SUPER LEAGUE GAMING, INC. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (form 10-Q)

References in this Quarterly Report on Form 10-Q to "Super League Gaming, Inc."
"Company," "we," "us," "our," or similar references mean Super League Gaming,
Inc. References to the "SEC" refer to the U.S. Securities and Exchange
Commission.



Forward-Looking Statements



You should read the following discussion and analysis of our financial condition
and results of operations in conjunction with our condensed consolidated
financial statements and the related notes included elsewhere in this interim
report. Our condensed consolidated financial statements have been prepared in
accordance with U.S. GAAP. The following discussion and analysis contains
forward-looking statements within the meaning of Section 27A of the Securities
Act of 1933, as amended (the "Securities Act") and Section 21E of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), including, without
limitation, statements regarding our expectations, beliefs, intentions or future
strategies that are signified by the words "expect," "anticipate," "intend,"
"believe," or similar language. All forward-looking statements included in this
document are based on information available to us on the date hereof, and we
assume no obligation to update any such forward-looking statements. Our business
and financial performance are subject to substantial risks and uncertainties.
Actual results could differ materially from those projected in the
forward-looking statements. In evaluating our business, you should carefully
consider the information set forth under the heading "Risk Factors" included
Part I, Item 1A of our Annual Report on Form 10-K for the year ended
December 31, 2021, as well as in Item II, Part 1A of this Quarterly Report on
Form 10-Q (this "Report"). Readers are cautioned not to place undue reliance on
these forward-looking statements.



Overview



Super League Gaming, Inc. (Nasdaq: SLGG) builds and operates networks of games,
monetization tools and content channels across open-world gaming platforms that
empower developers, energize players, and entertain fans. Our solutions provide
incomparable access to an audience consisting of players in the largest global
metaverse environments, fans of hundreds of thousands of gaming influencers, and
viewers of gameplay content across major social media and digital video
platforms. Fueled by proprietary and patented technology systems, the Company's
platform includes access to vibrant in-game communities, a leading metaverse
advertising platform, a network of highly viewed channels and original shows on
Instagram, TikTok, Snap, YouTube, and Twitch, cloud-based livestream production
tools, and an award-winning esports invitational tournament series. The
Company's properties deliver powerful opportunities for brands and advertisers
to achieve impactful insights and marketing outcomes with gamers of all ages.



We generate revenue from (i) advertising, serving as a marketing channel for
brands and advertisers to reach their target audiences of gamers across our
network, (ii) content, curating and distributing esports and gaming-centric
entertainment content for our own network of digital channels and media and
entertainment partner channels, and (iii) direct to consumer offers, including
digital subscriptions, in-game digital goods, and gameplay access fees. We
operate in one reportable segment to reflect the way management and our chief
operating decision maker review and assess the performance of the business.



Matters Affecting Comparability

During fiscal year 2021, we completed the acquisitions described below under the
heading, “FY 2021 Acquisitions.”



Executive Summary



During the second quarter of 2022, we continued our growth trajectory,
highlighted by reaching over 70 million unique monthly players through our
metaverse gaming network. Our challenge, and opportunity, is to capture the
significant shift in the digital advertising market toward in-game advertising.
We continued to strengthen our leadership position in video game experiences and
entertainment by winning a larger share of advertisers' wallets, further
monetizing our sought-after premium advertising inventory, and adding new
partners to expand our global network sales fleet.



Our continued focus on topline revenue growth resulted in second quarter 2022
revenue of $4.3 million, up nearly 300%, compared to $1.1 million in the second
quarter of 2021, driven by strong percentage increases in our advertising and
sponsorship and direct to consumer revenue streams. Second quarter 2022 cost of
revenue was $2.5 million compared to $533,000 in the comparable prior year
quarter, primarily reflecting the significant increase in related revenue,
compared to the prior year quarter. As a percent of revenue, gross profit in the
second quarter of 2022 was 43% compared to 51% in the prior year quarter,
reflecting a full quarter of Mobcrush related influencer marketing revenue which
on average has higher direct cost profiles.



Total operating expense in the second quarter of 2022 were $10.6 million
compared to $6.9 million in the comparable prior year quarter, and included
increased personnel costs, and intangible asset amortization expense associated
with our FY 2021 M&A activities. Operating expense in the second quarter of 2022
included noncash amortization of intangible assets, totaling $1.3 million
compared to $505,000 in the second quarter of 2021, reflecting a full quarter of
amortization of intangible assets acquired in connection with our fiscal year
2021 acquisitions, compared to one month of amortization in the comparable prior
year quarter. Noncash stock compensation charges for the second quarter of 2022
totaled $1.0 million compared to $561,000 in the second quarter of 2021.



On a GAAP-basis, which includes the impact of noncash charges and credits, net
loss in the second quarter of 2022 was $8.7 million, or $(0.24) per share,
compared to a net loss of $2.0 million, or $(0.07) per share, in the comparable
prior year quarter. Second quarter 2021 GAAP net loss included a noncash gain on
debt extinguishment totaling $1.2 million and a noncash gain related to a
partial release of tax related valuation allowances totaling $3.1 million.
Excluding the impact of these noncash gains, the net loss for the second quarter
of 2021 was $6.3 million or $(0.23) per share.





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FY 2021 Acquisitions


Fiscal year 2021 acquisitions were comprised of the following:

? We acquired Mobcrush, effective June 1, 2021. We believe the acquisition of

Mobcrush will enable us to provide brands, advertisers, and other consumer

facing businesses with significant audience reach across the most important

engagement channels, providing livestream and video on demand social media

audience reach through a network of mid-tier social media influencers.

? In August 2021, we completed the acquisition of Bannerfy which reinforces

our commitment to helping creators monetize their fan base as they seek to

turn their passion into their livelihood and provides brands with access to

additional premium inventory from creators through the Company, to establish

organic connections with their fans and followers. Based in the United

Kingdom, and having already onboarded a strong roster of European gaming

creators and brand partners, and as the first international acquisition by

      the Company, Bannerfy represents another path to expansion of our
      advertising and sponsorship partner base.



? On October 4, 2021, we completed the acquisition of Bloxbiz Co. (doing

business as, and hereinafter referred to as “Superbiz”), a dynamic

advertising platform designed specifically for metaverse environments.

Superbiz’s initial deployment enables brands to advertise across popular

Roblox game titles and helps Roblox creators with monetization and game

analytics. Superbiz’s advertising platform reaches more than 70 million

monthly active Roblox users across a collection of more than 150 curated,

brand-safe games. In-game ads take the form of creative billboards that

complement the gaming experience, allowing for natural discovery without

interrupting gameplay. The ads are measured through Superbiz’s advanced

technology, which verifies viewability in a 3D space and provides aggregated

audience geographic, language, and device data. The acquisition allows us to

execute on our strategic plans to extend our existing and expanding presence

      and reach in the metaverse






During the six months ended June 30, 2022, we also focused on continuing to
forge strategic partnerships to create a global reseller network to augment our
direct salesforce efforts. These partners have breadth and depth across all of
the significant industry verticals along with global geographic coverage, which
we believe will facilitate the acceleration of the rollout and awareness for our
innovative ad products and drive the acceleration of future monetization.



