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What changed in Super League Enterprise, Inc.'s 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of Super League Enterprise, Inc.'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+525 added−410 removedSource: 10-K (2024-04-15) vs 10-K (2023-03-31)

Top changes in Super League Enterprise, Inc.'s 2023 10-K

525 paragraphs added · 410 removed · 247 edited across 6 sections

Item 1. Business

Business — how the company describes what it does

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Biggest changeOther notable trends that amplify these statistics: ● The rise of metaverse, open-world gaming as preferred social channels that go way beyond the traditional concept of gaming; ● The democratization of content creation, launching self-produced social content platforms and new creator economies; ● The further disaggregation of content and increasing underperformance of traditional digital advertising channels forcing advertisers to find new solutions; ● With smarter screens, an increasing consumer expectation for more personalized, customized and interactive web experiences; ● Cross-generational reach of gaming as a lifestyle trend placing it at the intersection of pop culture, cutting broadly across dimensions, and; ● Younger generations live a blended life where digital and physical personas are viewed as one, driving cross-over consumer preference. -4- Table of Contents Our Scalable Technology Platform Our platform is focused on the creator and player journey and provides innovative ways for brands and advertisers to engage with audiences of gaming enthusiasts.
Biggest changeNot only has there been a massive audience shift, but it is also taking a disproportionate amount of this next generation consumer’s time with the Roblox users averaging 156 minutes per day of play vs. the next closest social media channel, Tik Tok, averaging 95 minutes per day of usage. 4 Table of Contents Other notable trends that amplify these statistics: ● The rise of metaverse, open-world gaming as preferred social channels that go way beyond the traditional concept of gaming; ● The democratization of content creation, launching self-produced social content platforms and new creator economies; ● The further disaggregation of content and increasing underperformance of traditional digital advertising channels forcing advertisers to find new solutions; ● With smarter screens, an increasing consumer expectation for more personalized, customized and interactive web experiences; ● Cross-generational reach of gaming as a lifestyle trend placing it at the intersection of pop culture, cutting broadly across dimensions; ● Younger generations live a blended life where digital and physical personas are viewed as one, driving cross-over consumer preference, and ● Use of Artificial Intelligence (“AI”) to accelerate the company’s development cycles and product road maps for faster-to-market, turnkey solutions that enable scale and margin growth.
Our analytics suite provides Super League, brands and advertisers, and game developers data that informs campaign measurement and insights, along with enhanced game design. Beyond our primary advertising revenue stream, we have the opportunity to extend further downstream in the metaverse gaming worlds we operate, and generate direct to consumer revenues.
Our analytics suite provides Super League, brands and advertisers, and game developers data that informs campaign measurement and insights, along with enhanced game design. Beyond our primary advertising revenue stream, we have the opportunity to extend further downstream in the metaverse gaming worlds we operate, and generate in-game direct to consumer revenues.
Super Studios: Super Studios is our fully virtual production studio providing state-of-the-art, scalable solutions for video, television, and branded content, powered by our patented Super View technology, offering a browser-based, fully remote control room solution.
Super View: Super Studios is our fully virtual production studio providing state-of-the-art, scalable solutions for video, television, and branded content, powered by our patented Super View technology, offering a browser-based, fully remote control room solution.
Because we have successfully built our own metaverse gaming worlds and content network over the course of several years, we deeply understand the ecosystem of players and creators and what it takes to help brands and advertisers navigate this this new social channel in an authentic and engaging way.
Because we have successfully built our own metaverse gaming worlds and content network over the course of several years, we deeply understand the ecosystem of players and creators and what it takes to help brands and advertisers navigate this this new digital social channel in an authentic and engaging way.
COPPA sets forth, among other things, a number of restrictions related to what information may be collected with respect to children under the age of 13, as the kinds of content that website operators may present to children under such age.
COPPA sets forth, among other things, a number of restrictions related to what information may be collected with respect to children under the age of 13, as well as the kinds of content that website operators may present to children under such age.
We believe we have successfully iterated our business model through these market insights, and our organic and inorganic growth to establish scale and ultimately drive our monetization strategies. Our strong and growing product-market fit currently reaches over 100 million monthly unique players in Roblox, Minecraft and Fortnite and generates over one billion monthly impressions.
We believe we have successfully iterated our business model through these market insights, and our organic and inorganic growth to establish scale and ultimately drive our monetization strategies. Our strong and growing product-market fit currently reaches over 130 million monthly unique players in Roblox, Minecraft and Fortnite and generates over one billion monthly impressions.
Our brand partner and creator facing digital properties include: Super Games: One of the preeminent game creation resources in virtual world game platforms, our Super Games publishing capability provides bespoke game development and custom game experiences within our owned and affiliate game worlds and is a power source connecting our developer network to our brand partners.
Our brand partner and creator facing digital properties include: Super League Game Studio: One of the preeminent game creation resources in virtual world game platforms, our Super Games publishing capability provides bespoke game development and custom game experiences within our owned and affiliate game worlds and is a power source connecting our developer network to our brand partners.
As Super League has scaled in both metaverse player and viewing audience reach, we have experienced growth in both the average revenue size of advertiser programs, along with a strong percentage of repeat buyers, while upholding our premium cost per impressions (“CPM”) advertising rates and margins, further validating a new premium social marketing channel for advertisers to reach elusive Generation Z and Alpha gamers.
As Super League has scaled in both metaverse player and viewing audience reach, we have experienced growth in both the average revenue size of branded programs, along with a strong percentage of repeat buyers, while upholding our premium cost per impressions (“CPM”) rates, further validating a new premium social marketing channel for advertisers to reach elusive Generation Z and Alpha gamers.
Two of only seven partner servers with Microsoft that, while “free to play,” monetize the players through in-game micro transactions, such as gameplay passes and durable goods which run through the Microsoft marketplace.
One of seven partner servers with Microsoft that, while “free to play,” monetize the players through in-game micro transactions, such as gameplay passes and durable goods which run through the Microsoft marketplace.
We believe that this seasonality in advertising spending affects our quarterly results, which generally reflect relatively higher advertising revenue in second half of each year, compared to the first half of the year. Employees and Labor Relations As of December 31, 2022, we had 101 full-time and full-time equivalent employees.
We believe that this seasonality in advertising spending affects our quarterly results, which generally reflect relatively higher advertising revenue in the second half of each year, compared to the first half of the year. Employees and Labor Relations As of December 31, 2023, we had 91 full-time and full-time equivalent employees.
Since COVID-19, we have augmented our virtual control room with remote monitoring and communications and enhanced broadcast-level graphics, for an end-to-end, cloud-based production system built around Super View’s proprietary workflow. -5- Table of Contents Our Growth Strategy Our core strategy is to further monetize the audience reach we have built on existing metaverse, or “open-world” game platforms and begin applying that smart backbone to other virtual world engines for extended reach and diversification of revenues.
Since COVID-19, we have augmented our virtual control room with remote monitoring and communications and enhanced broadcast-level graphics, for an end-to-end, cloud-based production system built around Super View’s proprietary workflow, primarily used for branded broadcasting requests. 5 Table of Contents Our Growth Strategy Our core strategy is to further monetize the audience reach we have built on existing metaverse, or “open-world” game platforms and continue applying that smart backbone to other virtual world engines for extended reach and diversification of revenues.
In addition, we ensure viewability with advanced technology that observes if ads are on screen, unobstructed, meet a screen coverage threshold, and other requirements set by Interactive Advertising Bureau (“IAB”) which translates into our premium CPM business model.
For example, we ensure viewability with advanced technology that observes if ads are on screen, unobstructed, meet a screen coverage threshold, and other requirements set by Interactive Advertising Bureau (“IAB”) which translates into our premium CPM business model.
Built on a powerful foundation of unmatched capabilities, solutions and software platforms that have driven consistent success for innovative brand experiences, creator growth and monetization, and significant consumer engagement, our scalable, vertically-integrated engine offers: ● Successful owned and third-party publishing worlds, experiences and destinations; ● Innovative marketing solutions for brands and developers; and ● Valued tools and services for creators and developers.
Built on a powerful foundation of unmatched capabilities and software platforms that have driven consistent success for innovative brand experiences, creator growth and monetization, and significant consumer engagement, our scalable, vertically-integrated solution offers: ● Successful owned and third-party publishing worlds, experiences and destinations; ● Innovative product and marketing solutions for brands and developers; and ● Valued tools and analytics for brands and developers.
We employ a kick-out procedure during user registration whereby anyone identifying themselves as being under the age of 13 during the process is not allowed to register for a player account on our website or participate in any of our online experiences or tournaments without linking their account to that of a parent or guardian. -7- Table of Contents In addition, as a part of our experiences, we offer prizes and/or gifts as incentives to play.
We employ a kick-out procedure during user registration whereby anyone identifying themselves as being under the age of 13 during the process is not allowed to register for a player account on our website or participate in any of our online experiences or tournaments without linking their account to that of a parent or guardian.
As of the date of this Report, we have one pending patent application and five issued patents, and various trademark applications, most of which are granted and some of which are currently pending, covering our technologies and brands, as more specifically set forth below.
As of the date of this Report, we have one pending patent application and five issued patents, and other trademark applications, most of which are granted and some of which are currently pending, covering our technologies and brands.
In addition to Super League’s original owned and operated consumer reach, including, but not limited to, Minehut, our Roblox games worlds and Framerate, advertisers can now reach tens of millions of monthly metaverse players in-game through our distributed game world network and hundreds of millions of viewers in-stream distributed across social media channels including YouTube, TikTok and Instagram.
In addition to Super League’s original owned and operated consumer reach, including, but not limited to, Minehut, and our Roblox partner game worlds, advertisers are able to reach tens of millions of monthly metaverse players in-game through our distributed game world network and hundreds of millions of viewers through our amplified programs with influencers distributed across social media channels including YouTube, TikTok and Instagram.
Our various advertiser offerings include: ● Dedicated, on-platform experiential spaces; ● Custom integrations into existing, popular games; ● In-game media placement including digital billboards, 3-D ad products, portals and catalogue units; ● In-game branded digital goods; ● Display and video advertising; ● Social amplification through influencer partnerships; ● In-stream and in-video custom and banner ad products; ● Entertainment and competitive play broadcasts, on-demand clips and other custom content; ● Brand lift studies, performance reporting and advanced analytics; and ● Children’s Online Privacy and Protection Act (“COPPA”) compliant and kidSAFE-verified inventory. -3- Table of Contents Direct to Consumer Direct to consumer revenues are comprised of revenues generated from the growing number of Minecraft and Roblox virtual gaming worlds we operate.
Our various advertiser offerings include: ● Dedicated, on-platform experiential spaces; ● Custom integrations into existing, popular games; ● In-game media placement including digital billboards, 3-D ad products, portals and catalogue units; ● In-game branded digital goods; ● Display and video advertising; ● Social amplification through influencer partnerships; ● In-stream and in-video custom and banner ad products; ● Entertainment and competitive play broadcasts, on-demand clips and other custom content; ● Brand lift studies, performance reporting and advanced analytics; and ● Children’s Online Privacy and Protection Act (“COPPA”) compliant and kidSAFE-verified inventory.
Our consumer facing digital properties include: Minehut: Attracting younger gamers and creators, Minehut is an "always on" social and gaming portal and one of the largest server farms for advanced, avid Minecraft players in the world.
Minehut: Attracting younger gamers and creators, Minehut is an “always on” social and gaming portal and one of the largest server farms for advanced, avid Minecraft players in the world.
From branded in-game experiences, through to custom content and media, Super League can provide end-to-end solutions for brands to acquire customers, deepen brand affinity and deliver campaign performance with innovative advertising inventory.
From branded in-game experiences, through to custom content and media, Super League can provide end-to-end solutions for brands to acquire customers, deepen brand affinity and deliver digital to physical conversion to drive meaningful brand business performance.
We believe that we maintain a good working relationship with our employees, and we have not experienced any labor disputes. None of our employees are represented by labor unions. Governmental Regulation Our online gaming platforms, which target individuals ranging from elementary school age children to adults, are subject to laws and regulations relating to privacy and child protection.
None of our employees are represented by labor unions. Governmental Regulation Our online gaming platforms, which target individuals ranging from elementary school age children to adults, are subject to laws and regulations relating to privacy and child protection.
While our roots are in open gaming platforms where interactive worlds were first spawned, we believe our success is in the creation, growth, and monetization of digital experiences across the wider immersive web landscape. Super League’s vision is to build the most comprehensive immersive web publishing engine and driver of the next generation of digital platform businesses and experiences.
While our roots are in open gaming platforms where interactive worlds were first spawned, we believe our success is in the creation, growth, and monetization of digital experiences across the wider immersive web landscape.
In addition, our platform, and our capability to produce compelling gaming-centric video and livestream broadcasts drives viewership to our own and our brand partner’s digital channels, and generates content production and syndication revenues from third party partners. Specifically, Super League’s digital experience and media products provide a wide range of solutions for brands and advertisers.
In addition, our platform, and our capability to produce compelling gaming-centric video and livestream broadcasts drives viewership to our experiences and our brand partner’s digital channels for further amplification. 2 Table of Contents Specifically, Super League’s digital experience and media products provide a wide range of solutions for brands and advertisers.
Mineville & Pixel Paradise: Through a relationship with Microsoft, the owner of Minecraft, we operate two additional Minecraft server worlds for more casual players enjoying the game on consoles and tablets.
Our consumer facing digital properties include: Mineville: Through a relationship with Microsoft, the owner of Minecraft, we operate a Minecraft server world for more casual players enjoying the game on consoles and tablets.
Specifically, our turnkey metaverse ad products are a progressive and differentiated way for advertisers to embed natively into games through dynamic digital billboards, interactive 3-D characters, and portals to access their target audience by enhancing the gaming experience without interrupting the play itself.
Specifically, our turnkey metaverse ad products are a progressive and differentiated way for advertisers to embed natively into games through interactive 3-D characters, pop-up shops, and catalogues, to name a few, to access their target audience by enhancing the gaming experience without interrupting the play itself. These are high-performing media products offering a best-in-class benchmark for in-game advertising.
We have developed and own various intellectual properties, including pending and issued trademarks, patents, and copyrights. We also have obtained licenses to valuable intellectual property with game publishers. We leverage these licenses and service agreements to operate online and location-based competitions, and in parallel, use them to generate a wide array of content.
We leverage these licenses and service agreements to operate online and location-based competitions, and in parallel, use them to generate a wide array of content.
Our software supports the creation and operation of our owned and third-party metaverse gaming worlds and experiences, along with creator tools and analytics underpinned by a creator economy. These tools enable Super League to access these extended audiences with our innovative in-game and in-stream ad products, and allow our game designers and content creators to participate in our advertising economy.
Our software supports the creation and operation of our owned and third-party metaverse gaming worlds and experiences, along with creator tools and analytics underpinned by a creator economy.
Additionally, a core differentiator for Super League is our ability to deliver Roblox metaverse game worlds and experiences along with bespoke tournaments and entertainment content through our Super Studio’s game technology and capability.
Additionally, a core differentiator for Super League is our deep insight and capability to deliver contagious custom Roblox game worlds and integrated experiences along with tailored off-platform entertainment content to drive exposure and on-platform engagement.
Item 1. Business Overview Super League Gaming, Inc. (Nasdaq: SLGG) (“Super League,” the “Company,” “we,” “us” or “our”) is a leading publisher of games, monetization tools and content channels across metaverse gaming platforms that empower developers, energize players, and entertain fans.
Item 1. Business Overview Super League Enterprise, Inc. (Nasdaq: SLE) (“Super League,” the “Company,” “we,” “us” or “our”) is a leading creator and publisher of content experiences and media solutions across the world’s largest immersive platforms.
Additionally, we occasionally enter into service agreements with independent contractors, on an as-needed basis, to perform certain services. As of December 31, 2022, four of our full-time employees were subject to fixed-term employment agreements with us, and all other employees served at-will pursuant to the terms set forth in their offer letters.
