Mon. Feb 6th, 2023

References on this Quarterly Report on Kind 10-Q to “Tremendous League Gaming, Inc.”
“Firm,” “we,” “us,” “our,” or comparable references imply Tremendous League Gaming,
Inc. References to the “SEC” discuss with the U.S. Securities and Alternate
Fee.

Ahead-Wanting Statements

It’s best to learn the next dialogue and evaluation of our monetary situation
and outcomes of operations along side our condensed consolidated
monetary statements and the associated notes included elsewhere on this interim
report. Our condensed consolidated monetary statements have been ready in
accordance with U.S. GAAP. The next dialogue and evaluation incorporates
forward-looking statements inside the which means of Part 27A of the Securities
Act of 1933, as amended (the “Securities Act”) and Part 21E of the Securities
Alternate Act of 1934, as amended (the “Alternate Act”), together with, with out
limitation, statements relating to our expectations, beliefs, intentions or future
methods which might be signified by the phrases “count on,” “anticipate,” “intend,”
“consider,” or comparable language. All forward-looking statements included on this
doc are based mostly on info accessible to us on the date hereof, and we
assume no obligation to replace any such forward-looking statements. Our enterprise
and monetary efficiency are topic to substantial dangers and uncertainties.
Precise outcomes might differ materially from these projected within the
forward-looking statements. In evaluating our enterprise, it is best to rigorously
contemplate the data set forth underneath the heading “Danger Elements” included
Half I, Merchandise 1A of our Annual Report on Kind 10-Ok for the yr ended
December 31, 2021, in addition to in Merchandise II, Half 1A of this Quarterly Report on
Kind 10-Q (this “Report”). Readers are cautioned to not place undue reliance on
these forward-looking statements.

Overview

Tremendous League Gaming, Inc. (Nasdaq: SLGG) builds and operates networks of video games,
monetization instruments and content material channels throughout open-world gaming platforms that
empower builders, energize gamers, and entertain followers. Our options present
incomparable entry to an viewers consisting of gamers within the largest world
metaverse environments, followers of a whole bunch of hundreds of gaming influencers, and
viewers of gameplay content material throughout main social media and digital video
platforms. Fueled by proprietary and patented expertise programs, the Firm’s
platform consists of entry to vibrant in-game communities, a number one metaverse
promoting platform, a community of extremely seen channels and unique exhibits on
Instagram, TikTok, Snap, YouTube, and Twitch, cloud-based livestream manufacturing
instruments, and an award-winning esports invitational match sequence. The
Firm’s properties ship highly effective alternatives for manufacturers and advertisers
to realize impactful insights and advertising and marketing outcomes with avid gamers of all ages.

We generate income from (i) promoting, serving as a advertising and marketing channel for
manufacturers and advertisers to succeed in their goal audiences of avid gamers throughout our
community, (ii) content material, curating and distributing esports and gaming-centric
leisure content material for our personal community of digital channels and media and
leisure companion channels, and (iii) direct to client gives, together with
digital subscriptions, in-game digital items, and gameplay entry charges. We
function in a single reportable section to mirror the best way administration and our chief
working determination maker overview and assess the efficiency of the enterprise.

Issues Affecting Comparability

Throughout fiscal yr 2021, we accomplished the acquisitions described under underneath the
heading, “FY 2021 Acquisitions” (collectively, the FY 2021 Acquisitions”).

Government Abstract

Through the third quarter of 2022, we continued our development trajectory,
highlighted by reaching over 70 million distinctive month-to-month gamers by way of our
metaverse gaming community. Our problem, and alternative, is to seize the
vital shift within the digital promoting market towards in-game promoting.
We continued to strengthen our management place in online game experiences and
leisure by successful a bigger share of advertisers’ wallets, additional
monetizing our sought-after premium promoting stock, and including new
companions to broaden our world community gross sales fleet.