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Impact of COVID-19 Pandemic



The novel coronavirus and actions taken to mitigate the spread of it have had
and are expected to continue to have an adverse impact on the economies and
financial markets of many countries, including the geographical areas in which
the Company operates. On March 27, 2020, the Coronavirus Aid, Relief, and
Economic Security Act ("CARES Act") was enacted to among other provisions,
provide emergency assistance for individuals, families and businesses affected
by the coronavirus pandemic. It is unknown how long the adverse conditions
associated with the coronavirus will last and what the complete financial effect
will be to the Company.



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



For a discussion of the risk factors related to COVID-19, please refer to Part
II, Item 1A.""Risk Factor"" in our Annual Report on Form 10-K for the year ended
December 31, 2021.


Results of Operations for the Three and Six Months ended June 30, 2022 and 2021

The following table sets forth a summary of our results of operations for the
three and six months ended June 30, 2022 and 2021 (dollars in thousands):



                       Three Months                                          Six Months
                      Ended June 30,                Change                 Ended June 30,                 Change
                     2022         2021          $            %           2022          2021           $            %
REVENUE            $  4,279     $  1,084     $  3,195         295 %    $   

8,047 $ 1,872 $ 6,175 330 %
COST OF REVENUE 2,458 533 1,925 361 % 4,367

           875        3,492         399 %
GROSS PROFIT          1,821          551        1,270         230 %        3,680           997        2,683         269 %
OPERATING
EXPENSE
Selling,
marketing and
advertising           3,001        1,934        1,067          55 %        5,735         3,417        2,318          68 %
Engineering,
technology and
development           4,570        2,497        2,073          83 %        8,780         4,100        4,680         114 %
General and
administrative        2,993        2,433          560          23 %        5,869         4,419        1,450          33 %
Total operating
expense              10,564        6,864        3,700          54 %       20,384        11,936        8,448          71 %
NET LOSS FROM
OPERATIONS           (8,743 )     (6,313 )     (2,430 )        38 %      (16,704 )     (10,939 )     (5,765 )        53 %
OTHER INCOME
(EXPENSE), NET           23        1,214       (1,191 )       (98 )%          22         1,215       (1,193 )        98 %
Loss before
benefit from
income taxes         (8,720 )     (5,099 )     (3,621 )        71 %      (16,682 )      (9,724 )     (6,958 )        72 %
Benefit from
income taxes              -        3,073       (3,073 )       100 %           46         3,073       (3,027 )        99 %
NET LOSS           $ (8,720 )   $ (2,026 )   $ (6,694 )       330 %    $ (16,636 )   $  (6,651 )   $ (9,985 )       150 %



Comparison of the Results of Operations for the Three and Six Months ended June
30, 2022
and 2021

Revenue (dollars in thousands)




                      Three Months                                      Six Months
                     Ended June 30,              Change               Ended June 30,              Change
                    2022        2021          $           %          2022        2021          $           %
Advertising and
sponsorships       $ 3,518     $   485     $ 3,033         625 %    $ 5,374     $   928     $ 4,446         479 %
Content sales          288         365         (77 )       (21 )%     1,693         646       1,047         162 %
Direct to
consumer               473         234         239         102 %        980         298         682         229 %
                   $ 4,279     $ 1,084     $ 3,195         295 %    $ 8,047     $ 1,872     $ 6,175         330 %








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                                                  Three Months                    Six Months
                                                 Ended June 30,                 Ended June 30,
                                               2022           2021            2022            2021
Number of customers > 10% of revenue /
percent of revenue                            Two/ 46%       One/ 15%       Three/ 36%           -
By revenue category:
Advertising and sponsorships                  Two/ 46%            -           Two/ 25%           -
Content Sales                                      -              -           One/ 11%
Direct to consumer                                 -         One/ 15%              -             -



Three Months Ended June 30, 2022, Compared to the Three Months Ended June 30,
2021
:

? Advertising and sponsorship revenue increased primarily due to a 36% increase

in our direct sales advertising revenue generating customers, driven by our

growing, premium in-game and in-stream advertising inventory, due in part to

the FY 2021 Acquisitions, and an approximately 560% increase in the average

revenue per customer, for the three months ended June 30, 2022, as compared to

    the prior year comparable quarter.



? Content sales revenue decreased 21% during the three months ended June 30,

2022 primarily due to a decrease in average content sales revenue per

customer, which was partially offset by an increase in content sales revenue

generating customers. Content sales revenue for the three months ended June

30, 2022 were primarily comprised of broadcast and or gameplay projects with

Endemol Shine North America, a division of Banijay, Topgolf Entertainment

Group, iHeartMedia + Entertainment, Inc., Bytedance Pte. Ltd, Viacom

International Inc., and Hamilton IP, LLC. During the three months ended June

30, 2021, content sales revenue was primarily comprised of broadcast and or

gameplay projects with Endemol Shine North America, a division of Banijay, AVY

Entertainment (DBA Tempo Storm), Aftershock Media Group, Topgolf Entertainment

    Group, Hitbox, LLC d/b/a Next Generation Esports and GenG.



? Direct to consumer revenue for the three months ended June 30, 2022 increased

$239,000, or 102%, compared to the comparable prior year quarter. Direct to

consumer revenue, prior to the acquisition of Mobcrush in June 2021, was

primarily comprised of revenue generated from our Minehut digital property,

which provides various Minecraft server hosting services on a subscription

basis and other digital goods to the Minecraft gaming community.

Mobcrush generates direct to consumer in-game platform sales revenue through

the sale of digital goods, including cosmetic items, durable goods, player

ranks and game modes, within our Mineville and Pixel Paradise gaming servers,

which leverage the flexibility of the Microsoft Minecraft Bedrock platform,

are powered by our InPvP cloud architecture technology, and represent two of

the seven official Microsoft Minecraft partner servers. Revenue is generated

when transactions are facilitated between Microsoft and the end user, either

    via in-game currency or cash.



Six Months Ended June 30, 2022, Compared to the Three Months Ended June 30,
2021
:

? Advertising and sponsorship revenue increased primarily due to a 29% increase

in our direct sales advertising revenue generating customers, driven by our

growing, premium in-game and in-stream advertising inventory, due in part to

the FY 2021 Acquisitions, and an approximately 445% increase in the average

revenue per customer, for the six months ended June 30, 2022, as compared to

    the prior year comparable period.



? Content sales revenue increased primarily due to a 111% increase in content

sales revenue generating customers, and a 68% increase in average content

sales revenue per customer and included broadcast and or gameplay projects

with Twitch Interactive, Topgolf Entertainment Group, Aftershock Media Group,

iHeartMedia + Entertainment, Inc., Bytedance Pte. Ltd, Viacom International

Inc., and Hamilton IP, LLC. 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

    2022



? Direct to consumer revenue for the six months ended June 30, 2022 increased

$682,000, or 229%, compared to the comparable prior year quarter, due

primarily to a full six months of direct to consumer in-game platform sales

    revenue within our Mineville and Pixel Paradise gaming servers, which was
    acquired in June 2021.