As of December 31, 2023, four of our full-time employees were subject to fixed-term employment agreements with us, and all other employees served at-will pursuant to the terms set forth in their offer letters. 6 Table of Contents We believe that we maintain a good working relationship with our employees, and we have not experienced any labor disputes.
An increasing part of our revenue diversification strategy, consumer monetization includes in-game items, e-commerce, game passes and ticketing, and digital collectibles. Content & Technology As part of our strategy to provide an end-to-end solution for advertiser objectives, Super Studios and Super View augment our advertiser offer to take a greater share of campaign dollars.
Content & Technology As part of our strategy to provide an end-to-end solution for advertiser objectives, Super League’s creative services team, powered for broadcasting by Super View, augment our advertiser offer to take a greater share of campaign dollars.
We have several leverage points including: ● Deepen our owned metaverse game worlds to grow direct to consumer revenues. ● Grow our publishing, media and creator tool suite to expand audience and further drive average advertiser deal-size. ● Expand and optimize our global network of sales partnerships to further monetize our international audience reach. ● Increase domestic sales force effectiveness resulting in higher salesperson throughput and net revenue. ● Move beyond our advertising model by applying our end-to-end immersive experience and media engine to new platforms for ownable and third-party intellectual property for greater control and share of the consumer experience, digital economy, digital to physical crossover, and first-party data. -6- Table of Contents Intellectual Property and Patents Similar to other interactive entertainment and esports companies, our business depends heavily on the creation, acquisition, licensing, use and protection of intellectual property.
We have several leverage points including: ● Deepen our owned metaverse game worlds to grow direct to consumer revenues. ● Grow our publishing, media and creator tool suite to expand audience and analytic insights; ● Increase average overall deal-size and total annual spend per advertiser as we become a standard part of their marketing strategies; ● Increase domestic sales force effectiveness resulting in higher salesperson throughput and net revenue; ● Move beyond our advertising model by applying our end-to-end immersive experience and media engine to new platforms for a persistent immersive marketing strategy for brands and IP owners, and; ● Explore strategies to further develop ownable IP to participate in direct to consumer, digital to physical conversion, and first-party data.
Whether for the creation and broadcast of premium content, or monitoring productions from remote locations, Super Studios and Super View are an innovative, affordable solution to deliver compelling content to meet advertiser objectives and generate additional sources of revenue.
Whether for the creation and broadcast of premium content, or monitoring productions from remote locations, Super Studios and Super View are an innovative, affordable solution to deliver compelling content to meet advertiser objectives and generate additional sources of revenue. 3 Table of Contents Monetization Innovative Brand & Media Integrations The highly sought-after Generation Z and Alpha audience is increasingly difficult for brands to reach due to the fragmentation of content distribution channels, ad-blocking technology and a sentiment against overt marketing and promotion.
Beyond our hundreds of Roblox partner game worlds, we have deepened our internal capability to create compelling gaming and custom metaverse Minecraft experiences for our player bases in our Minehut, Mineville and Pixel Paradise properties, as well as extending that capability to virtual world platforms such as Fortnite and The Sandbox.
Beyond our few thousand Roblox partner game worlds, we have deepened our internal capability to create custom Roblox worlds through the acquisition of Melon Studios in May 2023 and are extending this capability to new virtual world platforms such as Fortnite.
Furthermore, our platform enables digital tools for scale, including, but not limited to, data services, event creation and management, ecommerce, advertising technology, COPPA compliance, search engine optimization, and email and mobile marketing. Our advertising technology, both in the size of monetizable ad products and the creator tool suite, was materially expanded with the acquisitions of Bloxbiz Co.
Our proprietary cloud-based platform serves three core functions (i) dynamic media technology (ii) metaverse game experience and tournament technology, and (iii) fully remote production and livestream broadcast technology. Furthermore, our platform enables digital tools for scale, including, but not limited to, data services, event creation and management, ecommerce, advertising technology, COPPA compliance, search engine optimization, and email and mobile marketing.
( doing business as, and hereinafter referred to as “Super Biz” ) and Bannerfy, Ltd. (rebranded to “Super Biz”) during the year ended December 31, 2021 (“Fiscal Year 2021”).
Our dynamic media technology, both in the size of monetizable ad products and the creator tool suite, was materially expanded with the acquisitions of Bloxbiz Co. ( doing business as, and hereinafter referred to as “Super Biz” ) during the year ended December 31, 2021 (“Fiscal Year 2021”).
We access players and creators through our vast network of digital game worlds and content channels and then drive them into branded digital experiences through our media products and creator tools. Our proprietary cloud-based platform serves three core functions (i) advertising technology (ii) metaverse game experience and tournament technology, and (iii) fully remote production and livestream broadcast technology.
Our Scalable Technology Platform Our platform is focused on the creator and player journey and provides innovative ways for brands and advertisers to engage with audiences of gaming enthusiasts. We access players and creators through our vast network of digital game worlds and content channels and then drive them into branded digital experiences through our media products and creator tools.
We further developed our in-house direct sales capability to monetize our domestic experiential and media inventory and launched a global network of resellers to sell our international media inventory on our behalf.
We further developed our in-house direct sales capability to monetize our experiential and media inventory and continued to realize increases in sales force effectiveness, as demonstrated by larger total revenue wins for our direct sellers.
Additionally, our capability and proprietary technology is now being applied to new virtual world platforms beyond our core offering and is proving to be an enterprise solution for our owned and branded digital experiences that are less temporal and campaign-centric, generating revenue opportunities that are more diversified, annual in nature and less impacted by traditional advertising seasonality. -1- Table of Contents Digital Properties and Offerings Our gaming content and media network is underpinned by our proprietary tech and applied to much of our owned and operated consumer properties as well.
Digital Properties and Offerings Our gaming content and media network is underpinned by our proprietary tech and applied to much of our owned and operated consumer properties as well.
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The Company’s solutions provide incomparable access to an audience consisting of players in the largest global metaverse game environments, fans of hundreds of thousands of gaming influencers, and viewers of gameplay content across major social media and digital video platforms.
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From open gaming powerhouses such as Roblox, Minecraft and Fortnite Creative, to bespoke worlds built using the most advanced 3D creation tools, Super League’s innovative solutions provide incomparable access to massive audiences who gather in immersive digital spaces to socialize, play, explore, collaborate, shop, learn and create.
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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.
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As a true end-to-end activation partner for dozens of global brands, Super League offers a complete range of development, distribution, monetization and optimization capabilities designed to engage users through dynamic, energized programs.
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Super League’s properties deliver powerful opportunities for brands and advertisers to achieve impactful insights and marketing outcomes with gamers of all ages.
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As an originator of new experiences fueled by a network of top developers, a comprehensive set of proprietary creator tools and a future-forward team of creative professionals, Super League accelerates intellectual property (“IP”) and audience success within the fastest growing sector of the media industry.
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Super League Arcade & ABX: Our more recently launched owned and operated game worlds in Roblox, these open-world games are targeted to more competitive esports gamers and anime enthusiasts respectively. These game worlds attract targeted players and offer a channel for brands and advertisers, along with in-game player transactions, such as gameplay passes and durable goods through the Roblox marketplace.
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Super League’s vision is to build the most comprehensive immersive web publishing and products engine to deliver the future of digital advertising and brand and IP monetization through the newer immersive, 3D engagement marketing channels.
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Framerate: Framerate is a fast-growing social video network in gaming, generating tens of millions of monthly views, with multiple channels across social media, namely Instagram and Tik Tok. Targeting more young-adult gamers and creators, Framerate enables gamers to submit their own user-generated highlight reel for recognition, and channels for us to package and monetize to meet advertisers’ objectives.
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These capabilities and tools enable Super League to build immersive experiences and custom worlds, as well as, extend audience reach with our innovative in-game ad and consumer products, allowing our content creator partners to participate in our advertising economy.
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Super Mob: Our experience and accessible pool of gaming influencers, both on and off platform, allows us to offer a full 360-soltuion for brands and advertisers.
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Additionally, our capability and proprietary technology is now being applied to new virtual world platforms beyond our core offering with the vision of being an enterprise solution for brands to have a persistent, omni-channel across immersive world platforms driving back to a brand’s web experience that speaks this new language of 3D engagement.
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This advertising amplification not only allows us to maximize campaign objectives, but also to obtain a greater share of advertisers’ wallets with our end-to-end solution, increasing our related revenue generating opportunities. -2- Table of Contents Monetization Innovative Advertising The highly sought-after Generation Z and Alpha audience is increasingly difficult for brands to reach due to the fragmentation of content distribution channels, ad-blocking technology and a sentiment against overt marketing and promotion.
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A move to more persistent branded programs shifts the Company’s business model from being one of temporal, campaign-centric, engagements to streams that are more annual, recurring, and forecastable in nature, smoothing out some of the current traditional advertising model seasonality.
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These are high-performing ad units; for example, our digital billboard impressions are ten seconds of cumulative view time offering a best-in-class benchmark for in-game advertising.
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On February 29, 2024, the Company sold substantially all of the assets related to its Minehut operations to GamerSafer, Inc., and has thereafter ceased all Minehut operations.
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The transaction allows Super League to streamline its position in partnering with major brands to build, market, and operate 3D experiences across multiple immersive platforms, including open gaming powerhouses like Minecraft, and aligns with our cost improvement initiatives.
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Super League and GamerSafer will maintain a commercial relationship which ensures that Minehut can remain an ongoing destination available to Super League’s partners.
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In-Game Digital Goods: While nascent in development, the company has the capability to develop 1 st party and 3 rd party branded digital consumer goods inside virtual world platforms currently being piloted in their owned and operated game worlds, as well as with a small set of brand partners.
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Direct to Consumer Direct to consumer revenues are comprised of revenues generated from the growing number of Minecraft and Roblox virtual gaming worlds we operate. As a component of our revenue diversification strategy, consumer monetization includes in-game items, e-commerce, game passes and ticketing, and digital collectibles.
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Intellectual Property and Patents Similar to other interactive entertainment companies, our business depends on the creation, acquisition, licensing, use and protection of intellectual property. We have developed and own various intellectual properties, including pending and issued trademarks, patents, and copyrights. We also have obtained licenses to valuable intellectual property with game publishers.
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Additionally, we occasionally enter into service agreements with independent contractors, on an as-needed basis, to perform certain services.
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On December 20, 2023, the FTC announced long-awaited proposed amendments to the Children’s Online Privacy Protection Rule (“COPPA Rule”). If adopted, the proposed amendments would be the first changes to the COPPA Rule in a decade. The amendments aim to modernize the COPPA framework and shift the burden for protecting children’s privacy and security from parents to service providers.
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The proposed changes include: ● Requiring separate opt-in for targeted advertising; ● Prohibiting conditioning a child’s participation on collection of personal information; ● Limiting the support for the internal operations exception, which allows operators to collect persistent identifiers without first obtaining verifiable parental consent as long as the operator does not collect any other personal information; ● Imposing restrictions on educational technology companies, including prohibiting these companies’ use of students’ data for commercial purposes; ● Increasing accountability for Safe Harbor programs, including by requiring each program to publicly disclose its membership list and report additional information to the Commission; ● Strengthening data security requirements; and ● Limiting data retention.
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In addition, as a part of our experiences, we offer prizes and/or gifts as incentives to play.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeFrom November 2022 to January 2023, we issued 12,622 shares of our (i) Series A Convertible Preferred Stock, par value $0.001 per share (the “Series A Preferred”); (ii) Series A-2 Convertible Preferred Stock, par value $0.001 per share (the “Series A-2 Preferred”); (iii) Series A-3 Convertible Preferred Stock, par value $0.001 per share (the “Series A-3 Preferred”); (iv) Series A-4 Convertible Preferred Stock, par value $0.001 per share (the “Series A-4 Preferred”) and (v) Series A-5 Convertible Preferred Stock, par value $0.001 per share (the “Series A-5 Preferred”, and, collectively with the Series A Preferred, Series A-2 Preferred, Series A-3 Preferred and Series A-4 Preferred, the “Series A Stock”), to a group of accredited investors (collectively, the “Investors”), pursuant to a certain placement agency agreement.
Biggest changeAs of March 14, 2024, we had the following shares of Preferred Stock outstanding: (i) 440 shares of Series A Convertible Preferred Stock, par value $0.001 per share (the “Series A Preferred”); (ii) 463 shares of Series A-2 Convertible Preferred Stock, par value $0.001 per share (the “Series A-2 Preferred”); (iii) 315 shares of Series A-3 Convertible Preferred Stock, par value $0.001 per share (the “Series A-3 Preferred”); (iv) 476 shares of Series A-4 Convertible Preferred Stock, par value $0.001 per share (the “Series A-4 Preferred”); (v) 780 shares of Series A-5 Convertible Preferred Stock, par value $0.001 per share (the “Series A-5 Preferred”), (vi) 4,491 shares of Series AA Convertible Preferred Stock, par value $0.001 per share (the “Series AA Preferred”); (vii) zero shares of Series AA-2 Convertible Preferred Stock, par value $0.001 per share (the “Series AA-2 Preferred”); (viii) 391 shares of Series AA-3 Convertible Preferred Stock, par value $0.001 per share (the “Series AA-3 Preferred”); (ix) 515 shares of Series AA-4 Convertible Preferred Stock, par value $0.001 per share (the “Series AA-4 Preferred”); (x) 550 shares of Series AA-5 Convertible Preferred Stock, par value $0.001 per share (the “Series AA-5 Preferred”), (xi) 8,423 shares of Series AAA Convertible Preferred Stock, par value $0.001 per share (the “Series AAA Preferred”); and (xii) 5,234 shares of Series AAA-2 Convertible Preferred Stock, par value $0.001 per share (the “Series AAA-2 Preferred”); and, collectively with the Series A Preferred, Series A-2 Preferred, Series A-3 Preferred, Series A-4 Preferred, Series A-5 Preferred, Series AA Preferred, Series AA-2 Preferred, Series AA-3 Preferred, Series AA-4 Preferred, Series AA-5 Preferred, Series AAA Preferred, and Series AAA-2 Preferred (the “Preferred Stock”).
In the future, we may attempt to increase our capital resources by offering debt securities. In the event of a bankruptcy or liquidation, holders of our debt securities, and lenders with respect to other borrowings we may make, would receive distributions of our available assets prior to any distributions being made to holders of our common stock.
In the future, we may attempt to increase our capital resources by offering debt securities. In the event of bankruptcy or liquidation, holders of our debt securities, and lenders with respect to other borrowings we may make, would receive distributions of our available assets prior to any distributions being made to holders of our common stock.
Developing and integrating new games, titles, content, products, services or infrastructure could be expensive and time-consuming, and these efforts may not yield the benefits we expect to achieve at all.
Developing and integrating into new games, titles, content, products, services or infrastructure could be expensive and time-consuming, and these efforts may not yield the benefits we expect to achieve at all.
These fluctuations could cause you to lose all or part of your investment in our common stock since you might be unable to sell your shares at or above the price you paid in the offering.
These fluctuations could cause you to lose all or part of your investment in our common stock since you might be unable to sell your shares at or above the price you paid.
We expect to continue to expend substantial financial and other resources on, among other things: ● investments to expand and enhance our esports technology platform and technology infrastructure, make improvements to the scalability, availability and security of our platform, and develop new offerings; ● sales and marketing, including expanding our customer acquisition and sales organization and marketing programs, and expanding our programs directed at increasing our brand awareness among current and new customers; ● investments in bandwidth to support our video streaming functionality; ● contract labor costs and other costs to host our leagues and tournaments; ● costs to retain and attract users and creators and license first tier game titles, grow our online user community and generally expand our business operations; ● hiring additional employees; ● expansion of our operations and infrastructure, both domestically and internationally; and ● general administration, including legal, accounting and other costs related to being a public company.