Our continued concentrate on topline income development resulted in third quarter 2022
income of $4.5 million, a rise of 25%, in comparison with $3.6 million within the
third quarter of 2021, pushed by robust share will increase in our promoting
and sponsorship income stream. Third quarter 2022 value of income was $2.7
million in comparison with $2.3 million within the comparable prior yr quarter, primarily
reflecting the numerous improve in associated income, in comparison with the prior
yr quarter. As a p.c of income, gross revenue within the third quarter of 2022
was 40% in comparison with 38% within the prior yr quarter.

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Desk of Contents

Complete working expense within the third quarter of 2022, excluding noncash goodwill
impairment costs totaling $42.0 million (Notice 2) and accrued contingent
consideration associated to FY 2021 Acquisitions totaling $1.8 million (Notice 4),
have been $10.1 million in comparison with $8.3 million within the comparable prior yr
quarter, and included elevated personnel prices, and intangible asset
amortization expense related to our FY 2021 Acquisitions. Working expense
within the third quarter of 2022 included noncash amortization of intangible belongings,
totaling $1.7 million in comparison with $1.1 million within the third quarter of 2021,
reflecting a full quarter of amortization of intangible belongings acquired in
reference to our FY 2021 Acquisitions. Noncash inventory compensation costs for
the third quarter of 2022 totaled $1.2 million in comparison with $636,000 within the third
quarter of 2021.

As mentioned under, third quarter 2022 outcomes included a goodwill impairment
cost totaling $42.0 million, primarily as a result of sustained decline in our
market capitalization as of September 30, 2022, according to the broader mid
and micro-cap markets. As well as, as mentioned under, third quarter 2022
outcomes included the accrual of contingent consideration associated to FY 2021
Acquisitions totaling $1.8 million, which is mirrored as compensation expense
within the condensed consolidated assertion of operations as a result of associated earn
out being contingent upon continued employment.

On a GAAP-basis, which incorporates the affect of noncash costs, together with the
goodwill impairment cost of $42.0 million, web loss within the third quarter of
2022 was $52.6 million, or $(1.41) per share, in comparison with a web lack of $7.0
million, or $(0.20) per share, within the comparable prior yr quarter. Excluding
the affect of the goodwill impairment costs and the accrual of FY 2021
Acquisition associated contingent consideration, the web loss for the third quarter
of 2022 was $8.7 million, or ($0.23) per share.

FY 2021 Acquisitions

FY 2021 Acquisitions have been comprised of the next:

? We acquired Mobcrush, efficient June 1, 2021 (the “Mobcrush Acquisition”). We

consider the acquisition of Mobcrush will allow us to offer manufacturers,

advertisers, and different client dealing with companies with vital viewers

attain throughout a very powerful engagement channels, offering livestream and

video on demand social media viewers attain by way of a community of mid-tier

social media influencers.

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

dedication to serving to creators monetize their fan base as they search to show

their ardour into their livelihood and supplies manufacturers with entry to

further premium stock from creators by way of the Firm, to determine

natural connections with their followers and followers. Primarily based within the United

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

creators and model companions, and because the first worldwide acquisition by the

Firm, Bannerfy represents one other path to growth of our promoting and

sponsorship companion base.

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

enterprise as, and hereinafter known as “Superbiz”), a dynamic promoting

platform designed particularly for metaverse environments. Superbiz’s preliminary

deployment permits manufacturers to promote throughout in style Roblox sport titles and

helps Roblox creators with monetization and sport analytics. Superbiz’s

promoting platform reaches greater than 70 million month-to-month lively Roblox customers

throughout a group of greater than 150 curated, brand-safe video games. In-game advertisements

take the type of inventive billboards that complement the gaming expertise,

permitting for pure discovery with out interrupting gameplay. The advertisements are

measured by way of Superbiz’s superior expertise, which verifies viewability in

a 3D house and supplies aggregated viewers geographic, language, and gadget

knowledge. The acquisition permits us to execute on our strategic plans to increase

our present and increasing presence and attain within the metaverse.