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Cost of Revenue (dollars in thousands)




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, content capture and production services,
direct marketing, cloud services, software, prizing, revenue sharing fees and
venue fees. Cost of revenue fluctuates period to period based on the specific
programs and revenue streams contributing to revenue each period and the related
cost profile of our physical and digital experiences, advertising campaigns and
content sales activities occurring each period



Three Months Ended June 30, 2022, Compared to the Three Months ended June 30,
2021
:

? Cost of revenue increased $1,925,000, or 361%, due primarily to the 295%

    increase in related revenue for the same period.


? The greater than proportionate increase in cost of revenue was primarily due

to the impact of a full quarter of Mobcrush related direct sales advertising

revenue with higher direct cost profiles during the three months ended June

30, 2022, compared to one-month of Mobcrush related direct sales advertising

    revenue in the comparable prior year quarter.



Six Months Ended June 30, 2022, Compared to the Six Months Ended June 30, 2021:

? Cost of revenue increased $3,492,000, or 399%, relatively consistent with the

    330% increase in related revenue for the same period.


? Cost of revenue increased primarily due to the increase in related revenue for

    the six-month periods presented.



Operating Expense (dollars in thousands)

Refer to the table summarizing our results of operations for the three and six
months ended June 30, 2022 and 2021 above.

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



                           Three Months                                              Six Months
                          Ended June 30,                   Change                  Ended June 30,                    Change
                        2022           2021            $            %            2022           2021             $             %
Sales, marketing
and advertising      $   251,000     $ 237,000     $  14,000            6 %   $   481,000     $ 420,000     $    61,000           15 %

Engineering,

technology and
development               74,000        24,000        50,000          208 % 

263,000 57,000 206,000 361 %
General and
administrative

           675,000       300,000       375,000          125 %     1,355,000       495,000         860,000          174 %
Total noncash
stock compensation
expense              $ 1,000,000     $ 561,000     $ 439,000           78 %   $ 2,099,000     $ 972,000     $ 1,127,000          116 %




On January 1, 2022, the Company issued 1,350,000 performance stock units
("PSUs") under the Company's 2014 Amended and Restated Stock Option and
Incentive Plan, which vest in five equal increments of 270,000 PSUs, based on
satisfaction of market related vesting conditions during the three-year period
commencing on January 1, 2022, as described at Note 2 to the consolidated
financial statements included elsewhere herein. A market condition is reflected
in the grant-date fair value of an award, and therefore, a Monte Carlo
simulation model is utilized to determine the estimated fair value of the
equity-based award. Compensation cost is recognized for awards with a market
condition, provided the requisite service period is satisfied, regardless of
whether the market condition is ever satisfied. Noncash stock compensation
expense related to the PSUs totaled $564,000 and $1,121,000 for the three and
six months ended June 30, 2022.







                                      -30-
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Selling, Marketing and Advertising.

Three Months Ended June 30, 2022, Compared to the Three Months Ended June 30,
2021
:

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

? Increase in personnel costs associated with the acquisition of Mobcrush and

the addition of a total of 11 former Mobcrush employees, effective June 1,

    2021, to our direct sales function.



  ? In addition to the impact on personnel costs arising from the Mobcrush

Acquisition, the change reflects a net increase since the end of the prior

year comparable quarter of approximately 14 net full-time employees in

connection with the increase in our inhouse direct sales and marketing team

focused on monetization and personnel in our creative and content functions.

? The increase in selling, marketing and advertising expense also included the

amortization of partner, customer and advertiser related intangible assets

acquired in connection with the FY 2021 Acquisitions totaling $526,000 for the

three months ended June 30, 2022. FY 2021 Acquisition related amortization of

partner, customer and advertiser related intangible assets for the three

    months ended June 30, 2021 totaled $151,000.



Six Months Ended June 30, 2022, Compared to the Six Months Ended June 30, 2021:

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

? Increase in personnel costs associated with the acquisition of Mobcrush and

the addition of a total of 11 former Mobcrush employees, effective June 1,

    2021, to our direct sales function.



  ? In addition to the impact on personnel costs arising from the Mobcrush

Acquisition, the change reflects a net increase since the end of the prior

year comparable quarter of approximately 14 net full-time employees in

connection with the increase in our inhouse direct sales and marketing team,

focused on monetization and personnel in our creative and content functions.

? The increase in selling, marketing and advertising expense also included the

amortization of partner, customer and advertiser related intangible assets

acquired in connection with the FY 2021 Acquisitions totaling $1,052,000 for

the six months ended June 30, 2022. FY 2021 Acquisition related amortization

of partner, customer and advertiser related intangible assets for the six

    months ended June 30, 2021 totaled $151,000.



Engineering, Technology and Development.




Components of our platform are available on a "free to use," "always on basis,"
and are utilized and offered as an audience acquisition tool, as a means of
growing our audience, engagement, viewership, players and community.
Engineering, technology and development related operating expense include the
costs described below, incurred in connection with our audience acquisition and
viewership expansion activities. Engineering, technology and development related
operating expense includes (i) allocated internal engineering personnel expense,
including salaries, noncash stock compensation, taxes and benefits, (ii)
third-party contract software development and engineering expense, (iii)
internal use software cost amortization expense, and (iv) technology platform
related cloud services, broadband and other platform expense, incurred in
connection with our audience acquisition and viewership expansion activities,
including tools and product offering development, testing, minor upgrades and
features, free to use services, corporate information technology and general
platform maintenance and support. Capitalized internal use software development
costs are amortized on a straight-line basis over the software's estimated
useful life.



Three Months Ended June 30, 2022, Compared to the Three Months Ended June 30,
2021
:

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

? Increase in personnel costs associated with the FY 2021 Acquisitions which

included an acquisition date increase in engineering and product function

    personnel totaling 16 full-time employees, effective June 1, 2021.



  ? In addition to the impact on personnel costs arising from the FY 2021

Acquisitions, the change reflects a net increase since the end of the prior

year comparable quarter of approximately 14 net full-time employees in

connection with the increase in our inhouse product and engineering functions.

? The increase in engineering, technology and development costs for the three

months ended June 30, 2022 also reflected an increase in cloud services and

other technology platform costs totaling $448,000, primarily reflecting costs

resulting from our FY 2021 Acquisitions, as well as the continued strong

    engagement across our digital properties.


? The increase also included the amortization of developed technology related

intangible assets acquired in connection with the FY 2021 Acquisitions

totaling $337,000 for the three months ended June 30, 2022. FY 2021

Acquisition related amortization of developed technology related intangible

    assets for the three months ended June 30, 2021 totaled $63,000.




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Six Months Ended June 30, 2022, Compared to the Six Months Ended June 30, 2021:

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

? Increase in personnel costs associated with the FY 2021 Acquisitions which

included an increase in engineering and product function personnel totaling 16

    full-time employees, effective June 30, 2021.