We expect to continue to expend substantial financial and other resources on, among other things: ● investments to expand and enhance our technology platform and technology infrastructure, make improvements to the scalability, availability and security of our platform, and develop new offerings; ● sales and marketing, including expanding our customer acquisition and sales organization and marketing programs, and expanding our programs directed at increasing our brand awareness among current and new customers; ● investments in bandwidth to support our video streaming functionality; ● contract labor costs and other costs to host our leagues and tournaments; 9 Table of Contents ● costs to retain and attract users and creators and license first tier game titles, grow our online user community and generally expand our business operations; ● hiring additional employees; ● expansion of our operations and infrastructure, both domestically and internationally; and ● general administration, including legal, accounting and other costs related to being a public company.
We continue to make substantial investments of resources to support our acquisitions, including the 2021 Acquisitions, which has in the past resulted, and we expect will in the future result, in significant ongoing operating expense and the diversion of resources and management attention from other areas of our business. We cannot assure you that these investments will be successful.
We continue to make substantial investments of resources to support our acquisitions, which has in the past resulted, and we expect will in the future result, in significant ongoing operating expense and the diversion of resources and management attention from other areas of our business. We cannot assure you that these investments will be successful.
Broad market and industry factors, as well as general economic, political and market conditions such as recessions or interest rate changes, may seriously affect the market price of our common stock, regardless of our actual operating performance. These fluctuations may be even more pronounced in the trading market for our stock shortly following our offering.
Broad market and industry factors, as well as general economic, political and market conditions such as recessions or interest rate changes, may seriously affect the market price of our common stock, regardless of our actual operating performance. These fluctuations may be even more pronounced in the trading market for our stock shortly.
We expect to continue to invest heavily in our operations, our online and in person experiences, and business development related to game publishers, advertisers, sponsors and user acquisition, to maintain as well as accelerate our market position, support anticipated future growth and to meet our expanded reporting and compliance obligations as a public company.
We expect to continue to invest heavily in our operations, our online experiences, and business development related to game platforms and publishers, advertisers, sponsors and user acquisition, to maintain as well as accelerate our market position, support anticipated future growth and to meet our expanded reporting and compliance obligations as a public company.
Governance Risks and Risks Related to Our Common Stock ● provisions of Delaware law and our certificate of incorporation and bylaws could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us; ● low trading volume of our common stock; ● the volatility of the trading price of our common stock; ● our policy of not paying cash dividends on our common stock; -9- Table of Contents ● lessened disclosure requirements due to our status as an emerging growth company; and ● increased share-based compensation expense due to granted equity awards.
Governance Risks and Risks Related to Our Common Stock ● provisions of Delaware law and our certificate of incorporation and bylaws could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us; ● low trading volume of our common stock; ● the volatility of the trading price of our common stock; ● our policy of not paying cash dividends on our common stock; ● lessened disclosure requirements due to our status as an emerging growth company; and ● increased share-based compensation expense due to granted equity awards.
On October 4, 2022, we received a letter (the “Notice”) from the Listing Qualifications Staff of Nasdaq, indicating that, based upon the closing bid price of our common stock for the prior 30 consecutive business days, we are currently not in compliance with the requirement to maintain a minimum bid price of $1.00 per share for continued listing on the Nasdaq Capital Market, as set forth in Nasdaq Listing Rule 5550(a)(2).
On October 4, 2022, we received a letter (the “Notice”) from the Listing Qualifications Staff of Nasdaq, indicating that, based upon the closing bid price of our common stock for the prior 30 consecutive business days, were not in compliance with the requirement to maintain a minimum bid price of $1.00 per share for continued listing on the Nasdaq Capital Market, as set forth in Nasdaq Listing Rule 5550(a)(2).
To regain compliance, the closing bid price of our common stock must be at least $1.00 per share for 10 consecutive business days during the 180-day period from October 4, 2022 to April 3, 2023.
To regain compliance, the closing bid price of our common stock must be at least $1.00 per share for 10 consecutive business days (the “Minimum Bid Price Requirement”) during the 180-day period from October 4, 2022 to April 3, 2023.
Regulatory and Legal ● complex and evolving U.S. and foreign laws and regulations; ● changes in tax laws or regulations regarding us or our customers; ● decreased levels of traffic due to intensified government regulation of the Internet industry; ● liability in the event of a violation of privacy regulations, data privacy laws, and/or child protection laws; ● lawsuits or liability arising as a result of the Company providing its products and/or services; and ● lawsuits or liability as a result of content published through our products and services.
Regulatory and Legal ● complex and evolving U.S. and foreign laws and regulations; ● changes in tax laws or regulations regarding us or our customers; ● decreased levels of traffic due to intensified government regulation of the Internet industry; 8 Table of Contents ● liability in the event of a violation of privacy regulations, data privacy laws, and/or child protection laws; ● lawsuits or liability arising as a result of the Company providing its products and/or services; and ● lawsuits or liability as a result of content published through our products and services.
The trading price of our common stock following our offering will depend on several factors, including those described in this “ Risk Factors ” section, many of which are beyond our control and may not be related to our operating performance.
The trading price of our common stock will depend on several factors, including those described in this “ Risk Factors ” section, many of which are beyond our control and may not be related to our operating performance.
We currently do not have definitive license agreements in place with game publishers for the use of certain of the game titled played on our platform, as these publishers currently permit us to integrate the specifications of the game title with our technology.
We currently do not have definitive license agreements in place with game publishers and platforms for the use of certain of the game titled played on our platform, as these publishers currently permit us to integrate the specifications of the game title with our technology.
Uncertainty in global economic conditions could negatively affect our business, results of operations and financial condition . We have significant intangible assets recorded on our consolidated balance sheets as of December 31, 2022.
Uncertainty in global economic conditions could negatively affect our business, results of operations and financial condition . We have significant intangible assets recorded on our consolidated balance sheets as of December 31, 2023.
See “Management’s Discussion and Analysis of Financial Condition and Results of Operations” for a discussion of the accounting estimates, judgments and assumptions that we believe are the most critical to an understanding of our consolidated financial statements and our business. We are currently dependent on certain game publishers and online game platforms for a substantial portion of our revenue.
See “Management’s Discussion and Analysis of Financial Condition and Results of Operations” for a discussion of the accounting estimates, judgments and assumptions that we believe are the most critical to an understanding of our consolidated financial statements and our business. 23 Table of Contents We are currently dependent on certain game publishers and online game platforms for a substantial portion of our revenue.
We may discover that future opportunities to provide new and innovative services to users and creators may be precluded by existing patents that we are unable to license on reasonable terms. -24- Table of Contents Our technology, content and brands are subject to the threat of piracy, unauthorized copying and other forms of intellectual property infringement.
We may discover that future opportunities to provide new and innovative services to users and creators may be precluded by existing patents that we are unable to license on reasonable terms. Our technology, content and brands are subject to the threat of piracy, unauthorized copying and other forms of intellectual property infringement.
The holders of our Series A Stock are generally entitled to vote with the holders of our common stock on all matters submitted for a vote of our stockholders (voting together with the holders of common stock as one class) on an as-converted basis.
The holders of our Preferred Stock are generally entitled to vote with the holders of our common stock on all matters submitted for a vote of our stockholders (voting together with the holders of common stock as one class) on an as-converted basis.
We cannot assure you, however, that these activities will be successful or that we will be able to achieve the brand promotion effect we expect. In addition, any negative publicity in relation to our service offerings, or operations, regardless of its veracity, could harm our brands and reputation.
We cannot assure you, however, that these activities will be successful or that we will be able to achieve the brand promotion effect we expect. 14 Table of Contents In addition, any negative publicity in relation to our service offerings, or operations, regardless of its veracity, could harm our brands and reputation.
If we are ultimately unable to achieve or improve profitability at the level or during the time frame anticipated by securities or industry analysts, investors and our stockholders, the trading price of our common stock may decline. -15- Table of Contents We may experience security breaches and cyber threats.
If we are ultimately unable to achieve or improve profitability at the level or during the time frame anticipated by securities or industry analysts, investors and our stockholders, the trading price of our common stock may decline. We may experience security breaches and cyber threats.
If we fail to successfully integrate the companies we acquire, we may not realize the benefits expected from the transaction and our business may be harmed. We may encounter significant difficulties integrating acquired businesses. The integration of any businesses is a complex, costly and time-consuming process.
If we fail to successfully integrate the companies we acquire, we may not realize the benefits expected from the transaction and our business may be harmed. 22 Table of Contents We may encounter significant difficulties integrating acquired businesses. The integration of any businesses is a complex, costly and time-consuming process.
Our board of directors have the authority to cause us to issue, without any further vote or action by the stockholders, up to an additional 9,994,641 shares of preferred stock in one or more series, to designate the number of shares constituting any series, and to fix the rights, preferences, privileges and restrictions thereof, including dividend rights, voting rights, rights and terms of redemption, redemption price or prices and liquidation preferences of such series.
Our board of directors have the authority to cause us to issue, without any further vote or action by the stockholders, up to an additional 9,960,875 shares of preferred stock in one or more series, to designate the number of shares constituting any series, and to fix the rights, preferences, privileges and restrictions thereof, including dividend rights, voting rights, rights and terms of redemption, redemption price or prices and liquidation preferences of such series.
Any future growth would add complexity to our organization and require effective coordination across our organization, and an inability to do so would adversely affect our business, financial conditions and results of operations. -18- Table of Contents We provide access to offerings within our platform that are subscription-based.
Any future growth would add complexity to our organization and require effective coordination across our organization, and an inability to do so would adversely affect our business, financial conditions and results of operations. We provide access to offerings within our platform that are subscription-based.
As a result, the holders of Series A Stock may in the future have the ability to influence the outcome of certain matters affecting our governance and capitalization.
As a result, the holders of Preferred Stock may in the future have the ability to influence the outcome of certain matters affecting our governance and capitalization.
Additionally, the consent of the holders of a majority of the outstanding shares of Series A Stock is required in order for us to take certain actions, including issuances of securities that are senior to, or equal in priority with, the Series A Stock.
Additionally, the consent of the holders of a majority of the outstanding shares of Preferred Stock are required in order for us to take certain actions, including issuances of securities that are senior to, or equal in priority with, the Preferred Stock.
Our strong and growing product-market fit currently reaches over 100 million monthly unique players in Roblox, Minecraft and Fortnite and generates over one billion monthly impressions. We view our KPIs as a critical measure of our user engagement, and adding, maintaining, and engaging users has been and will continue to be necessary to our continued growth.
Our strong and growing product-market fit currently reaches over 100 million monthly unique players in Roblox, Minecraft and Fortnite and generates over one billion monthly impressions. We view our key performance Indicators (“KPIs”) as a critical measure of our user engagement, and adding, maintaining, and engaging users has been and will continue to be necessary to our continued growth.
For Fiscal Year 2022 and Fiscal Year 2021, we recorded share-based compensation expense of $4.3 million and $2.4 million, respectively, primarily related to issuances and vesting of awards under the 2014 Plan.
For Fiscal Year 2023 and Fiscal Year 2022, we recorded share-based compensation expense of $2.7 million and $4.3 million, respectively, primarily related to issuances and vesting of awards under the 2014 Plan.
Risk Factor Summary Our business operations are subject to numerous risks and uncertainties, including those outside of our control, that could cause our business, financial condition or operating results to be harmed, including risks regarding the following: Risks Related to Our Business and Industry ● our significant past operating losses and any inability to maintain profitability or accurately predict fluctuations in the future; ● a rapidly developing and relatively new market; ● inability to sustain or manage our growth, or otherwise implement our business strategies; ● loss of advertising revenue; ● inability to maintain an effective revenue model; ● reduction in activity by material clients and/or vendors; ● ineffective marketing and/or advertising efforts; ● our ability to maintain and promote our company culture; ● competition in our industry; ● ability to attract, maintain, and retain licenses for popular games on our platforms; ● ability to enter into definitive license agreements with certain game publishers; -8- Table of Contents ● ability to maintain and acquire new users and creators; ● our ability to maintain, enhance, and promote our brand; ● negative perceptions about our brand, platform, content, leagues, tournaments, and/or competitions; ● anticipating and adopting changes to new technologies, business strategies, and/or methods; ● actual or perceived security breaches, as well as errors, vulnerabilities or defects in our software and/or products, and in software and/or products of third-party providers; ● reliance on server functionality; ● the interoperability of our products and services across third-party services and systems; ● security breaches and cyber threats; ● system failures, outages, and/or disruption due to certain events and interruptions by man-made problems; ● our ability to hire, retain and motivate highly skilled personnel; and ● our reliance on assumptions and estimates to calculate certain key metrics.
Additional risks and uncertainties not presently known to us or that we currently deem immaterial also may impair our business operations. 7 Table of Contents Risk Factor Summary Our business operations are subject to numerous risks and uncertainties, including those outside of our control, that could cause our business, financial condition or operating results to be harmed, including risks regarding the following: Risks Related to Our Business and Industry ● our significant past operating losses and any inability to maintain profitability or accurately predict fluctuations in the future; ● a rapidly developing and relatively new market; ● inability to sustain or manage our growth, or otherwise implement our business strategies; ● loss of advertising revenue; ● inability to maintain an effective revenue model; ● reduction in activity by material clients and/or vendors; ● ineffective marketing and/or advertising efforts; ● our ability to maintain and promote our company culture; ● competition in our industry; ● ability to attract, maintain, and retain licenses for popular games on our platforms; ● ability to enter into definitive license agreements with certain game publishers; ● ability to maintain and acquire new users and creators; ● our ability to maintain, enhance, and promote our brand; ● negative perceptions about our brand, platform, content, leagues, tournaments, and/or competitions; ● anticipating and adopting changes to new technologies, business strategies, and/or methods; ● actual or perceived security breaches, as well as errors, vulnerabilities or defects in our software and/or products, and in software and/or products of third-party providers; ● reliance on server functionality; ● the interoperability of our products and services across third-party services and systems; ● security breaches and cyber threats; ● system failures, outages, and/or disruption due to certain events and interruptions by human-caused problems; ● our ability to hire, retain and motivate highly skilled personnel; and ● our reliance on assumptions and estimates to calculate certain key metrics.
We believe that our continued growth will depend on many factors, including our ability to develop new sources of revenues, diversify monetization methods including our direct to consumer offerings, attract and retain competitive gamers and creators, increase engagement, continue developing innovative technologies, tournaments and competitions in response to shifting demand in online gaming, increase brand awareness, and expand into new markets.
We believe that our continued growth will depend on many factors, including our ability to develop new sources of revenues, diversify monetization methods including our direct to consumer offerings, attract and retain competitive gamers and creators, increase engagement, continue developing innovative technologies, and experiences in response to shifting demand in open world gaming, increase brand awareness, and expand into new markets.
The size and engagement level of our users are critical to our success and are closely linked to the quality and popularity of the game publishers with which we have licenses.
The size and engagement level of our users are critical to our success and are closely linked to the quality and popularity of the game publishers with which we have licenses and the platforms on which we operate.
Existing and prospective developers may not be successful in creating content that leads to and maintains user engagement (including maintaining the quality of experiences) or they may fail to expand the types of experiences that our developers can build for users, and other global entertainment companies, online content platforms, and social platforms may entice our users and potential users away from, or to spend less time with, our platform, each of which could adversely affect users’ interest in our platform and lead to a loss of revenue opportunities and harm our results of operations.
Existing and prospective developers may not be successful in creating content that leads to and maintains user engagement (including maintaining the quality of experiences) or they may fail to expand the types of experiences that our developers can build for users, and other global entertainment companies, online content platforms, and social platforms may entice our users and potential users away from, or to spend less time with, our platform, each of which could adversely affect users’ interest in our platform and lead to a loss of revenue opportunities and harm our results of operations. 18 Table of Contents Additionally, we may not succeed in further monetizing our platform and user base.
Although we have developed our brand through word of mouth referrals, key strategic partners and our esports game publisher licensors, as we expand, we may conduct various marketing and brand promotion activities using various methods to continue promoting our brand.
Although we have developed our brand through word of mouth referrals, and key strategic partners, as we expand, we may conduct various marketing and brand promotion activities using various methods to continue promoting our brand.
