of the arrangement.   Contingent consideration that is paid to sellers that remain employed by the acquirer and linked to future services is generally considered compensation cost and recorded in the statement of operations in the post-combination period.    Goodwill   Goodwill represents the excess of the purchase price of the acquired business over the acquisition date fair value of the net assets acquired. Goodwill is tested for impairment at the reporting unit level (operating segment or one level below an operating segment) on an annual basis (December 31) and between annual tests if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying value. We consider our market capitalization and the carrying value of our assets and liabilities, including goodwill, when performing our goodwill impairment tests. We operate in one reporting segment.   If a potential impairment exists, a calculation is performed to determine the fair value 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.   -48- Table of Contents   When conducting the Company’s annual or interim goodwill impairment assessment, we initially perform a qualitative evaluation of whether it is more likely than not that goodwill is impaired. In evaluating whether it is more likely than not that the fair value of our reporting unit is less than its carrying amount, we consider the guidance set forth in ASC-350 “Intangibles Goodwill and Other,” (“ASC 350”) which requires an entity to assess relevant events and circumstances, including macroeconomic conditions, industry and market considerations, cost factors, financial performance and other relevant events or circumstances. From a qualitative standpoint, we considered the Company’s history of reported losses and negative cash flows from operating activities, along with the downturn in macroeconomic conditions and the broader mid-cap and micro-cap equity markets in late 2021. 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 Bloxbiz on our premium advertising inventory, product offerings to advertisers, current period revenues recognized and future revenue generating opportunities. Given that the Company’s significant growth occurred recently, and the relatively short period of time between the commencement of the downturn in macroeconomic and general equity market conditions as of December 31, 2021, management believes that the reduction in prices of our common stock, consistent with the broader market, is not other-than-temporary and not indicative of any fundamental change in the value or prospects of the underlying business as of the measurement date.   As another data point, the Company also performed a quantitative goodwill impairment analysis, comparing the estimated fair value of the Company’s reporting unit to its carrying or book value as of the current period presented herein. In performing the quantitative analysis, the Company compared the fair value of the reporting unit to its carrying or book value to determine if the fair value of the reporting unit exceeded its carrying value as of the testing date, in which case the standard indicates that goodwill would not be impaired, and no further testing is required. The fair value of a reporting unit refers to the price that would be received to sell the reporting unit as a whole in an orderly transaction between market participants at the measurement date. Quoted market prices in active markets are considered to be the best evidence of fair value and should be used as the basis for fair value measurement, if available.   At December 31, 2021, we reported goodwill of $50.3 million. We utilized the Company’s market capitalization, based on the 30-day volume weighted average (“30-day VWAP”) closing price of the Company’s common stock as of December 31, 2021, multiplied by the number of shares of the Company’s common stock outstanding as of the measurement date, for purposes of estimating the fair value of the Company at December 31, 2021. In management’s estimate, the 30-day VWAP of closing stock prices for our common stock was the best estimate of fair value of the company’s single reporting unit available at the date of testing. Based on the results of the quantitative impairment analysis, the fair value of the Company’s single reporting unit exceeded its carrying value at December 31, 2021 by approximately $11.3 million.   Based on the qualitative analysis and other data points described above,  the Company concluded that goodwill was not “more likely than not” impaired as of December 31, 2021..   As described above, we have significant intangible assets recorded on our consolidated balance sheets. We will continue to evaluate the recoverability of the carrying amount of our intangible assets on an ongoing basis. There can be no assurance that the outcome of such reviews in the future will not result in substantial impairment charges. Impairment assessment inherently involves judgment as to assumptions about expected future cash flows and the impact of market conditions on those assumptions. Future events and changing market conditions may impact our assumptions as to prices, costs, holding periods or other factors that may result in changes in our estimates of future cash flows. Although we believe the assumptions we used in testing for impairment are reasonable, significant changes in any one of our assumptions could produce a significantly different result. The 30-day VWAP of closing stock prices for our common stock subsequent to December 31, 2021, consistent with the broader market, have continued to trend downward. If the decline in our stock price persists throughout the three-month period ending March 31, 2022, we will perform an interim goodwill impairment assessment as of March 31, 2022, consistent with the methodology and approach described above.   Relaxed Ongoing Reporting Requirements   Upon the completion of our initial public offering, we elected to report as an “emerging growth company” (as defined in the JOBS Act) under the reporting rules set forth under the Exchange Act. For so long as we remain an “emerging growth company,” we may take advantage of certain exemptions from various reporting requirements that are applicable to other Exchange Act reporting companies that are not “emerging growth companies,” including but not limited to:     ● not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act;     ● taking advantage of extensions of time to comply with certain new or revised financial accounting standards;     ● being permitted to comply with reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements; and     ● being exempt from the requirement to hold a non-binding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved.   We are subject to ongoing public reporting requirements that are less rigorous than Exchange Act rules for companies that are not “emerging growth companies,” and our stockholders could receive less information than they might expect to receive from more mature public companies.   We expect to take advantage of these reporting exemptions until we are no longer an emerging growth company. We will remain an “emerging growth company” for up to five years, although if the market value of our Common Stock that is held by non-affiliates exceeds $700 million as of any June 30 before that time, we would cease to be an “emerging growth company” as of the following December 31.   ITEM 7A.   QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK   In the ordinary course of our business, we are not currently exposed to market risk of the sort that may arise from changes in interest rates or foreign currency exchange rates, or that may otherwise arise from transactions in derivatives.   The preparation of financial statements in conformity with GAAP requires our management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. The Company’s significant estimates and assumptions include the fair value of the Company’s common stock, stock-based compensation, the recoverability and useful lives of long-lived assets, and the valuation allowance relating to the Company’s deferred tax assets.   -49- Table of Contents