  ? In addition to the impact on personnel costs arising from the FY 2021

Acquisitions, the change reflects a net increase since the end of the prior

year comparable quarter of approximately 14 net full-time employees in

connection with the increase in our inhouse product and engineering functions.

? The increase in engineering, technology and development costs for the three

months ended June 30, 2022 also reflected an increase in cloud services and

other technology platform costs totaling $1,452,000, primarily reflecting

costs resulting from our FY 2021 Acquisitions, as well as continued strong

    engagement across our digital properties.


? The increase also included the amortization of developed technology related

intangible assets acquired in connection with the FY 2021 Acquisitions

totaling $674,000 for the six months ended June 30, 2022. FY 2021 Acquisition

related amortization of developed technology related intangible assets for the

    six months ended June 30, 2021 totaled $63,000.




General and Administrative.



General and administrative expense for the periods presented was comprised of
the following (dollars in thousands):




                      Three Months                                      Six Months
                     Ended June 30,              Change               Ended June 30,              Change
                    2022        2021          $           %          2022        2021          $           %
Personnel costs    $   729     $   532     $   197          37 %    $ 1,304     $   993     $   311          31 %
Office and
facilities              63          28          35         125 %        130          55          75         136 %
Professional
fees                   322         389         (67 )       (17 )%       745         846        (101 )       (12 )%
Stock-based
compensation           676         300         376         125 %      1,356         495         861         174 %
Depreciation and
amortization           227          89         138         155 %        457         140         317         226 %
Other                  976       1,095        (119 )       (11 )%     1,877       1,890         (13 )        (1 )%
Total general
and
administrative
expense            $ 2,993     $ 2,433     $   560          23 %    $ 5,869     $ 4,419     $ 1,450          33 %



A summary of the main drivers of the change in general and administrative
expense for the periods presented is as follows:

For the Three Months Ended June 30, 2022, Compared to the Three Months Ended
June 30, 2021:

? Personnel costs increased primarily due to a slight increase in headcount in

    our finance and accounting function.



? Office and facilities expense increased due to the lease of 1,550 square feet

of collaboration space, commencing August 1, 2021, which is subject to a

    two-year lease.




? Professional fees costs decreased primarily due to legal, audit, advisory,

financial and tax due diligence related professional fees, totaling $159,000,

incurred in connection with the acquisition of Mobcrush in the second quarter

of 2021. In accordance with the acquisition method of accounting,

acquisition-related costs incurred are expensed as incurred in the period that

the services are performed. Professional fees for the three months ended June

30, 2022 include debt financing costs of $123,000 which are expensed as

incurred in connection with electing the fair value option to account for the

    underlying convertible debt instrument issued. Refer to Note 5 to the
    consolidated financial statements contained elsewhere herein.



? Noncash stock compensation expense included in general and administrative

expense increased $375,000, primarily due to the discretionary grant of

incentive equity-based awards to personnel in connection with the FY 2021

Acquisitions totaling $42,000, and noncash stock compensation amortization in

connection with 1,350,000 performance-based stock units granted on January 1,

    2022, described above.




  ? Depreciation and amortization expense increased due primarily to the

amortization of trademark, developer and influencer related intangible assets

acquired in connection with the FY 2021 acquisitions, totaling $165,000.

? Other general and administrative expense decreased primarily due to 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 well as a decrease in

proxy and annual shareholder meeting expense totaling $154,000, which was

comprised of proxy solicitation, printing and mailing costs incurred in

connection with our 2021 Annual Shareholders Meeting, which included, among

other proposals, our proposal requesting our stockholders to approve of the

Mobcrush related common stock issuance in connection with the Merger, in order

to comply with Listing Rule 5635 of the Nasdaq Stock Market. The decrease was

partially offset by an increase in general and administrative software costs,

including Mobcrush related general and administrative software costs, travel

    and entertainment costs and other corporate fees.






                                      -32-
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For the Six Months Ended June 30, 2022, Compared to the Six Months Ended June
30, 2021
:

? Personnel costs increased primarily due to a slight increase in headcount in

our finance and accounting function.

? Office and facilities expense increased due to the lease of 1,550 square

feet of collaboration space, commencing August 1, 2021, which is subject to

a two-year lease.

? Noncash stock compensation expense included in general and administrative

expense increased primarily due to the net annual and discretionary grant of

incentive equity-based awards to employees in May 2022, in connection with

our board-approved compensation and retention programs, and the

discretionary grant of incentive equity-based awards to personnel in

connection with the FY 2021 Acquisitions in June 2021, and noncash stock

compensation amortization in connection with 1,350,000 performance based

stock units granted on January 1, 2022, which vest in five equal tranches of

270,000 based on the achievement of certain Company stock price targets as

described at Note 2 to the condensed consolidated financial statements

      elsewhere herein.



   ?  Depreciation and amortization expense increased due primarily to the

amortization of trademark, developer and influencer related intangible

      assets acquired in connection with the FY 2021 acquisitions, totaling
      $330,000.



Liquidity and Capital Resources



General



Cash and cash equivalents totaled approximately $7.1 million and $14.5 million
at June 30, 2022 and December 31, 2021, respectively. The change in cash and
cash equivalents for the periods presented reflects the impact of operating,
investing and financing cash flow related activities as described below.



The accompanying condensed 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. We incurred net losses of $8.7 million and $16.6 million during the
three and six months ended June 30, 2022, respectively, and had an accumulated
deficit of $141.9 million as of June 30, 2022. For the three and six months
ended June 30, 2022, net cash used in operating activities totaled $3.9 million
and $10.2 million, respectively.



To date, our principal sources of capital used to fund our operations and growth
have been the net proceeds received from equity and debt financings. We have and
will continue to use significant capital for the growth and development of our
business, and, as such, we expect to seek additional capital either from
operations or that may be available from future issuance(s) of common stock or
debt financings, to fund our planned operations. Accordingly, our results of
operations and the implementation of our long-term business strategies have been
and could continue to be adversely affected by general conditions in the global
economy, including conditions that are outside of our control. The most recent
global financial crisis caused by severe geopolitical conditions, including
conflicts abroad, and the lingering effects of COVID-19 and threats of other
outbreaks, have resulted in extreme volatility, disruptions and downward
pressure on stock prices and trading volumes across the capital and credit
markets in which we traditionally operate. A severe or prolonged economic
downturn could result in a variety of risks to our business and could have a
material adverse effect on us, including limiting our ability to obtain
additional funding from the capital and credit markets. In management's
judgement, these conditions raise substantial doubt about the ability of the
Company to continue as a going concern as contemplated by ASC 205-40, "Going
Concern."



Management's Plans



The Company experienced significant growth in fiscal year 2021 through organic
and inorganic growth activities, including the expansion of our premium
advertising inventory and quarter over quarter and year over year increases in
recognized revenue across our three primary revenue streams. In 2022, we are
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 is currently exploring several 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.