These risks could negatively impact our operating results and include the popularity, price to play, and timing of release of our esports licensed games, economic conditions that adversely affect discretionary consumer spending, changes in user demographics, the availability and popularity of other forms of entertainment, and critical reviews and public tastes and preferences, which may change rapidly and cannot necessarily be predicted.
These risks could negatively impact our operating results and include the popularity, price to play, and timing of release of third-party and our own games and interactive content, economic conditions that adversely affect discretionary consumer spending, changes in user demographics, the availability and popularity of other forms of entertainment, and critical reviews and public tastes and preferences, which may change rapidly and cannot necessarily be predicted.
These difficulties have been enhanced further during the COVID-19 pandemic as a result of our office closures and work-from home policies, which may hinder assimilation of key personnel.
These difficulties have been enhanced further as a result of our office closures and work-from home policies, which may hinder the assimilation of key personnel.
Should those game publishers choose not to allow us to offer experiences involving their respective game titles to our users, the popularity of our amateur city leagues, tournaments and competitions may decline and the number of our users and creators may decrease, which could materially and adversely affect our results of operations and financial condition.
Should those game publishers or platforms choose not to allow us to offer experiences involving their respective game titles to our users, the popularity of our experiences and competitions may decline and the number of our users and creators may decrease, which could materially and adversely affect our results of operations and financial condition.
The integration of acquisitions, including the 2021 Acquisitions, requires significant time and resources, particularly with respect to companies that have significant operations or that develop products where we do not have prior experience, and we may not manage these processes successfully.
The integration of companies or assets we acquire requires significant time and resources, particularly with respect to companies that have significant operations or that develop products where we do not have prior experience, and we may not manage these processes successfully.
We may not obtain any future research coverage by securities industry analysts. In the event we are covered by research analysts, and one or more of such analysts downgrade our securities, or otherwise reports on us unfavorably, or discontinues coverage of us, the market price and market trading volume of our common stock could be negatively affected.
In the event we are covered by research analysts, and one or more of such analysts downgrade our securities, or otherwise reports on us unfavorably, or discontinues coverage of us, the market price and market trading volume of our common stock could be negatively affected.
Our operations may be materially and adversely affected if we fail to maintain this community culture as we expand in our addressable user communities. We have cultivated an interactive and vibrant online social user community centered around online gaming and content creation.
We have a unique community culture that is vital to our success. Our operations may be materially and adversely affected if we fail to maintain this community culture as we expand in our addressable user communities. We have cultivated an interactive and vibrant online social user community centered around online gaming and content creation.
Our KPI growth rate has fluctuated in the past and may slow in the future due to various factors. As COVID-19 related shelter-in-place orders are lifted and children return to school, we have seen growth rates moderate in certain markets.
Our KPI growth rate has fluctuated in the past and may slow in the future due to various factors. As COVID-19 related shelter-in-place orders lifted and children returned to school, we saw growth rates moderate in certain markets.
The laws and regulations concerning data privacy are continually evolving. Failure to comply with these laws and regulations could harm our business. Consumers are able to access our service offerings online through our platform. We collect and store information about our consumers both personally identifying and non-personally identifying information.
Failure to comply with these laws and regulations could harm our business. Consumers are able to access our service offerings online through our platform. We collect and store information about our consumers both personally identifying and non-personally identifying information.
We rely on a combination of patent, copyright, trademark and trade secret laws and restrictions on disclosure to protect our intellectual property rights. Further, we require every employee and consultant to execute proprietary information and invention agreements prior to commencing work.
Policing unauthorized use of proprietary technology is difficult and expensive. We rely on a combination of patent, copyright, trademark and trade secret laws and restrictions on disclosure to protect our intellectual property rights. Further, we require every employee and consultant to execute proprietary information and invention agreements prior to commencing work.
Rapid technology changes require us to anticipate, sometimes years in advance, which technologies we must develop, implement and take advantage of in order to be and remain competitive in both the content-creation and delivery market, as well as the esports gaming market.
Rapid technology changes require us to anticipate, sometimes years in advance, which technologies we must develop, implement and take advantage of in order to be and remain competitive in both the content-creation and delivery market, social media markets, and the metaverse gaming market.
New laws and regulations may be adopted from time to time to address new issues that come to the authorities’ attention. We may not timely obtain or maintain all the required licenses or approvals or make all the necessary filings in the future.
The Internet industry is increasingly subject to strict scrutiny. New laws and regulations may be adopted from time to time to address new issues that come to the authorities’ attention. We may not timely obtain or maintain all the required licenses or approvals or make all the necessary filings in the future.
Changes in the state of the U.S. economy and a return to volatile or recessionary conditions in the United States or abroad could adversely affect our business or our access to capital markets in a material manner.
Changes in the state of the U.S. economy, such as rising inflation and a return to volatile or recessionary conditions in the United States or abroad, and volatile global economic conditions in general, could adversely affect our business or our access to capital markets in a material manner.
We cannot assure you that we will succeed in any of these aspects or that the esports gaming industry will continue to grow as rapidly as it has in the past. -11- Table of Contents We generate a significant portion of our revenues from advertising and sponsorships.
We cannot assure you that we will succeed in any of these aspects or that the industry within which we operate will continue to grow as rapidly as it has in the past. We generate a significant portion of our revenues from advertising and sponsorships.
We have granted, and may continue to grant, share incentive awards, which may result in increased share-based compensation expenses. We adopted our Amended and Restated 2014 Stock Option and Incentive Plan (the “2014 Plan”) in October 2014, for purposes of granting share-based compensation awards to employees, directors and consultants to incentivize their performance and align their interests with ours.
We adopted our Amended and Restated 2014 Stock Option and Incentive Plan (the “2014 Plan”) in October 2014, for purposes of granting share-based compensation awards to employees, directors and consultants to incentivize their performance and align their interests with ours.
In the event a significant defect in our platform and associated systems and controls is realized, we could be required to offer refunds, suspend the availability of our service offerings, or expend significant resources to cure the defect, each of which could significantly harm our business and operating results.
In the event a significant defect in our platform and associated systems and controls is realized, we could be required to offer refunds, suspend the availability of our service offerings, or expend significant resources to cure the defect, each of which could significantly harm our business and operating results. 17 Table of Contents We may experience system failures, outages and/or disruptions of the functionality of our platform.
Our business relies upon our ability to cultivate and grow a robust community of creators and audience members, and our ability to successfully monetize such community through digital subscriptions, and advertising and sponsorship opportunities.
Our business relies upon our ability to cultivate and grow a robust community of developers and creators and audience members, and our ability to successfully monetize such community through advertising and direct to consumer opportunities.
If one or more of our executive officers or key employees were unable or unwilling to continue their services with us, we might not be able to replace them easily, in a timely manner, or at all.
Our future success depends substantially on the continued efforts of our executive officers and key employees. If one or more of our executive officers or key employees were unable or unwilling to continue their services with us, we might not be able to replace them easily, in a timely manner, or at all.
For example, legislative and regulatory developments, such as the European Union's General Data Protection Regulation (“GDPR”), and the California Consumer Privacy Act (“CCPA”), have impacted, and we expect will continue to impact, our ability to use such signals in our ad products.
For example, legislative and regulatory developments, such as the GDPR, and the California Consumer Privacy Act (“CCPA”), have impacted, and we expect will continue to impact, our ability to use such signals in our ad products.
Our stock price may be volatile, and you could lose all or part of your investment. The trading price of our common stock following our offering may fluctuate substantially and may be higher or lower than the initial public offering price. This may be especially true for companies with a small public float.
The trading price of our common stock may fluctuate substantially and may be higher or lower than the initial public offering price. This may be especially true for companies with a small public float.
The loss of or a substantial reduction in activity by one or more of our largest customers and/or vendors could materially and adversely affect our business, financial condition and results of operations. For the year ended December 31, 2022 (“Fiscal Year 2022”) and Fiscal Year 2021, one customer accounted for 8% and one customer accounted for 12% of revenue, respectively.
The loss of or a substantial reduction in activity by one or more of our largest customers and/or vendors could materially and adversely affect our business, financial condition and results of operations. For Fiscal Years 2023 and 2022, one customer accounted for 14% and one customer accounted for 8% of revenue, respectively.
As a result, we have devoted, and will continue to devote, significant management attention and resources to integrating acquired businesses, including those acquired in the 2021 Acquisitions.
As a result, we have devoted, and will continue to devote, significant management attention and resources to integrating acquired businesses.
Although we have entered into multi-year agreements with certain publishers, if we fail to license multiple additional “hit” games or any of our existing licensed game publishers with which we currently have a license decide to breach the license agreement or choose not to continue with us once the term of the license agreement expires, the popularity of our tournaments, competitions and content generated across our platforms may decline and the number of our users and creators may decrease, which could materially and adversely affect our results of operations and financial condition.
If we fail to license multiple additional “hit” games or any of our existing licensed game publishers with which we currently have a license decide to breach the license agreement or choose not to continue with us once the term of the license agreement expires, or if platforms on which we operate modify or restrict our access, the popularity of our experiences and content generated across platforms may decline and the number of our users and creators may decrease, which could materially and adversely affect our results of operations and financial condition. 13 Table of Contents We have not entered into definitive license agreements with certain game publishers or platforms that we currently have relationships with, and we may never do so.
In order to attract, retain and engage users and creators and remain competitive, we must continue to develop and expand our product offerings, including internationally, produce engaging tournaments and competitions, successfully license the newest “hit” esports games and titles, implement new technologies and strategies, improve features of our platform and stimulate interactions in our user community.
In order to attract, retain and engage users and creators and remain competitive, we must continue to develop and expand our product offerings, including internationally, implement new technologies and strategies, improve features of our platform and stimulate interactions in our user community.
Further, we have not undertaken independent third-party testing, verification or analysis of our platform and associated systems and controls. Therefore, our platform and quality controls and preventative measures we have implemented may not be effective in detecting all defects in our platform.
Nonetheless, these quality controls are subject to human error, overriding, and reasonable resource or technical constraints. Further, we have not undertaken independent third-party testing, verification or analysis of our platform and associated systems and controls. Therefore, our platform and quality controls and preventative measures we have implemented may not be effective in detecting all defects in our platform.
We do not have any agreements with our developers that require them to continue to use our platform for any time period. In the future, if we are unable to continue to provide value to these developers and they have alternative methods to publish and commercialize their offerings, they may not continue to provide content to our platform.
In the future, if we are unable to continue to provide value to these developers and they have alternative methods to publish and commercialize their offerings, they may not continue to provide content to our platform.
We may experience system failures, outages and/or disruptions of the functionality of our platform. Such failures, delays and other problems could harm our reputation and business, cause us to lose customers and expose us to customer liability.
Such failures, delays and other problems could harm our reputation and business, cause us to lose customers and expose us to customer liability. We may experience system failures, outages and/or disruptions of our infrastructure, including information technology system failures, network disruptions, and cloud hosting and broadband disruptions.
We plan to continue to make acquisitions and pursue other strategic transactions, which could impact our financial condition or results of operations and may adversely affect the price of our common stock.
We plan to continue to make acquisitions and pursue other strategic transactions, which could require significant management attention, disrupt our business, dilute our stockholders, impact our financial condition or results of operations, significantly harm our business, and adversely affect the price of our common stock.
In particular, the European Union and its member states traditionally have taken broader views as to types of data that are subject to privacy and data protection laws and regulations and have imposed greater legal obligations on companies in this regard.
In particular, the European Union and its member states traditionally have taken broader views as to types of data that are subject to privacy and data protection laws and regulations and have imposed greater legal obligations on companies in this regard. For example, in April 2016, European legislative bodies adopted the GDPR, which became effective on May 25, 2018.
Future issuances of debt securities, which would rank senior to our common stock upon our bankruptcy or liquidation, and future issuances of preferred stock, which would rank senior to our common stock for the purposes of dividends and liquidating distributions, may adversely affect the level of return you may be able to achieve from an investment in our common stock .
Any dilution or potential dilution may cause our stockholders to sell their shares, which may contribute to a downward movement in the stock price of our common stock. 30 Table of Contents Future issuances of debt securities, which would rank senior to our common stock upon our bankruptcy or liquidation, and future issuances of preferred stock, which would rank senior to our common stock for the purposes of dividends and liquidating distributions, may adversely affect the level of return you may be able to achieve from an investment in our common stock .
Even if an investor finds a broker willing to effect a transaction in the shares of our common stock, the combination of brokerage commissions, transfer fees, taxes, if any, and any other selling costs may exceed the selling price. Further, many lending institutions will not permit the use of low-priced shares of common stock as collateral for any loans.
Even if an investor finds a broker willing to effect a transaction in the shares of our common stock, the combination of brokerage commissions, transfer fees, taxes, if any, and any other selling costs may exceed the selling price.
We compete for users and their engagement hours with global technology leaders such as Amazon, Apple, Meta Platforms, Google, Microsoft, and Tencent, global entertainment companies such as Comcast, Disney, and ViacomCBS, online content platforms including Netflix, Spotify, and YouTube, as well as social platforms such as Facebook, Instagram, Pinterest, and Snap. -10- Table of Contents We rely on developers to create the content that leads to and maintains user engagement (including maintaining the quality of experiences).
We compete for users and their engagement hours with global technology leaders such as Amazon, Apple, Meta Platforms, Google, Microsoft, and Tencent, global entertainment companies such as Comcast, Disney, and ViacomCBS, online content platforms including Netflix, Spotify, and YouTube, as well as social platforms such as Facebook, Instagram, Pinterest, and Snap.
Preventing such unauthorized use is inherently difficult. If we are unable to prevent such unauthorized use, competitors and other third parties may continue to drive potential users and creators away from our platform to competing, irrelevant or potentially offensive platforms, which could harm our reputation and cause us to lose revenue.
If we are unable to prevent such unauthorized use, competitors and other third parties may continue to drive potential users and creators away from our platform to competing, irrelevant or potentially offensive platforms, which could harm our reputation and cause us to lose revenue. 26 Table of Contents We may not be able to prevent others from unauthorized use of our intellectual property, which could harm our business and competitive position.
However, this philosophy of putting our users and creators first may also negatively impact our relationships with advertisers, sponsors or other third parties, and may not result in the long-term benefits that we expect, in which case the success of our business and operating results could be harmed.
However, this philosophy of putting our users and creators first may also negatively impact our relationships with advertisers, sponsors or other third parties, and may not result in the long-term benefits that we expect, in which case the success of our business and operating results could be harmed. 12 Table of Contents Our revenue model may not remain effective and we cannot guarantee that our future monetization strategies will be successfully implemented or generate sustainable revenues and profit.
We may not be successful in our metaverse gaming strategy and investments, which could adversely affect our business, reputation, or financial results. We believe the metaverse, an embodied internet where people have immersive experiences beyond two-dimensional screens, is the next evolution in social technology. Our business strategy focuses on offerings within metaverse gaming.
We believe the metaverse, an embodied internet where people have immersive experiences beyond two-dimensional screens, is the next evolution in social technology. Our business strategy focuses on offerings within metaverse gaming.
If our new or enhanced services fail to engage users, marketers, or developers, or if our business plans are unsuccessful, we may fail to attract or retain users or to generate sufficient revenue, operating margin, or other value to justify our investments, and our business may be adversely affected.
If our new or enhanced services fail to engage users, marketers, or developers, or if our business plans are unsuccessful, we may fail to attract or retain users or to generate sufficient revenue, operating margin, or other value to justify our investments, and our business may be adversely affected. 15 Table of Contents We may not be successful in our metaverse gaming strategy and investments, which could adversely affect our business, reputation, or financial results.
If our users provide us with incorrect or incomplete information regarding their age or other attributes, then our estimates may prove inaccurate. -19- Table of Contents Errors or inaccuracies in our metrics or data could also result in incorrect business decisions and inefficiencies.
For example, because users self-report their dates of birth, our age demographic data may differ from our users’ actual ages. If our users provide us with incorrect or incomplete information regarding their age or other attributes, then our estimates may prove inaccurate. Errors or inaccuracies in our metrics or data could also result in incorrect business decisions and inefficiencies.
If we are not able to successfully integrate an acquisition, if we incur significantly greater costs to achieve the expected synergies than we anticipate or if activities related to the expected synergies have unintended consequences, our business, financial condition or results of operations could be adversely affected. -21- Table of Contents The preparation of our financial statements involves the use of good faith estimates, judgments and assumptions, and our financial statements may be materially affected if such good faith estimates, judgments or good faith assumptions prove to be inaccurate .
If we are not able to successfully integrate an acquisition, if we incur significantly greater costs to achieve the expected synergies than we anticipate or if activities related to the expected synergies have unintended consequences, our business, financial condition or results of operations could be adversely affected.
At December 31, 2022, three customers accounted for 33% of accounts receivable. At December 31, 2021, three customers accounted for 35% of accounts receivable. At December 31, 2022, one vendor accounted for 10% of accounts payable. At December 31, 2021, one vendor accounted for 21% of accounts payable.
At December 31, 2023, three customers accounted for 55% of accounts receivable. At December 31, 2022, three customers accounted for 33% of accounts receivable. At December 31, 2023, two vendors accounted for 37% of accounts payable. At December 31, 2022, one vendor accounted for 10% of accounts payable.
Our online platform and the services offered through our platform are extremely complex and are difficult to develop and distribute. We have quality controls in place to detect defects in our platform before they are released. Nonetheless, these quality controls are subject to human error, overriding, and reasonable resource or technical constraints.
Our online platform and services offered through our platform may contain defects. Our online platform and the services offered through our platform are extremely complex and are difficult to develop and distribute. We have quality controls in place to detect defects in our platform before they are released.
In particular, we may not be able to prevent others from developing or exploiting competing technologies and trademarks, which could have a material and adverse effect on our business operations, financial condition and results of operations.
In particular, we may not be able to prevent others from developing or exploiting competing technologies and trademarks, which could have a material and adverse effect on our business operations, financial condition and results of operations. Currently, we have one patent application pending, and 187 registered trademarks, along with certain licenses from game publishers to utilize their proprietary games.
Negative perceptions about our brand, platforms, tournaments or competitions and/or business practices may damage our business and increase the costs incurred in addressing gamer concerns. Expectations regarding the quality, performance and integrity of our service offerings are high.
Negative perceptions about our brand, or platforms, and/or business practices may damage our business and increase the costs incurred in addressing user concerns. Expectations regarding the quality, performance and integrity of our service offerings are high. Users and creators may be critical of our brand, platform, content, service offerings, and/or business practices for a wide variety of reasons.
We also may miss opportunities to adopt technology, or develop technologies, products, or services that become popular with users and creators, which could adversely affect our financial results.
We also may miss opportunities to adopt technology, or develop technologies, products, or services that become popular with users and creators, which could adversely affect our financial results. It may take significant time and resources to shift our focus to such technologies, putting us at a competitive disadvantage.
If the marketing for our service offerings fails to resonate and expand with both the gamer and metaverse community, or if advertising rates or other media placement costs increase, our business and operating results could be harmed. -12- Table of Contents We have a unique community culture that is vital to our success.
Our ability to market our service offerings is dependent in part upon the success of these programs. If the marketing for our service offerings fails to resonate and expand with both the gamer and metaverse community, or if advertising rates or other media placement costs increase, our business and operating results could be harmed.
Our independent registered public accounting firm will not be required to attest to the effectiveness of our internal control over financial reporting pursuant to Section 404 of the Sarbanes-Oxley Act until the later of the year following our first annual report required to be filed with the SEC, or the date we are no longer an “emerging growth company” as defined in the JOBS Act.
In particular, our independent registered public accounting firm is not required to attest to the effectiveness of our internal control over financial reporting pursuant to Section 404 of the Sarbanes-Oxley Act. We are an “emerging growth company” as defined in the JOBS Act.
The issuance of shares of preferred stock may also have the effect of delaying, deferring or preventing a change in control of our company without further action by the stockholders, even where stockholders are offered a premium for their shares. -28- The holders of Series A Preferred Stock are entitled to vote on an as-converted to Class A common stock basis and have rights to approve certain actions.
The issuance of shares of preferred stock may also have the effect of delaying, deferring or preventing a change in control of our company without further action by the stockholders, even where stockholders are offered a premium for their shares.
Our business and prospects depend on the continuing development of gaming-focused entertainment and content creation. The market for gaming-related content has grown significantly in recent years and continues to rapidly develop, which may present significant challenges.
Our business and prospects depend on the continuing development of leading position as a creator and publisher of content experiences and media solutions across the world’s largest immersive platforms. The market for gaming-related content has grown significantly in recent years and continues to rapidly develop, which may present significant challenges.
Because many of our services play a critical role for our community and partners, any damage to or failure of the infrastructure we rely on could disrupt or degrade the operation of our network, our platform and the provision of our services and result in the loss of current and potential community members and/or partners and harm our ability to conduct normal business operations. -17- Table of Contents We use third-party services and technologies in connection with our business, and any disruption to the provision of these services and technologies to us could result in negative publicity and a slowdown in the growth of our users, which could materially and adversely affect our business, financial condition and results of operations.
Because many of our services play a critical role for our community and partners, any damage to or failure of the infrastructure we rely on could disrupt or degrade the operation of our network, our platform and the provision of our services and result in the loss of current and potential community members and/or partners and harm our ability to conduct normal business operations.
We may not have access to “ hit ” games or titles. Select game titles dominate competitive online gaming, and many new games titles are regularly introduced in each major industry segment (console, mobile and PC free-to-download). Despite the number of new entrants, only a very few “hit” titles account for a significant portion of total revenue in each segment.
We may not have access to “ hit ” games or titles. Select game titles and platforms dominate competitive online gaming and open world gaming, and many new games titles and platforms are regularly introduced in each major industry segment (console, mobile and PC free-to-download).

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeITEM 2. PROPERTIES As of December 31, 2022 we maintain approximately 3,200 square feet of office space, 1,650 square feet of which is on a month-to-month basis, and 1,550 square feet of which is subject to a two-year lease, commencing on August 1, 2021, at a combined rate of approximately $12,000 per month.
Biggest changeITEM 2. PROPERTIES As of December 31, 2023 we maintain approximately 3,200 square feet of office space, 1,650 square feet of which is on a month-to-month basis, and 1,550 square feet of which is subject to a two-year lease, commencing on August 1, 2021, at a combined rate of approximately $12,000 per month.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeOur 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, 2022 and 2021 that were not previously reported.
Biggest changeOur ability to pay dividends may also be restricted by the terms of any future credit agreement or any future debt or preferred equity securities.
MARKET FOR REGISTRANT ’ S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Market Information and Holders Our common stock is listed on the Nasdaq Capital Market under the ticker symbol “SLGG.” As of March 22, 2023, we had 164 holders of record of our common stock based upon the records of our transfer agent, which do not include beneficial owners of common stock whose shares are held in the names of various securities brokers, dealers and registered clearing agencies.
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 “SLE.” As of April 1, 2024, we had 274 holders of record of our common stock based upon the records of our transfer agent, which do not include beneficial owners of common stock whose shares are held in the names of various securities brokers, dealers and registered clearing agencies.
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.
Recent Sales of Unregistered Equity Securities No unregistered securities were issued during the years ended December 31, 2023 and 2022 that were not previously reported. 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.
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Issuance of Common Stock as Dividends During the fourth quarter of 2023, the Company paid dividends to the holders of the Company’s Series A Convertible Preferred Stock, in the form of 232,981 shares of common stock, as further described in Note 7.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeIn addition, on January 31, 2023, we entered into subscription agreements with accredited investors in connection with the sale of an aggregate of 2,299 shares of newly designated Series A-5 Convertible Preferred Stock, par value $0.001 per share (collectively with the Series A, A-2, A-3 and A-4 Convertible Preferred Stock, the “Series A Preferred”), at a purchase price of $1,000 per share, raising net proceeds of $2,000,000, after deducting placement agent costs of $299,000.
Biggest changeEquity Financings Convertible Preferred Stock Issuances ● Series AAA Convertible Preferred Financing On the dates set forth in the applicable table below, we entered into subscription agreements with accredited investors in connection with the sale of an aggregate of 8,355 shares of newly designated Series AAA and AAA-2 Convertible Preferred Stock, each series having a $0.001 par value and a $1,000 purchase price, hereinafter collectively referred to as “Series AAA Preferred,” and the individual offerings of Series AAA Preferred stock, hereinafter collectively referred to as the “Series AAA Offerings”, raising gross proceeds of $8.4 million, before fees. ● Series AA Convertible Preferred Financing On the dates set forth in the applicable table below, we entered into subscription agreements with accredited investors in connection with the sale of an aggregate of 11,781 shares of newly designated Series AA, AA-2, AA-3, AA-4 and AA-5 Convertible Preferred Stock, each series having a $0.001 par value and a $1,000 purchase price, hereinafter collectively referred to as “Series AA Preferred,” and the individual offerings of Series AA Preferred stock hereinafter collectively referred to as the “Series AA Offerings”, raising gross proceeds of $11.8 million, before fees. ● Series A Convertible Preferred Financing On the dates set forth in the applicable table below, we entered into subscription agreements with accredited investors in connection with the sale of an aggregate of 12,622 shares of newly designated Series A, A-2, A-3, A-4 and A-5 Convertible Preferred Stock, each series having a $0.001 par value and a $1,000 purchase price, hereinafter collectively referred to as “Series A Preferred,” and the individual offerings of Series A Preferred stock, hereinafter, collectively referred to as the “Series A Offerings”, raising gross proceeds of $12.6 million, before fees.
We believe that this seasonality in advertising spending affects our quarterly results, which generally reflect relatively higher advertising revenue in second half of each year, compared to the first half of the year.
We believe that this seasonality in advertising spending affects our quarterly results, which generally reflect relatively higher advertising revenue in the second half of each year, compared to the first half of the year.
During the third and fourth quarters of Fiscal Year 2022 we made convertible note redemption payments totaling $3,782,000. As of December 31, 2022, the outstanding balance of the Notes and related accrued interest totaled $719,000, which was subsequently paid in full in the first quarter of 2023.
During the third and fourth quarters of Fiscal Year 2022 we made convertible note redemption payments totaling $3,782,000. As of December 31, 2023, the outstanding balance of the Notes and related accrued interest totaled $719,000, which was subsequently paid in full in the first quarter of 2023.
At December 31, 2022, from a qualitative standpoint, we considered the factors described above under “September 30, 2022 Goodwill Impairment Testing,” including the current period reported loss and negative cash flows from operating activities, and the sustained downturn in industry and macroeconomic conditions, including inflationary pressures and potential reductions in advertising spending and the sustained downturn of the broader mid-cap and micro-cap equity markets in the fourth quarter of Fiscal Year 2022.
At December 31, 2022, from a qualitative standpoint, we considered the factors described above under “September 30, 2022 Goodwill Impairment Testing,” including the applicable current period reported loss and negative cash flows from operating activities, and the sustained downturn in industry and macroeconomic conditions, including inflationary pressures and potential reductions in advertising spending and the sustained downturn of the broader mid-cap and micro-cap equity markets in the fourth quarter of Fiscal Year 2022.
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. -48- Table of Contents 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.
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. 56 Table of Contents 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.
Net cash used in operating activities for Fiscal Year 2022 primarily reflected our net GAAP loss for Fiscal Year 2022, net of adjustments to reconcile net GAAP loss to net cash used in operating activities, which included $50,263,000 of goodwill impairment charges, $4,263,000 of noncash stock compensation charges, depreciation and amortization of $5,403,000, and a write down of a trademark related intangible asset totaling $423,000.
Net cash used in operating activities for Fiscal Year 2022 primarily reflected our net loss for Fiscal Year 2022, net of adjustments to reconcile net loss to net cash used in operating activities, which included $50,263,000 of goodwill impairment charges, $4,263,000 of noncash stock compensation charges, depreciation and amortization of $5,403,000, and a write down of a trademark related intangible asset totaling $423,000.
We have and will continue to use significant capital for the growth and development of our business, and, as such, we expect to seek additional capital either from operations or that may be available from future issuance(s) of common stock, preferred stock and / or debt financings, to fund our planned operations.
We have and will continue to use significant capital for the growth and development of our business, and, as such, we expect to seek additional capital either from operations or that may be available from future issuance(s) of common stock or debt financings, to fund our planned operations.
As of December 31, 2022 the decline in our stock price and other factors were deemed to be sustained, and therefore a triggering event requiring a goodwill impairment test as of December 30, 2022 was deemed to have occurred.
As of December 31, 2022 the decline in our stock price and other factors were deemed to be sustained, and therefore a triggering event requiring a goodwill impairment test as of December 31, 2022 was deemed to have occurred.
Results of Operations for the Fiscal Years Ended December 31, 2022 and 2021 We derived the financial data as of and for the years ended December 31, 2022 and 2021, set forth below, from our audited consolidated financial statements included elsewhere herein, and should be read in conjunction with those audited consolidated financial statements and related notes thereto, as well as the information found under this section.
Results of Operations for the Fiscal Years Ended December 31, 2023 and 2022 We derived the financial data as of and for the Fiscal Years 2023 and 2022, set forth below, from our audited consolidated financial statements included elsewhere herein, and should be read in conjunction with those audited consolidated financial statements and related notes thereto, as well as the information found under this section.
To assess whether the decline in our market capitalization was an indicator requiring an interim goodwill impairment test, we considered the significance of the decline and the length of time our common stock has been trading at a depressed value along with the macro factors described above. The significance of the decline is consistent with the broader microcap market.
To assess whether the decline in our market capitalization was an indicator requiring an interim goodwill impairment test, we considered the significance of the decline and the length of time our common stock had been trading at a depressed value along with the macro factors described above. The significance of the decline is consistent with the broader microcap market.
Cost of Revenues Cost of revenue includes direct costs incurred in connection with the satisfaction of performance obligations under our revenue arrangements including internal and third-party engineering, creative, content, broadcast and other personnel, talent and influencers, developers, content capture and production services, direct marketing, cloud services, software, prizing, revenue sharing fees and venue fees.
Cost of Revenues Cost of revenue includes direct costs incurred in connection with the satisfaction of performance obligations under our revenue arrangements including internal and third-party engineering, creative, content, broadcast and other personnel, talent and influencers, internal and third-party game developers, content capture and production services, direct marketing, cloud services, software, prizing, and revenue sharing fees.
As disclosed at Note 6, in the event the Company consummated a subsequent equity financing during the term of the Notes, the Company is required, at the option of the Note Holders, to use 50% of the gross proceeds raised from such sale to redeem all or any portion of the Notes outstanding upon closing of such equity financing.
As disclosed at Note 6, in the event the Company consummated a subsequent equity financing during the term of the Notes, the Company was required, at the option of the Note Holders, to use 50% of the gross proceeds raised from such sale to redeem all or any portion of the Notes outstanding upon closing of such equity financing.
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.
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.
As of December 31, 2022 we maintain approximately 3,200 square feet of office space, 1,650 square feet of which is on a month-to-month basis, and 1,550 square feet of which is subject to a two-year lease, commencing on August 1, 2021.
As of December 31, 2023 we maintain approximately 3,200 square feet of office space, 1,650 square feet of which is on a month-to-month basis, and 1,550 square feet of which is subject to a two-year lease, commencing on August 1, 2021.
We utilized the market capitalization of the Company as of December 31, 2022, a Level 1 input as described above, to estimate the fair value of the Company’s single reporting unit.
We utilized the market capitalization of the Company as of December 31, 2022, a Level 1 input, to estimate the fair value of the Company’s single reporting unit.
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.
In evaluating whether it is more likely than not that the fair value of our reporting unit is less than its carrying amount, we consider the guidance set forth in FASB ASC Topic 350 - Intangibles Goodwill and Other (“ASC 350”) which requires an entity to assess relevant events and circumstances, including macroeconomic conditions, industry and market considerations, cost factors, financial performance and other relevant events or circumstances.