                                      -33-
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Securities Purchase Agreement



On May 16, 2022, the Company entered into a SPA with three institutional
investors (collectively, the "Note Holders") providing for the sale and issuance
of a new series of senior convertible notes in the aggregate original principal
amount of $4,320,000, of which 8% is an original issue discount (each, a "Note,"
and, collectively, the "Notes," and such financing, the "Note Offering"). Each
Note will accrue interest at a guaranteed annual rate of 9% per annum, mature 12
months from the date of issuance, and is convertible at the option of the Note
Holders into that number of shares of the Company's common stock, equal to the
sum of the outstanding principal balance, accrued and unpaid interest, and
accrued and unpaid late charges (the "Conversion Amount"), divided by $4.00,
subject to adjustment upon the occurrence of certain events as more specifically
set forth in the Note; provided, however, in no event will the Company be
permitted to issue more than 19.99% of the shares of Common Stock issued and
outstanding immediately prior to the Note Offering, which number of shares shall
be reduced, on a share-for-share basis, by the number of shares of common Stock
issued or issuable pursuant to any transaction or series of transactions that
may be aggregated with the Note Offering.



In addition, the Company may be required to redeem all or a portion of the Notes
under certain circumstances, and, in the event (a) the Company sells Company
common stock, then the Note Holders will have the right, but not the obligation,
to require the Company to use 50% of the gross proceeds raised from such sale to
redeem all or any portion of the Conversion Amount then remaining under the
Notes, in cash, at a price equal to the Conversion Amount being redeemed. The
Company may, at its option, redeem all or a portion of the Notes at a price
equal to 110% of the Conversion Amount being redeemed.



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


Common Stock Purchase Agreement




On March 25, 2022, we entered into a Purchase Agreement with Tumim, pursuant to
which we have the right, but not the obligation, to sell to Tumim, and Tumim is
obligated to purchase up to the Total Commitment from time to time during the
term of the Purchase Agreement. As consideration for Tumim's commitment to
purchase shares of common stock under the Purchase Agreement, we issued to Tumim
50,000 shares of common stock, valued at $100,000, following the execution of
the Purchase Agreement.



The Purchase Agreement initially precludes us from issuing and selling more than
7,361,833 shares of our common stock, including the Commitment Shares, which
number equals 19.99% of our common stock issued and outstanding as of March 25,
2022, unless we obtain stockholder approval to issue additional shares, or
unless certain exceptions apply. In addition, a beneficial ownership limitation
in the agreement initially limits us from directing Tumim to purchase shares of
common stock if such purchases would result in Tumim beneficially owning more
than 4.99% of the then-outstanding shares of our common stock (subject to an
increase to 9.99% at Tumim's option upon at least 61 calendar days' notice). See
Note 6 to the condensed consolidated financial statements contained elsewhere in
this Report for additional information about the Tumim Offering.



Equity Distribution Agreement



On September 3, 2021, we entered into an Equity Distribution Agreement with two
investment banks, pursuant to which we may offer and sell, from time to time,
through the Agents, up to $75 million of its shares of our common stock. Any
Shares offered and sold in the ATM Offering will be issued pursuant to our
Registration Statement on Form S-3 filed with the SEC on September 7, 2021.



Subject to the terms and conditions of the Sales Agreement, the Agents will use
their commercially reasonable efforts to sell the Shares from time to time,
based upon our instructions. Under the Sales Agreement, the Agents may sell the
Shares by any method permitted by law deemed to be an "at-the-market" offering
as defined in Rule 415 promulgated under the Securities Act of 1933, as amended
(the "Securities Act"), including, without limitation, sales made directly on
the Nasdaq Capital Market, on any other existing trading market for our common
stock or to or through a market maker. The Agents may also sell Shares in
privately negotiated transactions, provided that the Agents receive our prior
written approval.



                                      -34-
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We have no obligation to sell any of the Shares and may at any time suspend
offers under the Sales Agreement. The ATM Offering will terminate upon the
earlier of (a) the sale of all of the Shares, (b) the termination by the mutual
written agreement of the managing agent and the Company, or (c) November 16,
2022, one year from the date that the Form S-3 was declared effective by the
SEC.


Under the terms of the Sales Agreement, the Agents will be entitled to an
aggregate commission at a fixed rate of 3.0% of the gross sales price of Shares
sold under the Sales Agreement.




We intent to use the net proceeds from any "at-the-market" offering, if any,
primarily for working capital and general corporate purposes, including sales
and marketing activities, product development and capital and acquisition
related expenditures. We may also use a portion of the net proceeds for the
acquisition of, or investment in, technologies, solutions or businesses. As of
the date of this Report, there have been no sales of any Shares in connection
with the ATM Offering.



We may continue to evaluate potential strategic acquisitions. To finance such
strategic acquisitions, we may find it necessary to raise additional equity
capital, incur debt, or both. Any efforts to seek additional funding could be
made through issuances of equity or debt, or other external financing. However,
additional funding may not be available on favorable terms, or at all. The
capital and credit markets have experienced extreme volatility and disruption
periodically and such volatility and disruption may occur in the future. If we
fail to obtain additional financing when needed, we may not be able to execute
our business plans which, in turn, would have a material adverse impact on our
financial condition, our ability to meet our obligations, and our ability to
pursue our business strategies.



Cash Flows for the Six Months ended June 30, 2022 and 2021

The following table summarizes the change in cash balances for the periods
presented (dollars in thousands):



                                                       Six Months Ended
                                                           June 30,
                                                      2022          2021
Net cash used in operating activities               $ (10,247 )   $ (9,925 )
Net cash used in investing activities                  (1,221 )          1
Net cash provided by financing activities               4,004       33,437
(Decrease) Increase in cash                            (7,464 )     23,513

Cash and cash equivalents, at beginning of period 14,533 7,942
Cash and cash equivalents, at end of period $ 7,069 $ 31,455

Cash Flows from Operating Activities.




Net cash used in operating activities during the six months ended June 30, 2022,
primarily reflected our net GAAP loss for the six months ended June 30, 2022
of ($16,636,000), net of adjustments to reconcile net GAAP loss to net cash used
in operating activities totaling $6,399,000, which included $2,099,000 of
noncash stock compensation charges and depreciation and amortization of
$2,701,000. Net cash used in operating activities during the six months ended
June 30, 2021 was $9,925,000, which primarily reflected our net GAAP loss for
the six months ended June 30, 2021 of ($6,651,000), net of adjustments to
reconcile net GAAP loss to net cash used in operating activities
of ($3,274,000), which included $972,000 of noncash stock compensation charges,
depreciation and amortization of $801,000, a noncash gain totaling $1,213,000 in
connection with the forgiveness of our PPP Loan in May 2021 and changes in
valuation allowance totaling $3,073,000. Changes in working capital for the
periods presented reflected the impact of the settlement of receivables and
payables in the ordinary course.



Cash Flows from Investing Activities.