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 complexity of the underlying revenue arrangement and related terms and conditions, significant judgments, assumptions and estimates may be required to determine each parties rights regarding the goods or services to be transferred, each parties performance obligations, whether performance obligations are satisfied at a point in time or over time, estimates of completion methodologies, the timing of satisfaction of performance obligations, whether we are a principal or agent in the arrangement and the appropriate period or periods in which, or during which, the completion of the earnings process and transfer of control occurs.
As such, the fair value of our single reporting unit was deemed to be below its carrying value as of December 31, 2022, resulting in an additional goodwill impairment charge of $8.3 million in the fourth quarter of Fiscal Year 2022, reflecting the write down of the remaining balance of goodwill for our single reporting unit.
As such, the fair value of our single reporting unit was deemed to be below its carrying value as of December 31, 2022, resulting in an additional goodwill impairment charge of $8.3 million for the year ended December 31, 2022, reflecting the write down of the remaining balance of goodwill for our single reporting unit.
Loss contingencies considered remote are generally not disclosed unless they involve guarantees, in which case the guarantees would be disclosed. -44- Table of Contents Recent Accounting Pronouncements Refer to Note 2 to the accompany consolidated financial statements contained elsewhere in this Report.
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.
Similarly, given the Company’s recent significant growth, management does not believe that the current market capitalization of the Company is indicative of any fundamental change in the Company’s underlying business or future prospects as of the December 31, 2022 measurement date.
Similarly, given the Company’s recent significant growth, management did not believe that the December 31, 2022 market capitalization of the Company was indicative of any fundamental change in the Company’s underlying business or future prospects as of the December 31, 2022 measurement date.
On May 16, 2022, as summarized above and further described at Note 6, the Company entered into a securities purchase agreement with three institutional investors, providing for the sale and issuance of a new series of senior convertible notes in the aggregate original principal amount of $4,320,000, of which 8% is an original issue discount.
Refer to Note 6 for additional information. 52 Table of Contents Convertible Debt On May 16, 2022, as summarized above and further described at Note 6, the Company entered into a securities purchase agreement with three institutional investors, providing for the sale and issuance of a new series of senior convertible notes in the aggregate original principal amount of $4,320,000, of which 8% is an original issue discount.
The Company's stock price has been volatile, and the volatility continued during the three months ended December 31, 2022, declining 50% from the September 30, 2022 closing price to $0.336 as of December 31, 2022, reflecting a market capitalization that was approximately 46% of the Company’s December 31, 2022 net book value.
The Company's stock price had been volatile, and the volatility continued during the three months ended December 31, 2022, declining 50% from the September 30, 2022 closing price to $6.72 as of December 31, 2022, reflecting a market capitalization that was approximately 46% of the Company’s December 31, 2022 net book value.
Any Shares offered and sold in the ATM Offering were issued pursuant to our Registration Statement on Form S-3 filed with the SEC on September 7, 2021. During Fiscal Year 2022 the Company issued 323,639 shares of common stock, at an average price of $0.99, raising net proceeds of $312,000, under the Sales Agreement.
Any Shares offered and sold in the ATM Offering were issued pursuant to our Registration Statement on Form S-3 filed with the SEC on September 7, 2021. During Fiscal Year 2022 the Company issued 16,182 shares of common stock, at an average price of $19.80, raising net proceeds of $312,000, under the Sales Agreement.
We also considered that the Company experienced significant inorganic and organic growth in Fiscal Year 2021, including the impact of the acquisitions of Mobcrush, Bannerfy and Super Biz on our premium advertising inventory, product offerings to advertisers, current period revenue recognized and future revenue generating opportunities. -47- Table of Contents However, the Company's stock price has been volatile, and the volatility continued during the three months ended September 30, 2022, declining 34% to $0.68 as of September 30, 2022, reflecting a market capitalization that was approximately 38% of the Company’s September 30, 2022 net book value.
We also considered that the Company experienced significant inorganic and organic growth in the year ended December 31, 2021, including the impact of the acquisitions of Mobcrush, Bannerfy and Super Biz on our premium advertising inventory, product offerings to advertisers, applicable current period revenue recognized and future revenue generating opportunities. 55 Table of Contents However, the Company's stock price had been volatile, and the volatility continued during the three months ended September 30, 2022, declining 34% to $13.60 as of September 30, 2022, reflecting a market capitalization that was approximately 38% of the Company’s September 30, 2022 net book value.
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. -46- Table of Contents Accounting for Business Combinations Acquisition Method.
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 We account for our business combinations under the acquisition method of accounting.
Other Income (Expense) On May 16, 2022, the Company entered into a securities purchase agreement with three institutional investors providing for the sale and issuance of a new series of senior convertible notes in the aggregate original principal amount of $4,320,000 (of which 8% was an original issue discount) which accrues interest at a guaranteed annual rate of 9% per annum, as described below and at Note 6 to the consolidated financial statements elsewhere herein.
Convertible Debt On May 16, 2022, the Company entered into a securities purchase agreement with three institutional investors providing for the sale and issuance of a new series of senior convertible notes in the aggregate original principal amount of $4,320,000 (of which 8% was an original issue discount) which accrues interest at a guaranteed annual rate of 9% per annum, as described below and at Note 6.
In Fiscal Year 2022, we focused on the continued expansion of our service offerings and revenue growth opportunities through internal development, collaborations, and through opportunistic strategic acquisitions, as well as management and reduction of costs.
In Fiscal Year 2023, we acquired Melon, as described above, and focused on the continued expansion of our service offerings and revenue growth opportunities through internal development, collaborations, and through opportunistic strategic acquisitions, as well as management and reduction of costs.
Management ’ s Plans The Company experienced significant growth in Fiscal Year 2022 and Fiscal Year 2021 through organic and inorganic growth activities, including the expansion of our premium advertising inventory and quarter over quarter and year over year increases in recognized revenue across our three primary revenue streams.
Management ’ s Plans The Company experienced significant growth during the periods presented through organic and inorganic growth activities, including the expansion of our premium advertising inventory and quarter over quarter and year over year increases in recognized revenue across our primary revenue streams.
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 Impairment of Goodwill.
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.
Use of net proceeds from the Series A Offering include the repayment of certain indebtedness and working capital and general corporate purposes, including sales and marketing activities and product development.
Use of net proceeds from the Preferred Offerings include the repayment of certain indebtedness and working capital and general corporate purposes, including sales and marketing activities and product development.
For Fiscal Year 2022, net cash used in operating activities totaled $19.8 million. -39- Table of Contents To date, our principal sources of capital used to fund our operations and growth have been the net proceeds received from equity and debt financings.
For Fiscal Years 2023 and 2022, net cash used in operating activities totaled $15.5 million and $19.8 million, respectively. To date, our principal sources of capital used to fund our operations and growth have been the net proceeds received from equity and debt financings.
In management’s judgement, these conditions raise substantial doubt about the ability of the Company to continue as a going concern as contemplated by Accounting Standards Codification (“ASC”) 205-40, “Going Concern” (“ASC 205-40”).
In management’s judgement, these conditions raise substantial doubt about the ability of the Company to continue as a going concern as contemplated by FASB ASC 205-40, “Going Concern,” (“ASC 205”).
Delisting Notice On October 4, 2022, we received a letter (the “Letter”) from the Listing Qualifications Staff of The Nasdaq Stock Market, LLC (“Nasdaq”) indicating that, based upon the closing bid price of our common stock for 30 consecutive business days, the Company is not currently in compliance with the requirement to maintain a minimum bid price of $1.00 per share for continued listing on the Nasdaq Capital Market, as set forth in Nasdaq Listing Rule 5550(a)(2).
Previously, On October 4, 2022, we received a letter (the “Letter”) from the Listing Qualifications Staff of Nasdaq, indicating that, based upon the closing bid price of our common stock for 30 consecutive business days, the Company was not currently in compliance with the requirement to maintain a minimum bid price of $1.00 per share for continued listing on the Nasdaq Capital Market, as set forth in the Rule, and on April 4, 2023, we received an extension notice letter (the “Extension Notice”) from Nasdaq notifying the Company that Nasdaq has granted the Company a 180-day extension until October 2, 2023 (the “Extension Period”), to regain compliance with the Rule.
As such, the fair value of our single reporting unit was deemed to be below its carrying value as of September 30, 2022, resulting in a goodwill impairment charge of $42.0 million, which was reflected in the consolidated statement of operations for the nine months ended September 30, 2022.
As such, the fair value of our single reporting unit was deemed to be below its carrying value as of September 30, 2022, resulting in a goodwill impairment charge of $42.0 million in the third quarter of 2022, which was reflected in the consolidated statement of operations for the year ended December 31, 2022. ● December 31, 2022 Goodwill Impairment Testing At December 31, 2022, prior to the completion of our goodwill impairment testing, the goodwill balance totaled $8.3 million.
Components of our platform are available on a “free to use,” “always on basis,” and are utilized and offered as an audience acquisition tool, as a means of growing our audience, engagement, viewership, players and community. Engineering, technology and development related operating expense include the costs described below, incurred in connection with our audience acquisition and viewership expansion activities.
Engineering, Technology and Development 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.
During Fiscal Year 2022, we issued 7,425 shares of common stock pursuant to the Purchase Agreement, at an average price of $1.11, raising net proceeds of approximately $8,000, under the Purchase Agreement. -43- 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 could offer and sell, from time to time, through the Agents (the “ATM Offering”), up to $75 million of shares of our common stock (the “Shares”), as described at Note 7.
Equity Distribution Agreement On September 3, 2021, we entered into an Equity Distribution Agreement (the “Sales Agreement”) with two investment banks (the “Agents”), pursuant to which we could offer and sell, from time to time, through the Agents (the “ATM Offering”), up to $75 million of shares of our common stock (the “Shares”), as described at Note 7.
Cash Flows for the Fiscal Years Ended December 31, 2022 and 2021 The following table summarizes the change in cash and cash equivalents for the periods presented: Fiscal Year 2022 2021 Net cash used in operating activities $ (19,826,000 ) $ (22,707,000 ) Net cash used in investing activities (1,690,000 ) (4,203,000 ) Net cash provided by financing activities 9,465,000 33,501,000 Increase (decrease) in cash and cash equivalents (12,051,000 ) 6,591,000 Cash and cash equivalents, at beginning of period 14,533,000 7,942,000 Cash and cash equivalents, at end of period $ 2,482,000 $ 14,533,000 Cash Flows from Operating Activities.
See Note 6 for additional information. 49 Table of Contents Cash Flows for the Fiscal Years Ended December 31, 2023 and 2022 The following table summarizes the change in cash and cash equivalents for the periods presented: Fiscal Year Ended December 31, 2023 2022 Net cash used in operating activities $ (15,489,000 ) $ (19,826,000 ) Net cash used in investing activities (825,000 ) (1,690,000 ) Net cash provided by financing activities 21,441,000 9,465,000 Increase (decrease) in cash and cash equivalents 5,127,000 (12,051,000 ) Cash and cash equivalents, at beginning of period 2,482,000 14,533,000 Cash and cash equivalents, at end of period $ 7,609,000 $ 2,482,000 Cash Flows from Operating Activities.
As described in more detail at Note 2 to the consolidated financial statements elsewhere herein, we performed goodwill impairment tests as of September 30, 2022 and December 31, 2022, resulting in aggregate goodwill impairment charges of $50,263,000 for Fiscal Year 2022. Acquisitions.
As described in more detail at Note 2, we performed goodwill impairment tests as of September 30, 2022 and December 31, 2022, resulting in aggregate goodwill impairment charges of $50.3 million for the year ended December 31, 2022.
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.
Revenue is recognized when the Company transfers promised goods or services to customers in an amount that reflects the consideration to which the Company expects to be entitled in exchange for those goods and services and when the customer obtains control of the good or service.
The Company utilized a portion of the net proceeds for the acquisition of, or investment in, technologies, solutions or businesses. Contractual Obligations and Off-Balance Sheet Commitments and Arrangements As of December 31, 2022, we had no significant commitments for capital expenditures, nor do we have any committed lines of credit, other committed funding or long-term debt, and no guarantees.
Contractual Obligations and Off-Balance Sheet Commitments and Arrangements As of December 31, 2023, other than as described herein, we had no significant commitments for capital expenditures, nor do we have any committed lines of credit, other committed funding or long-term debt, and no guarantees.
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.
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 change in cash and cash equivalents for the periods presented reflects the impact of operating, investing and financing cash flow related activities, as described below. The accompanying consolidated financial statements have been prepared assuming the Company will continue as a going concern, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business.
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.
Management continues to explore alternatives for raising capital to facilitate our growth and execute our business strategy, including strategic partnerships and or other forms of equity or debt financings.
Management continues to explore alternatives for raising capital to facilitate our growth and execute our business strategy, including strategic partnerships and or other forms of equity or debt financings. We may continue to evaluate potential strategic acquisitions. To finance such strategic acquisitions, we may find it necessary to raise additional equity capital, incur debt, or both.
Cash flows from investing activities were comprised of the following for the periods presented: Fiscal Year 2022 2021 Cash acquired in connection with the acquisition of Mobcrush, net $ - $ 586,000 Cash paid in connection with the acquisition of Bannerfy, net - (497,000 ) Cash paid in connection with the acquisition of Super Biz, net - (3,000,000 ) Purchase of property and equipment (149,000 ) (22,000 ) Purchase of third-party game properties (500,000 ) - Capitalization of software development costs (923,000 ) (1,065,000 ) Acquisition of other intangible and other assets (118,000 ) (205,000 ) Net cash used in investing activities $ (1,690,000 ) $ (4,203,000 ) -41- Table of Contents Acquisition of Mobcrush.
Cash flows from investing activities were comprised of the following for the periods presented: Fiscal Year Ended December 31, 2023 2022 Cash paid in connection with the acquisition of Melon, net $ (150,000 ) $ - Purchase of property and equipment (8,000 ) (149,000 ) Purchase of third-party game properties - (500,000 ) Capitalization of software development costs (650,000 ) (923,000 ) Acquisition of other intangible and other assets (17,000 ) (118,000 ) Net cash used in investing activities $ (825,000 ) $ (1,690,000 ) Melon Acquisition.
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. -42- Table of Contents Purchase of Third-Party Game Property.
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. Purchase of Third-Party Game Property. In June 2022, we purchased Anime Battlegrounds X , a highly rated game on Roblox, from a third-party game developer.
Changes in working capital primarily reflected the impact of the settlement of receivables and payables in the ordinary course.
Changes in working capital primarily reflected the impact of the settlement of receivables and payables in the ordinary course and the payment of the cash portion of the Super Biz Contingent Consideration, as described above.
Any excess of the purchase price over the fair value of the net assets acquired is recorded as goodwill.
Goodwill Goodwill represents the excess of the purchase price of the acquired business over the acquisition date fair value of the net assets acquired.
We generate revenue from (i) innovative advertising including immersive game world and experience publishing and in-game media products, (ii) direct to consumer offers, including in-game items, e-commerce, game passes and ticketing and digital collectibles, and (iii) content and technology through the production and distribution of our own, advertiser and third-party content.
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. 53 Table of Contents Revenue Recognition The Company generates revenue from (i) innovative advertising including immersive game world and experience publishing and in-game media products, (ii) content and technology through the production and distribution of our own, advertiser and third-party content, and (iii) direct to consumer offers, including in-game items, e-commerce, game passes and digital collectibles.
The Company would then be entitled to appeal that determination to a Nasdaq hearings panel. -34- Table of Contents Seasonality Our revenue fluctuates quarterly and is generally higher in the second half of our fiscal year, with the fourth quarter typically representing our highest revenue quarter each year.
Seasonality Our revenue fluctuates quarterly and is generally higher in the second half of our fiscal year, with the fourth quarter typically representing our highest revenue quarter each year.
The increase also included $919,000 of product design and software development kit related revenue pursuant to a development agreement with a customer, which was completed during the first quarter of Fiscal Year 2022. ● Direct to consumer revenue for Fiscal Year 2022 increased $406,000, or 29%, compared to the comparable prior year.
Revenue for Fiscal Year 2022 included $919,000 of product design and software development kit related revenue pursuant to a development agreement with a customer.
In June 2022, we purchased Anime Battlegrounds X , a highly rated game on Roblox, from a third-party game developer. The total purchase price of $500,000 was capitalized and is being amortized to cost of revenue over the estimated useful life of 5 years. Cash Flows from Financing Activities .
The total purchase price of $500,000 was capitalized and is being amortized over the estimated useful life of 5 years. Cash Flows from Financing Activities .
We generate revenue from (i) innovative advertising including immersive game world and experience publishing and in-game media products, (ii) direct to consumer offers, including in-game items, e-commerce, game passes and ticketing and digital collectibles, and (iii) content and technology through the production and distribution of our own, advertiser and third-party content.
As an originator of new experiences fueled by a network of top developers, a comprehensive set of proprietary creator tools and a future-forward team of creative professionals, Super League accelerates IP and audience success within the fastest growing sector of the media industry. 36 Table of Contents We generate revenue from (i) innovative advertising including immersive game world and experience publishing and in-game media products, (ii) direct to consumer offers, including in-game items, e-commerce, game passes and ticketing and digital collectibles, and (iii) content and technology through the production and distribution of our own, advertiser and third-party content.
September 30, 2022 Goodwill Impairment Testing At September 30, 2022, prior to the completion of our goodwill impairment testing, the goodwill balance totaled $50.3 million.
During the year ended December 31, 2022, goodwill impairment charges totaled $50,263,000, and were comprised of the following: ● September 30, 2022 Goodwill Impairment Testing At September 30, 2022, prior to the completion of our goodwill impairment testing, the goodwill balance totaled $50,263,000.
Pursuant to the terms and subject to the conditions of the Super Biz Purchase Agreement, up to aggregate amount $11.5 million will be payable to Super Biz and the Founders in connection with the achievement of certain revenue milestones for the period from the Super Biz Closing Date until December 31, 2022 and for the fiscal year ending December 31, 2023 (the “Super Biz Contingent Consideration”).
Pursuant to the terms and subject to the conditions of the Purchase Agreement, up to an aggregate of $2,350,000 (the “Contingent Consideration”) will be payable to Melon in connection with the achievement of certain revenue milestones for the period from the Closing until December 31, 2023 (the “First Earnout Period”) in the amount of $1,000,000, and for the year ending December 31, 2024 (the “Second Earnout Period) in the amount of $1,350,000 (the “Second Earnout Period” and the First Earnout Period are collectively referred to as the “Earnout Periods”).
Cost of revenue fluctuates period to period based on the specific programs and revenue streams contributing to revenue each period and the related cost profile of our physical and digital experiences, advertising campaigns and content sales activities occurring each period.
Cost of revenue fluctuates period to period based on the specific programs and revenue streams contributing to revenue each period and the related cost profile of our physical and digital experiences, media and advertising campaigns and publishing and content studio sales activities occurring each period. 42 Table of Contents Cost of revenue increased $4.1 million, or 37%, driven primarily by the 27% increase in related revenues for the fiscal year periods presented.
Including a noncash goodwill impairment charge of $50.3 million in Fiscal Year 2022, the Company incurred net losses of $85.5 million and $20.7 million during Fiscal Year 2022 and Fiscal Year 2021, respectively, and had an accumulated deficit of $210.7 million (including Fiscal Year 2022 noncash goodwill impairment charges of $50.3 million) as of December 31, 2022.
The Company incurred net losses of $30.3 million and $85.5 million for Fiscal Year 2023 and 2022, respectively, and had an accumulated deficit of $249.0 million as of December 31, 2023. Noncash stock compensation, amortization and impairment charges for Fiscal Year 2023 and 2022 totaled $17.3 million and $60.1 million, respectively.
If these estimates or related projections change in future periods, future goodwill impairment tests may result in charges to earnings. When conducting the Company’s annual or interim goodwill impairment assessment, we initially perform a qualitative evaluation of whether it is more likely than not that goodwill is impaired.
When conducting the Company’s annual or interim goodwill impairment assessment, we have the option to initially perform a qualitative evaluation of whether it is more likely than not that goodwill is impaired. The Company is also permitted to bypass the qualitative assessment and proceed directly to the quantitative test.
We consider our market capitalization and the carrying value of our assets and liabilities, including goodwill, when performing our goodwill impairment tests. We operate in one reporting segment. If a potential impairment exists, a calculation is performed to determine the fair value of existing goodwill.
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. When conducting the Company’s annual or interim goodwill impairment assessment, we have the option to initially perform a qualitative evaluation of whether it is more likely than not that goodwill is impaired.
Cash flows from financing activities were comprised of the following for the periods presented: Fiscal Year 2022 2021 Proceeds from issuance of preferred stock, net of issuance costs (Note 7) $ 8,926,000 - Proceeds from issuance of common stock, net of issuance costs (Note 7) 320,000 $ 33,390,000 Proceeds from convertible notes, net (Note 6) 4,000,000 - Payments on convertible notes (Note 6) (3,781,000 ) - Proceeds from common stock options and purchase warrant exercises - 111,000 Net cash provided by financing activities $ 9,465,000 $ 33,501,000 Convertible Preferred Stock During the fourth quarter of Fiscal Year 2022, we entered into subscription agreements with accredited investors relating to offerings with respect to the sale of an aggregate of 10,323 shares of newly designated Series A, A-2, A-3 and A-4 Convertible Preferred Stock, each series having a $0.001 par value and a $1,000 purchase price, hereinafter collectively referred to as “Series A Preferred,” and the individual offerings of Series A Preferred stock hereinafter collectively referred to as the Series A Offerings, as follows: Date Series Designation Conversion Price Shares Gross Proceeds Fees Net Proceeds Conversion Shares Placement Agent Warrants November 22, 2022 Series A $ 0.6200 5,359 $ 5,359,000 $ 752,000 $ 4,607,000 8,644,000 1,253,000 November 28, 2022 Series A-2 $ 0.6646 1,297 1,297,000 169,000 1,128,000 1,952,000 283,000 November 30, 2022 Series A-3 $ 0.6704 1,733 1,733,000 225,000 1,508,000 2,585,000 375,000 December 22, 2022 Series A-4 $ 0.3801 1,934 1,934,000 251,000 1,683,000 5,088,000 738,000 Total 10,323 $ 10,323,000 $ 1,397,000 $ 8,926,000 18,269,000 2,649,000 Use of net proceeds from the Series A Offering include the repayment of certain indebtedness and working capital and general corporate purposes, including sales and marketing activities and product development.
Cash flows from financing activities were comprised of the following for the periods presented: Fiscal Year Ended December 31, 2023 2022 Proceeds from issuance of preferred stock, net of issuance costs $ 19,295,000 $ 8,926,000 Proceeds from issuance of common stock, net of issuance costs 1,885,000 320,000 Proceeds from convertible notes, net - 4,000,000 Payments on convertible notes (539,000 ) (3,781,000 ) Proceeds from common stock options and purchase warrant exercises 800,000 - Net cash provided by financing activities $ 21,441,000 $ 9,465,000 50 Table of Contents Equity Financings Issuances of Convertible Preferred Stock During Fiscal Years 2023 and 2022, we entered into subscription agreements with accredited investors relating to offerings with respect to the sale of an aggregate of 32,758 newly designated series of convertible preferred stock (including Series A Preferred, Series AA Preferred, and Series AAA Preferred), each series having a $0.001 par value and a $1,000 purchase price, hereinafter collectively referred to as “Convertible Preferred,” and the individual offerings of Convertible Preferred stock hereinafter collectively referred to as the Preferred Offerings, as follows: Series AAA Convertible Preferred Offerings Date Series Design- ation Conversion Price – At Issuance Shares Gross Proceeds Fees Net Proceeds Conversion Shares – At Issuance Placement Agent Warrants (1) November 30, 2023 Series AAA $ 1.674 5,377 $ 5,377,000 $ 645,000 $ 4,732,000 3,212,000 466,000 December 22, 2023 Series AAA-2 $ 1.71 2,978 2,978,000 357,000 2,621,000 1,742,000 253,000 Total 8,355 $ 8,355,000 $ 1,002,000 $ 7,353,000 4,954,000 719,000 (1) Issued upon final closing of the Series AAA Offerings, effective as of the respective closing dates.
The Company sold the shares of Series A Preferred pursuant to a Placement Agency Agreement (the “Placement Agency Agreement”) with a registered broker dealer, which acted as the Company’s exclusive placement agent (the “Placement Agent”) for the offer and sale of the Series A Preferred (the “Series A Offering”).
The Company undertook the Preferred Offerings pursuant to certain placement agency agreements (collectively, the “Placement Agency Agreements”) with Aegis Capital Corporation, a New York corporation and registered broker-dealer and member of the Financial Industry Regulatory Authority (the “Placement Agent”), which acted as the Company’s exclusive placement agent for the Offerings.
Cost of revenue increased $4,615,000, or 70%, driven primarily by, and consistent with, the 69% increase in related revenues for Fiscal Year 2022. -36- Table of Contents Operating Expense Fiscal Year Change 2022 2021 $ % Selling, marketing and advertising $ 12,036,000 $ 9,670,000 $ 2,366,000 24 % Engineering, technology and development 15,876,000 11,100,000 4,776,000 43 % General and administrative 12,094,000 9,435,000 2,659,000 28 % Contingent consideration 3,206,000 - 3,206,000 100 % Impairment of goodwill 50,263,000 - 50,263,000 100 % Total operating expense $ 93,475,000 $ 30,205,000 $ 63,270,000 209 % Noncash stock-based compensation expense for the periods presented was included in the following operating expense line items: Fiscal Year Change 2022 2021 $ % Selling, marketing and advertising $ 1,079,000 $ 934,000 $ 145,000 16 % Engineering, technology and development 389,000 288,000 101,000 35 % General and administrative 2,795,000 1,159,000 1,636,000 141 % Total noncash stock-based compensation expense $ 4,263,000 $ 2,381,000 $ 1,882,000 79 % On January 1, 2022, the Company issued 1,350,000 performance stock units (“PSUs”) under the Company’s 2014 Amended and Restated Stock Option and Incentive Plan, which vest in five equal increments of 270,000 PSUs, based on satisfaction of market related vesting conditions during the three-year period commencing on January 1, 2022, as described at Note 2 to the consolidated financial statements included elsewhere herein.
Operating Expense Fiscal Year Ended December 31, Change 2023 2022 $ % Selling, marketing and advertising $ 12,450,000 $ 12,036,000 $ 414,000 3 % Engineering, technology and development 9,500,000 15,876,000 (6,376,000 ) (40 )% General and administrative 10,258,000 12,094,000 (1,836,000 ) (15 )% Contingent consideration 1,075,000 3,206,000 (2,131,000 ) (66 )% Loss on intangible asset disposal 2,284,000 - 2,284,000 100 % Impairment of intangible assets and goodwill 7,052,000 50,263,000 (43,211,000 ) (86 )% Total operating expense $ 42,619,000 $ 93,475,000 $ (50,856,000 ) (54 )% Noncash Stock-Based Compensation Expense Noncash stock-based compensation expense for the periods presented was included in the following operating expense line items: Fiscal Year Ended December 31, Change 2023 2022 $ % Selling, marketing and advertising $ 879,000 $ 1,079,000 $ (200,000 ) (19 )% Engineering, technology and development 219,000 389,000 (170,000 ) (44 )% General and administrative 1,637,000 2,795,000 (1,158,000 ) (41 )% Total noncash stock-based compensation expense $ 2,735,000 $ 4,263,000 $ (1,528,000 ) (36 )% Modifications to Equity-Based Awards On January 1, 2022, the Company issued 67,500 performance stock units (“PSUs”) under the Company’s 2014 Amended and Restated Stock Option and Incentive Plan (the “2014 Plan”), which vest in five equal increments of 13,500 PSUs, based on satisfaction of market based vesting conditions, as described at Note 8.
On October 4, 2021 (“Super Biz Closing Date”), the Company entered into an Asset Purchase Agreement (the “Super Biz Purchase Agreement”) with Super Biz and the founders of Super Biz (the “Founders”), pursuant to which the Company acquired (i) substantially all of the assets of Super Biz, and (ii) the personal goodwill of the Founders regarding Super Biz’s business, (the “Super Biz Acquisition”).
On May 4, 2023 (the “Melon Closing Date”), we entered into an Asset Purchase Agreement (the “Purchase Agreement”) with Melon, Inc., a Delaware corporation (“Melon”), pursuant to which the Company acquired substantially all of the assets of Melon (the “Melon Assets”) (the “Melon Acquisition”).
Convertible note related interest expense for Fiscal Year 2022 totaled $670,000, which was comprised of interest expense totaling $389,000, and the amortization of original issue discount totaling $280,000. In May 2020, we entered into a forgivable loan from the U. S.
Convertible note related interest expense for Fiscal Year 2022 totaled $670,000, which was comprised of interest expense totaling $389,000, and the amortization of original issue discount totaling $280,000. 48 Table of Contents Benefit for Income Taxes In June 2023, the Company assigned the intangible assets originally acquired in connection with the Company’s acquisition of Bannerfy, Ltd.
Noncash stock compensation expense related to the PSUs totaled $2,142,000 for Fiscal Year 2022.
Noncash stock compensation expense related to the modified PSUs, which is recognized on an accelerated basis over the derived term, totaled $351,000 for Fiscal Year 2023.
As of December 31, 2022, the Company determined that it was probable that the contingency for the Initial Earn Out Period would be met in accordance with the terms of the Super Biz Purchase Agreement, and the applicable amounts were reasonably estimable, resulting in a charge to compensation expense totaling $3,206,000 (including approximately 988,000 shares of common stock valued at $0.336, the closing price of our common stock as of December 31, 2022), which is reflected in general and administrative expense in the consolidated statement of operations for the year ended December 31, 2022.
During Fiscal Year 2022, the Company determined that it was probable that the contingency for the Super Biz Earn Out Periods would be met in accordance with the terms of the Super Biz Purchase Agreement, and the applicable amounts were reasonably estimable.
On the Super Biz Closing Date, the Company paid an aggregate total of $6.0 million to Super Biz and the Founders, of which $3.0 million was paid in the form of cash and $3.0 million was paid in the form of shares of the Company’s common stock, at a per share price of $2.91, the closing price of the Company’s common stock on the Super Biz Closing Date, as reported on the Nasdaq Capital Market.
At the Closing, the Company paid an aggregate total of $900,000 to Melon (the “Closing Consideration”), of which $150,000 was paid in cash, and the remaining $750,000 was paid in the form of shares of the Company’s common stock (with a closing date fair value of $722,000), valued at $9.64 (the “Closing Share Price”), the volume weighted average price (“VWAP”) of the Company’s common stock for the five trading days immediately preceding the Melon Closing Date, as quoted on the Nasdaq Capital Market.