Cash flows from investing activities were comprised of the following for the
periods presented (dollars in thousands):



                                                          Six Months Ended
                                                              June 30,
                                                           2022         2021
Cash acquired in connection with Merger with Mobcrush            -        

586

Purchase of property and equipment                            (153 )      (11 )
Purchase of third-party game properties                       (500 )        -
Capitalization of software development costs                  (497 )     (437 )
Acquisition of other intangible and other assets               (71 )     (137 )
Net cash used in investing activities                   $   (1,221 )   $    1






                                      -35-
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During the three months ended June 30, 2022, the Company purchased Anime
Battlegrounds X, one of the highest rated games on Roblox, from a third-party
game developer. Total purchase price of $500,000 was capitalized and amortized
to cost of revenue over the applicable useful life of 5 years.



Capitalized Internal Use Software Costs.




Software development costs incurred to develop internal-use software during the
application development stage are capitalized and amortized on a straight-line
basis over the software's estimated useful life, which is generally three years.
Software development costs incurred during the preliminary stages of development
are charged to expense as incurred. Maintenance and training costs are charged
to expense as incurred. Upgrades or enhancements to existing internal-use
software that result in additional functionality are capitalized and amortized
on a straight-line basis over the applicable estimated useful life.



Acquisition of Mobcrush.



On June 1, 2021, we completed the acquisition of Mobcrush pursuant to which we
acquired all of the issued and outstanding shares of Mobcrush. At closing, the
Company issued to the former stockholders of Mobcrush an aggregate total
of 12,067,571 shares of Company Common Stock and reserved an aggregate total
of 514,633 shares of Company Common Stock for issuance pursuant to stock options
to be granted to Mobcrush employees retained in connection with the Merger,
resulting in a total of 12,582,204 shares of Company Common Stock issued and
reserved as consideration for the Merger. Upon completion of the merger,
Mobcrush became a wholly owned subsidiary of the Company. Refer to Note 4 to the
consolidated condensed financial statements herein for information regarding
assets acquired and liabilities assumed in connection with the Mobcrush Merger.



Cash Flows from Financing Activities.

Cash flows from financing activities were comprised of the following for the
periods presented (dollars in thousands):



                                                Three Months Ended
                                                     June 30,
                                                2022           2021

Proceeds from issuance of common stock, net $ 8 $ 33,399
Proceeds from convertible notes, net

              4,000             -
Payments on convertible notes                        (4 )           -
Proceeds from stock option exercises                  -            38

Net cash provided by financing activities $ 4,004 $ 33,437




Equity Financings.


During the six months ended June 30, 2022, we issued 7,425 shares of common
stock at an average price of $1.11, raising net proceeds of approximately
$8,000, under the Purchase Agreement.

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

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




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



The offerings described above were made pursuant to an effective shelf
registration statement on Form S-3, which was originally filed with the
Securities and Exchange Commission on April 10, 2020 (File No. 333-237626). The
net proceeds from these offerings are intended to be used for working capital
and other general corporate purposes, including sales and marketing activities,
product development and capital expenditures. The Company may also use a portion
of the net proceeds for the acquisition of, or investment in, technologies,
solutions or businesses.





                                      -36-
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Key Performance Indicators.


The primary KPIs used by management on a consolidated basis to assess our
progress and drive revenue growth, which is also a key performance indicator,
are as follows:

? Views and Impressions: During the three months ended June 30, 2022, we

generated approximately 3.0 billion views and impressions, compared to 1.1

billion views and impressions during the three months ended June 30, 2021.

This continued growth in views results in the growth of our total and

monetizable advertising inventory, which we believe will drive an increasing

    number of brands and advertisers to our audience and platform.



? Monthly Active Users: As of June 30, 2022, we reached combined monthly active

users of over 70.0 million, which includes our extended reach in the metaverse

through our owned and operated property Minehut and our Mineville and Pixel

Paradise Minecraft partner servers, as compared to monthly active users of 3.0

    million as of June 30, 2021.



? Gameplay Hours: During the three months ended June 30, 2022, we generated

approximately 242.0 million hours of gameplay, as compared to approximately

28.0 million hours of gameplay during the three months ended June 30, 2021. We

continue to focus on ways we can repackage and distribute this significant

    derivative content library for further monetization.




Contractual Obligations



As of June 30, 2022, except as described below and at Note 5 to the condensed
consolidated financial statements elsewhere herein, we had no significant
commitments for capital expenditures, nor do we have any committed lines of
credit, noncancelable operating leases obligations, other committed funding or
long-term debt, and no guarantees. In June 2020, we terminated the lease for the
majority of our corporate headquarters (approximately 4,965 square feet). As of
June 30, 2022 we maintain approximately 3,200 square feet of office space, 1650
square feet of which is on a month-to-month basis, and 1550 square feet of which
is subject to a two-year lease, commencing on August 1, 2021. The following
table lists our material known future cash commitments as of June 30, 2022
(dollars in thousands):



                                                                   Payments Due by Period
                                                                                                     More than 3
                                             Total          Less than 1 year        1-3 years           years
Operating lease                            $       87       $              80                 7                 -
Insurance premium financing                $      649       $             649                 -                 -
Total contractual obligations              $      736       $             729                 7                 -



Off-Balance Sheet Commitments and Arrangements




We have not entered into any off-balance sheet financial guarantees or
other off-balance sheet commitments to guarantee the payment obligations of any
third parties. We have not entered into any derivative contracts that are
indexed to our shares and classified as stockholder's equity or that are not
reflected in our condensed consolidated financial statements included elsewhere
herein. Furthermore, we do not have any retained or contingent interest in
assets transferred to an unconsolidated entity that serves as credit, liquidity
or market risk support to such entity. We do not have any variable interest in
any unconsolidated entity that provides financing, liquidity, market risk or
credit support to us or engages in leasing, hedging or product development
services with us.



Contingencies



Certain conditions may exist as of the date the condensed consolidated financial
statements are issued, which may result in a loss to the Company, but which will
only be resolved when one or more future events occur or fail to occur. The
Company's management, in consultation with its legal counsel as appropriate,
assesses such contingent liabilities, and such assessment inherently involves an
exercise of judgment. In assessing loss contingencies related to legal
proceedings that are pending against the Company or unasserted claims that may
result in such proceedings, the Company, in consultation with legal counsel,
evaluates the perceived merits of any legal proceedings or unasserted claims, as
well as the perceived merits of the amount of relief sought or expected to be
sought therein. If the assessment of a contingency indicates it is probable that
a material loss has been incurred and the amount of the liability can be
estimated, then the estimated liability would be accrued in the Company's
condensed consolidated financial statements. If the assessment indicates a
potentially material loss contingency is not probable, but is reasonably
possible, or is probable, but cannot be estimated, then the nature of the
contingent liability, together with an estimate of the range of possible loss,
if determinable and material, would be disclosed. Loss contingencies considered
remote are generally not disclosed unless they involve guarantees, in which case
the guarantees would be disclosed.



Recent Accounting Pronouncements

Refer to Note 2 to the accompany condensed consolidated financial statements
contained elsewhere in this Report.

                                      -37-
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Critical Accounting Estimates



Our unaudited interim condensed consolidated financial statements have been
prepared in accordance with accounting principles generally accepted in the
United States of America. Preparation of these condensed consolidated statements
requires management to make judgments and estimates. Some accounting policies
have a significant impact on amounts reported in these condensed consolidated
financial statements. The SEC has defined a company's critical accounting
policies as the ones that are most important to the portrayal of a company's
financial condition and results of operations, and which require a company to
make its most difficult and subjective judgments. A summary of significant
accounting policies and a description of accounting policies that are considered
critical may be found in the audited financial statements and notes thereto
included in our Annual Report on Form 10-K for the year ended December 31, 2021,
filed with the SEC on March 31, 2022. In addition, refer to Note 2 to the
condensed consolidated financial statements included in this Report. The
following accounting policies were identified during the current period, based
on activities occurring during the current period, as critical and requiring
significant judgments and estimates.



Revenue Recognition



Revenue is recognized when we transfer promised goods or services to customers
in an amount that reflects the consideration to which we expect to be entitled
in exchange for those goods and services. In this regard, revenue is recognized
when: (i) the parties to the contract have approved the contract (in writing,
orally, or in accordance with other customary business practices) and are
committed to perform their respective obligations; (ii) the entity can identify
each party's rights regarding the goods or services to be transferred; (iii) the
entity can identify the payment terms for the goods or services to be
transferred; (iv) the contract has commercial substance (that is, the risk,
timing, or amount of the entity's future cash flows is expected to change as a
result of the contract);and (v) it is probable that the entity will collect
substantially all of the consideration to which it will be entitled in exchange
for the goods or services that will be transferred to the customer.



Transaction prices are based on the amount of consideration to which we expect
to be entitled in exchange for transferring promised goods or services to a
customer, excluding amounts collected on behalf of third parties, if any. We
consider the explicit terms of the revenue contract, which are typically written
and executed by the parties, our customary business practices, the nature,
timing, and the amount of consideration promised by a customer, in connection
with determining the transaction price for our revenue arrangements.



We report revenue on a gross or net basis based on management's assessment of
whether we act as a principal or agent in the transaction and is evaluated on a
transaction-by-transaction basis. To the extent we act as the principal, revenue
is reported on a gross basis net of any sales tax from customers, when
applicable. The determination of whether we act as a principal or an agent in a
transaction is based on an evaluation of whether we control the good or service
prior to transfer to the customer. Where applicable, we have determined that it
acts as the principal in all of its advertising and sponsorships, content and
direct to consumer revenue streams, except in situations where we utilize a
reseller partner with respect to direct advertising sales arrangements.



We generate revenue from (i) advertising, serving as a marketing channel for
brands and advertisers to reach their target audiences of gamers across our
network, (ii) content, curating and distributing esports and gaming-centric
entertainment content for our own network of digital channels and media and
entertainment partner channels and (iii) direct to consumer offers including
digital subscriptions, in-game digital goods, and gameplay access fees.



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

Advertising and Sponsorships:




Advertising revenue primarily consists of direct sales activity along with sales
of programmatic display and video advertising units to third-party advertisers
and exchanges. Advertising arrangements typically include contract terms for
time periods ranging from several days to several weeks in length.



For advertising arrangements that include performance obligations satisfied over
time, customers typically simultaneously receive and consume the benefits under
the arrangement as we satisfy our performance obligations, over the applicable
contract term. As such, revenue is recognized over the contract term based upon
estimates of progress toward complete satisfaction of the contract performance
obligations (typically utilizing a time, effort or delivery-based method of
estimation). Revenue from shorter term advertising arrangements that provide for
a contractual delivery or performance date is recognized when performance is
substantially complete and or delivery occurs. Payments are typically due from
customers during the term of the arrangement for longer-term campaigns, and once
delivery is complete for shorter-term campaigns.



                                      -38-
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Sponsorship revenue arrangements may include exclusive or non-exclusive title
sponsorships, marketing benefits, official product status exclusivity, product
visibly and additional infrastructure placement, social media rights, rights to
on-screen activations and promotions, display material rights, media rights,
hospitality and tickets and merchandising rights. Sponsorship revenue also
includes revenue pursuant to arrangements with brand and media partners, retail
venues, game publishers and broadcasters that allow our partners to run amateur
esports experiences, and or capture specifically curated gameplay content that
is customized for our partners' distribution channels. Sponsorship arrangements
typically include contract terms for time periods ranging from several weeks or
months to terms of twelve months in length.



For sponsorship arrangements that include performance obligations satisfied over
time, customers typically simultaneously receive and consume the benefits under
the agreement as we satisfy our performance obligations, over the applicable
contract term. As such, revenue is recognized over the contract term based upon
estimates of progress toward complete satisfaction of the contract performance
obligations (typically utilizing a time, effort or delivery-based method of
estimation). Payments are typically due from customers during the term of the
arrangement.



Revenue from sponsorship arrangements for one-off branded experiences and/or the
development of content tailored specifically for our partners' distribution
channels that provide for a contractual delivery or performance date, is
recognized at a point in time, when performance is substantially complete and or
delivery occurs.



Content Sales:



Content-related revenue is generated in connection with our curation and
distribution of esports and entertainment content for our own network of digital
channels and media and entertainment partner channels. We distribute three
primary types of content for syndication and licensing, including: (1) our own
original programming content, (2) user generated content ("UGC"), including
online gameplay and gameplay highlights, and (3) the creation of content for
third parties utilizing our remote production and broadcast technology.



For content arrangements that include performance obligations satisfied over
time, customers typically simultaneously receive and consume the benefits under
the arrangement as we satisfy our performance obligations, over the applicable
contract term. As such, revenue is recognized over the contract term based upon
estimates of progress toward complete satisfaction of the contract performance
obligations (typically utilizing a time, effort or delivery-based method of
estimation). Revenue from shorter-term content sales arrangements that provide
for a contractual delivery or performance date is recognized when performance is
substantially complete and or delivery occurs. Payments are typically due from
customers during the term of the arrangement for longer-term campaigns, and once
delivery is complete for shorter-term campaigns.



Direct to Consumer:


Direct to consumer revenue primarily consists of digital subscription fees,
in-game digital goods, and gameplay access fees. Subscription revenue is
recognized in the period the services are rendered. Payments are typically due
from customers at the point of sale.




Platform Generated Sales Transactions. Our Mobcrush subsidiary generates in-game
Platform sales revenue via digital goods sold within the platform, including
cosmetic items, durable goods, player ranks and game modes, leveraging the
flexibility of the Microsoft Minecraft Bedrock platform, and powered by the
InPvP cloud architecture technology platform. Revenue is generated when
transactions are facilitated between Microsoft and the end user, either via
in-game currency or cash.



Revenue for digital goods sold on the platform is recognized when Microsoft (our
partner) collects the revenue and facilitates the transaction on the platform.
Revenue for such arrangements includes all revenue generated, bad debt, make
goods, and refunds of all transactions managed via the platform by Microsoft.
The revenue is recognized on a monthly basis. Payments are made to the Company
monthly based on the reconciled sales revenue generated.