The following table sets forth a summary of our results of operations for the fiscal years ended December 31, 2022 and 2021: Fiscal Year Change 2022 2021 $ % REVENUE $ 19,677,000 $ 11,672,000 $ 8,005,000 69 % COST OF REVENUE 11,162,000 6,547,000 4,615,000 70 % GROSS PROFIT 8,515,000 5,125,000 3,390,000 66 % OPERATING EXPENSE Selling, marketing and advertising 12,036,000 9,670,000 2,366,000 24 % Engineering, technology and development 15,876,000 11,100,000 4,776,000 43 % General and administrative 12,094,000 9,435,000 2,659,000 28 % Contingent consideration 3,206,000 - 3,206,000 100 % Impairment of goodwill 50,263,000 - 50,263,000 100 % Total operating expense 93,475,000 30,205,000 63,270,000 209 % NET LOSS FROM OPERATIONS (84,960,000 ) (25,080,000 ) (59,880,000 ) 239 % OTHER INCOME (EXPENSE), NET (696,000 ) 1,221,000 (1,917,000 ) (157 )% Loss before benefit from income taxes (85,656,000 ) (23,859,000 ) (61,797,000 ) 259 % Benefit from income taxes 205,000 3,111,000 (2,906,000 ) (93 )% NET LOSS $ (85,451,000 ) $ (20,748,000 ) $ (64,703,000 ) 312 % -35- Table of Contents Comparison of the Results of Operations for the Fiscal Years Ended December 31, 2022 and 2021 Revenue Fiscal Year Change 2022 2021 $ % Advertising and sponsorships $ 13,957,000 $ 8,005,000 $ 5,952,000 74 % Content 3,911,000 2,264,000 1,647,000 73 % Direct to consumer 1,809,000 1,403,000 406,000 29 % $ 19,677,000 $ 11,672,000 $ 8,005,000 69 % Fiscal Year 2022 2021 Number of customers > 10% of revenue / percent of revenue - / - One / 12% By revenue category: Advertising and sponsorships - / - One / 12% ● Advertising and sponsorship revenue increased driven primarily by a $3,795,000, or 53% increase in our direct sales advertising revenue, reflecting a 21% increase in our direct sales advertising revenue generating customers, driven by the growth of our premium in-game and in-stream advertising inventory, due in part to a full twelve months of revenues related to our FY 2021 Acquisitions, and an approximately 26% increase in the related average revenue per customer for Fiscal Year 2022, as compared to the prior year comparable period.
All references to “Note,” followed by a number reference from one to twelve herein, refer to the applicable corresponding numbered footnotes to the consolidated financial statements contained elsewhere herein. 41 Table of Contents The following table sets forth a summary of our results of operations for Fiscal Years 2023 and 2022: Fiscal Year Ended December 31, Change 2023 2022 $ % REVENUE $ 25,079,000 $ 19,677,000 $ 5,402,000 27 % COST OF REVENUE 15,297,000 11,162,000 4,135,000 37 % GROSS PROFIT 9,782,000 8,515,000 1,267,000 15 % OPERATING EXPENSE Selling, marketing and advertising 12,450,000 12,036,000 414,000 3 % Engineering, technology and development 9,500,000 15,876,000 (6,376,000 ) (40 )% General and administrative 10,258,000 12,094,000 (1,836,000 ) (15 )% Contingent consideration 1,075,000 3,206,000 (2,131,000 ) (66 )% Loss on intangible asset disposal 2,284,000 - 2,284,000 100 % Impairment of intangible assets and goodwill 7,052,000 50,263,000 (43,211,000 ) (86 )% Total operating expense 42,619,000 93,475,000 (50,856,000 ) (54 )% NET LOSS FROM OPERATIONS (32,837,000 ) (84,960,000 ) (52,123,000 ) (61 )% OTHER INCOME (EXPENSE), NET 2,194,000 (696,000 ) (2,890,000 ) (415 )% Loss before benefit from income taxes (30,643,000 ) (85,656,000 ) (55,013,000 ) (64 )% Benefit from income taxes 313,000 205,000 108,000 53 % NET LOSS $ (30,330,000 ) $ (85,451,000 ) $ (55,121,000 ) (65 )% Comparison of the Results of Operations for the Fiscal Years Ended December 31, 2023 and 2022 Revenue Fiscal Year Ended December 31, Change 2023 2022 $ % Media and advertising $ 10,919,000 $ 12,122,000 $ (1,203,000 ) (10 %) Publishing and content studio 12,732,000 5,744,000 6,988,000 122 % Direct to consumer 1,428,000 1,811,000 (383,000 ) (21 %) $ 25,079,000 $ 19,677,000 $ 5,402,000 27 % Fiscal Year 2023 2022 Number of customers > 10% of revenue / percent of revenue One / 14% - / - By revenue category: Advertising and sponsorships One / 3% - / - Publishing and content studio One / 11% - / - ● Total revenue increased $5.4 million, or 27%, to $25.1 million, compared to $19.7 million in the comparable prior year period.
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.
All references to “ Note, ” followed by a number reference from one to twelve herein, refer to the applicable corresponding numbered footnotes to the consolidated financial statements contained elsewhere herein. General Super League Enterprise, Inc. is a leading creator and publisher of content experiences and media solutions across the world’s largest immersive platforms.
Amortization expense for the periods presented was included in the following operating expense line items: Fiscal Year Change 2022 2021 $ % Sales, marketing and advertising $ 2,104,000 $ 1,180,000 $ 924,000 78 % Engineering, technology and development 2,326,000 1,556,000 770,000 49 % General and administrative 1,199,000 451,000 748,000 166 % Total amortization expense $ 5,629,000 $ 3,187,000 $ 2,442,000 77 % The net increase in selling, marketing and advertising expense was primarily due to the following: ● Selling, marketing and advertising personnel costs increased $1,172,000 or 18%, driven by the addition of 11 former Mobcrush employees in connection with the acquisition of Mobcrush and organic growth in connection with the increase in our inhouse direct sales and marketing team focused on monetization and personnel in our creative and content functions.
Intangible Asset Amortization Expense Intangible asset amortization expense for the periods presented was included in the following operating expense line items: Fiscal Year Ended December 31, Change 2023 2022 $ % Sales, marketing and advertising $ 2,125,000 $ 2,104,000 $ 21,000 1 % Engineering, technology and development 2,331,000 2,326,000 5,000 - % General and administrative 782,000 1,199,000 (417,000 ) (35 )% Total amortization expense $ 5,238,000 $ 5,629,000 $ (391,000 ) (7 )% Selling, Marketing and Advertising Selling, marketing and advertising expense increased $414,000 or 3%, primarily due to the following: ● An increase in personnel costs and sales commissions totaling $1.3 million, including an increase in personnel costs totaling $608,000, in connection with the Melon Acquisition, which included the acquisition of ten former Melon full time resources, which are included in our client facing sales and marketing functions. ● The increase was partially offset by a $625,000, or 63% decrease in digital and other marketing and sales consulting expenses during Fiscal Year 2023, in connection with ongoing cost reduction and optimization activities.
Net cash used in operating activities for Fiscal Year 2021 primarily reflected our net GAAP loss for Fiscal Year 2021, net of adjustments to reconcile net GAAP loss to net cash used in operating activities, which included $2,381,000 of noncash stock compensation charges, depreciation and amortization of $3,323,000, a noncash gain totaling $1,213,000 in connection with the forgiveness of our PPP Loan in May 2021 and changes in valuation allowance and deferred income taxes totaling $3,073,000.
Net cash used in operating activities during Fiscal Year 2023, primarily reflected our net loss, net of adjustments to reconcile net loss to net cash used in operating activities, which included noncash stock compensation charges of $2,735,000, depreciation and amortization charges of $5,376,000, intangible asset impairment charges of $7,052,000, disposal of intangible asset charges of $2,284,000, net changes in fair value of warrant liabilities of ($2,898,000) and net changes in working capital of $116,000.
In connection with the Series A Offering, pursuant to the terms of the Placement Agency Agreement, the Company paid the Placement Agent an aggregate of $1,697,000 in Placement Agent fees and costs, and will issue to the Placement Agent or its designees warrants (the “Placement Agent Warrants”) to purchase 3,249,974 shares of Common Stock at a weighted average exercise price of $0.56 per share.
Pursuant to the terms of the Placement Agency Agreements, in connection with the closings of the Offerings, the Company paid the Placement Agent aggregate cash fees, and non-accountable expense allowances as disclosed in the applicable tables below, and issued to the Placement Agent or its designees warrants to purchase shares of common stock as disclosed in the tables below, at the conversion prices disclosed below.
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.
The acquisition method of accounting included the establishment of a net deferred tax liability resulting from book tax basis differences related to assets acquired and liabilities assumed on the date of acquisition.
Refer to Note 5 for additional information. Impairment of Goodwill As described at Note 2 to the consolidated financial statements elsewhere herein, we performed goodwill impairment tests as of September 30, 2022 and December 31, 2022 (“Measurement Dates”).
The impairment charge was based on the difference between the calculated fair value of the intangible assets totaling $860,000 and the carrying value of the applicable intangible assets which totaled $7,912,000 as of December 31, 2023. 47 Table of Contents Impairment of Goodwill As described at Note 2, we performed goodwill impairment tests as of September 30, 2022 and December 31, 2022 (“Measurement Dates”).
Series A Preferred Stock Financing During the fourth quarter of Fiscal Year 2022, we entered into subscription agreements with accredited investors in connection with the sale of an aggregate of 10,323 shares of newly designated Series A, A-2, A-3 and A-4 Convertible Preferred Stock, each series having a $0.001 par value and a $1,000 purchase price, raising net proceeds totaling $8,926,000, after deducting placement agent and other financing costs totaling $1,397,000.
Recent Series AAA Convertible Preferred Financing On the dates set forth in the table below, we entered into subscription agreements with accredited investors in connection with the sale and exchange of an aggregate of 8,355 shares of newly designated Series AAA and AAA-2 Convertible Preferred Stock, each series having a $0.001 par value and a $1,000 purchase price, hereinafter collectively referred to as “Series AAA Preferred,” and the individual offerings of Series AAA Preferred stock hereinafter collectively referred to as the Series AAA Offerings, as follows: Date Series Design- ation Conversion Price – At Issuance (2) Shares Gross Proceeds Fees Net Proceeds Conversion Shares – At Issuance Placement Agent Warrants (1) November 30, 2023 Series AAA $ 1.674 5,377 $ 5,377,000 $ 645,000 $ 4,732,000 3,212,000 466,000 December 22, 2023 Series AAA-2 $ 1.71 2,978 2,978,000 357,000 2,621,000 1,742,000 253,000 Total 8,355 $ 8,355,000 $ 1,002,000 $ 7,353,000 4,954,000 719,000 (1) Issued upon final closing of the Series AAA Preferred Stock offering, effective as of the respective closing dates.
General and administrative expense for the periods presented was comprised of the following: Fiscal Year Change 2022 2021 $ % Personnel costs $ 2,901,000 $ 2,460,000 $ 441,000 18 % Office and facilities 249,000 175,000 74,000 42 % Professional fees 1,247,000 1,330,000 (83,000 ) (6 )% Stock-based compensation 2,795,000 1,159,000 1,636,000 141 % Depreciation and amortization 1,306,000 524,000 782,000 149 % Other 3,596,000 3,787,000 (191,000 ) (5 )% Total general and administrative expense $ 12,094,000 $ 9,435,000 $ 2,659,000 28 % The net increase in general and administrative expense for the periods presented was primarily due to the following: ● Personnel costs increased primarily due to net increases in headcount in our finance and accounting function, human resources and operations functions. ● Noncash stock compensation expense increased primarily due to $1,665,000 of noncash stock compensation expense recorded in connection with the PSUs granted on January 1, 2022, which vest in five equal tranches based on the achievement of certain Company stock price targets, as described at Note 2 to the consolidated financial statements elsewhere herein. ● Depreciation and amortization expense included a full year of amortization of trademark, developer and influencer related intangible assets acquired in connection with the 2021 Acquisitions totaling $1,045,000 for Fiscal Year 2022. 2021 Acquisition related amortization of trademark, developer and influencer related intangible assets for Fiscal Year 2021 totaled $318,000, reflecting partial 2021 Acquisition related amortization for the period from the respective acquisition closing dates to December 31, 2021.
The net increase in engineering, technology and development costs was primarily due to the following: ● Engineering, technology and development costs decreased $6.4 million, or 40% driven primarily by a decrease in cloud services and other technology platform costs totaling $3.3 million, or 58%, and a decrease in product and engineering personnel costs totaling $2.7 million, or 39%, reflecting the impact of ongoing cost reduction and optimization activities. 44 Table of Contents General and Administrative General and administrative expense for the periods presented was comprised of the following: Fiscal Year Ended December 31, Change 2023 2022 $ % Personnel costs $ 2,605,000 $ 2,901,000 $ (296,000 ) (10 )% Office and facilities 202,000 249,000 (47,000 ) (19 )% Professional fees 798,000 1,247,000 (449,000 ) (36 )% Stock-based compensation 1,638,000 2,795,000 (1,157,000 ) (41 )% Depreciation and amortization 866,000 1,306,000 (440,000 ) (34 )% Other 4,149,000 3,596,000 553,000 15 % Total general and administrative expense $ 10,258,000 $ 12,094,000 $ (1,836,000 ) (15 )% The net decrease in general and administrative expense for the periods presented was primarily due to the following: ● Personnel costs decreased due to headcount reductions in various corporate, general and administrative functions in connection with ongoing cost reduction and optimization activities. ● Noncash stock compensation expense included in general and administrative expense decreased primarily due to a reduction in amortization of noncash stock compensation expense in connection with performance-based stock units granted on January 1, 2022, which vest based on the achievement of certain Company stock price targets, as described at Note 8, and are amortized on an accelerated basis in the earlier periods due to the utilization of a Monte Carlo simulation model to determine the estimated fair value of the equity-based award.
As a result, the Company recorded a write down of trademark related intangible assets acquired in connection with the acquisition of Mobcrush totaling $423,000, which is included as a component of amortization expense in general and administrative expense in the accompanying consolidated statement of operations for Fiscal Year 2022. -38- Table of Contents ● Other general and administrative expense decreased driven by a 38% decrease in D&O insurance premiums for the 2022-2023 policy period, which covers the period from March 2022 to February 2023.
As a result, the Company recorded a disposal of net developed technology related intangible assets acquired in connection with the acquisition of Bannerfy totaling $2,284,000, which is included in “Loss on intangible asset disposal” in the accompanying consolidated statement of operations for the year ended December 31, 2023. Intangible Asset Impairment Impairment Charges.
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. Liquidity and Capital Resources General Cash and cash equivalents totaled approximately $2.5 million and $14.5 million at December 31, 2022 and 2021, respectively.
Liquidity and Capital Resources General Cash and cash equivalents totaled approximately $7.6 million and $2.5 million at December 31, 2023 and 2022, respectively. The change in cash and cash equivalents for the periods presented reflects the impact of operating, investing and financing cash flow related activities, as described below.
The 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 were used for working capital and other general corporate purposes, including sales and marketing activities, product development and capital expenditures.
Use of net proceeds from the Common Stock Offering for the periods presented included working capital and general corporate purposes, including sales and marketing activities and product development. 40 Table of Contents The Firm Securities were offered, issued, and sold pursuant to a prospectus supplement and accompanying prospectus filed with the Securities and Exchange Commission (the “SEC”) pursuant to an effective shelf registration statement filed with the SEC on Form S-3 (File No. 333-259347) (the “Registration Statement”) under the Securities Act of 1933, as amended (the “Securities Act”), as supplemented by a prospectus supplement, dated August 23, 2023, relating to the Securities (together with the accompanying base prospectus, dated September 7, 2021, the “Prospectus Supplement”), filed with the SEC pursuant to Rule 424(b) of the Securities Act on August 23, 2023.
Removed
General Super League Gaming, Inc. is a leading publisher of games, monetization tools and content channels across metaverse gaming platforms that empower developers, energize players, and entertain fans.
Added
From open gaming powerhouses such as Roblox, Minecraft and Fortnite Creative, to bespoke worlds built using the most advanced 3D creation tools, Super League’s innovative solutions provide incomparable access to massive audiences who gather in immersive digital spaces to socialize, play, explore, collaborate, shop, learn and create.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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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.
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The Company believes that, of the significant accounting policies described herein, the accounting policies associated with revenue recognition, impairment of intangibles, stock-based compensation expense, capitalized internal-use-software costs, accounting for business combinations and related contingent consideration, accounting for convertible debt, including estimates and assumptions used to calculate the fair value of debt instruments, accounting for convertible preferred stock, including modifications and exchanges of equity and equity-linked instruments, accounting for warrant liabilities and accounting for income taxes and valuation allowances against net deferred tax assets, require its most difficult, subjective, or complex judgments and estimates.

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