We make estimates and judgments when determining whether we will collect
substantially all of the consideration to which we will be entitled in exchange
for the goods or services that will be transferred to the customer. We assess
the collectability of receivables based on several factors, including past
transaction history and the creditworthiness of our customers. If it is
determined that collection is not reasonably assured, amounts due are recognized
when collectability becomes reasonably assured, assuming all other revenue
recognition criteria have been met, which is generally upon receipt of cash for
transactions where collectability may have been an issue. Management's estimates
regarding collectability impact the actual revenue recognized each period and
the timing of the recognition of revenue. Our assumptions and judgments
regarding future collectability could differ from actual events and thus
materially impact our financial position and results of operations.



                                      -39-
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Depending on the complexity of the underlying revenue arrangement and related
terms and conditions, significant judgments, assumptions and estimates may be
required to determine each parties rights regarding the goods or services to be
transferred, each parties performance obligations, whether performance
obligations are satisfied at a point in time or over time, estimates of
completion methodologies, the timing of satisfaction of performance obligations,
and the appropriate period or periods in which, or during which, the completion
of the earnings process occurs. Depending on the magnitude of specific revenue
arrangements, if different judgments, assumptions and estimates are made
regarding revenue arrangements in any specific period, our periodic financial
results may be materially affected.



Accounting for Business Combinations




Acquisition Method.  Acquisitions that meet the definition of a business
under ASC 805 are accounted for using the acquisition method of accounting.
Under the acquisition method of accounting, assets acquired, liabilities
assumed, contractual contingencies, and contingent consideration, when
applicable, are recorded at fair value at the acquisition date. Any excess of
the purchase price over the fair value of the net assets acquired is recorded as
goodwill. The application of the acquisition method of accounting requires
management to make significant estimates and assumptions in the determination of
the fair value of assets acquired and liabilities assumed in connection with the
allocation of the purchase price consideration to the assets acquired and
liabilities assumed. Transaction costs associated with business combinations are
expensed as incurred and are included in general and administrative expense in
the consolidated statements of operations. Contingent consideration, if any, is
recognized and measured at fair value as of the acquisition date.



Cost Accumulation Model.  Acquisitions that do not meet the definition of a
business under ASC 805 are accounted for as an asset acquisition, utilizing a
cost accumulation model. Assets acquired and liabilities assumed are recognized
at cost, which is the consideration the acquirer transfers to the seller,
including direct transaction costs, on the acquisition date. The cost of the
acquisition is then allocated to the assets acquired based on their relative
fair values. Goodwill is not recognized in an asset acquisition. Direct
transaction costs include those third-party costs that can be directly
attributable to the asset acquisition and would not have been incurred absent
the acquisition transaction.



Contingent consideration, representing an obligation of the acquirer to transfer
additional assets or equity interests to the seller if future events occur or
conditions are met, is recognized when probable and reasonably estimable.
Contingent consideration recognized is included in the initial cost of the
assets acquired, with subsequent changes in the recorded amount of contingent
consideration recognized as an adjustment to the cost basis of the acquired
assets. Subsequent changes are allocated to the acquired assets based on their
relative fair value. Depreciation and/or amortization of adjusted assets are
recognized as a cumulative catch-up adjustment, as if the additional amount of
consideration that is no longer contingent had been accrued from the outset of
the arrangement.



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



Goodwill



Goodwill represents the excess of the purchase price of the acquired business
over the acquisition date fair value of the net assets acquired. Goodwill is
tested for impairment at the reporting unit level (operating segment or one
level below an operating segment) on an annual basis (December 31) and between
annual tests if an event occurs or circumstances change that would more likely
than not reduce the fair value of a reporting unit below its carrying value. We
consider our market capitalization and the carrying value of our assets and
liabilities, including goodwill, when performing our goodwill impairment tests.
We operate in one reporting segment.



If a potential impairment exists, a calculation is performed to determine the
fair value existing goodwill. This calculation can be based on quoted market
prices and / or valuation models, which consider the estimated future
undiscounted cash flows resulting from the reporting unit, and a discount rate
commensurate with the risks involved. Third-party appraised values may also be
used in determining whether impairment potentially exists. In assessing goodwill
impairment, significant judgment is required in connection with estimates of
market values, estimates of the amount and timing of future cash flows, and
estimates of other factors that are used to determine the fair value of our
reporting unit. If these estimates or related projections change in future
periods, future goodwill impairment tests may result in charges to earnings.



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When conducting the Company's annual or interim goodwill impairment assessment,
we initially perform a qualitative evaluation of whether it is more likely than
not that goodwill is impaired. In evaluating whether it is more likely than not
that the fair value of our reporting unit is less than its carrying amount, we
consider the guidance set forth in ASC 350 which requires an entity to assess
relevant events and circumstances, including macroeconomic conditions, industry
and market considerations, cost factors, financial performance and other
relevant events or circumstances. From a qualitative standpoint, we considered
the Company's history of reported losses and negative cash flows from operating
activities, along with the downturn in macroeconomic conditions and the broader
mid-cap and micro-cap equity markets in late 2021. We also considered that the
Company experienced significant inorganic and organic growth in fiscal 2021,
including the impact of the acquisitions of Mobcrush, Bannerfy and Superbiz on
our premium advertising inventory, product offerings to advertisers, current
period revenue recognized and future revenue generating opportunities. Given
that the Company's significant growth occurred recently, and the relatively
short period of time between the commencement of the downturn in macroeconomic
and general equity market conditions as of December 31, 2021, management
believes that the reduction in prices of our common stock, consistent with the
broader market, is not other-than-temporary and not indicative of any
fundamental change in the value or prospects of the underlying business as of
the measurement date. There was no change to this assessment as of June 30,
2022.



At June 30, 2022, we reported goodwill of $50.3 million. Based on the
qualitative analysis, the Company concluded that goodwill was not “more likely
than not” impaired as of June 30, 2022.

Relaxed Ongoing Reporting Requirements




Upon the completion of our initial public offering, we elected to report as an
"emerging growth company" (as defined in the JOBS Act) under the reporting rules
set forth under the Exchange Act. For so long as we remain an "emerging growth
company," we may take advantage of certain exemptions from various reporting
requirements that are applicable to other Exchange Act reporting companies that
are not "emerging growth companies," including but not limited to:



? not being required to comply with the auditor attestation requirements of

      Section 404 of the Sarbanes-Oxley Act;



? taking advantage of extensions of time to comply with certain new or revised

      financial accounting standards;



? being permitted to comply with reduced disclosure obligations regarding

      executive compensation in our periodic reports and proxy statements; and




   ?  being exempt from the requirement to hold a non-binding advisory vote on

executive compensation and stockholder approval of any golden parachute

      payments not previously approved.




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



We expect to take advantage of these reporting exemptions until we are no longer
an emerging growth company. We will remain an "emerging growth company" for up
to five years, although if the market value of our Common Stock that is held by
non-affiliates exceeds $700 million as of any June 30 before that time, we would
cease to be an "emerging growth company" as of the following December 31.

© Edgar Online, source Glimpses

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