Through the 9 months ended September 30, 2022, we additionally targeted on persevering with
to forge strategic partnerships to create a world reseller community to reinforce
our direct salesforce efforts. These companions have breadth and depth throughout all
of the numerous business verticals together with world geographic protection,
which we consider will facilitate the acceleration of the rollout and consciousness
for our modern advert merchandise and drive the acceleration of future
monetization.

Delisting Discover

On October 4, 2022, Tremendous League Gaming, Inc. (the “Firm”) acquired a letter
(the “Letter”) from the Itemizing {Qualifications} Workers of The Nasdaq Inventory Market,
LLC (“Nasdaq”) indicating that, based mostly upon the closing bid value of the
Firm’s widespread inventory, par worth $0.001 per share (“Widespread Inventory”), for 30
consecutive enterprise days, the Firm isn’t at present in compliance with the
requirement to keep up a minimal bid value of $1.00 per share for continued
itemizing on the Nasdaq Capital Market, as set forth in Nasdaq Itemizing Rule
5550(a)(2). The Letter has no fast impact on the itemizing of the Firm’s
Widespread Inventory on The Nasdaq Capital Market.

The Firm intends to watch the closing bid value of its Widespread Inventory. To
regain compliance, the closing bid value of the Firm’s Widespread Inventory should be
at the very least $1.00 per share for 10 consecutive enterprise days throughout the 180-day
interval from October 4, 2022 to April 3, 2023. If the Firm doesn’t regain
compliance with the minimal bid value requirement by April 3, 2023, Nasdaq could
grant the Firm a second 180-day interval to regain compliance. To qualify for
this extra 180-day compliance interval, the Firm can be required to fulfill
the continued itemizing requirement for market worth of publicly held shares and
all different preliminary itemizing requirements for the Nasdaq Capital Market, aside from
the minimal bid value requirement. As well as, the Firm would even be
required to inform Nasdaq of its intent to remedy the minimal bid value deficiency
by effecting a reverse inventory break up, if needed. If the Firm doesn’t regain
compliance inside the allotted compliance intervals, together with any extensions that
could also be granted by Nasdaq, Nasdaq will present discover that the Firm’s Widespread
Inventory might be topic to delisting. The Firm would then be entitled to enchantment
that dedication to a Nasdaq hearings panel.

Seasonality

Our income fluctuates quarterly and is mostly increased within the second half of
our fiscal yr, with the fourth quarter usually representing our highest
income quarter every year. Promoting spending is historically seasonally
robust within the second half of every yr, reflecting the affect of seasonal again
to highschool, sport launch and vacation season promoting spending by manufacturers and
advertisers. We consider that this seasonality in promoting spending impacts
our quarterly outcomes, which typically mirror comparatively increased promoting
income in second half of every yr, in comparison with the primary half of the yr.

Influence of COVID-19 Pandemic

The novel coronavirus and actions taken to mitigate the unfold of it have had
and are anticipated to proceed to have an hostile affect on the economies and
monetary markets of many international locations, together with the geographical areas through which
the Firm operates. It’s unknown how lengthy the hostile situations related
with the coronavirus will final and what the whole monetary impact might be to
the Firm.

Though we have been impacted by the overall deferral in promoting spending by
manufacturers and sponsors ensuing from the COVID-19 pandemic for a big
portion of fiscal yr 2020, we reported vital quarter over quarter development
in income within the second half of fiscal 2020, and all through fiscal yr 2021
and we count on to proceed to broaden our promoting income and income from the
sale of our proprietary and third-party person generated content material in future
intervals, as we proceed to broaden our promoting stock, viewership and
associated gross sales actions.

For a dialogue of the danger components associated to COVID-19, please discuss with Half
II, Merchandise 1A.””Danger Issue”” in our Annual Report on Kind 10-Ok for the yr ended
December 31, 2021.

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Desk of Contents

Outcomes of Operations for the Three and 9 Months Ended September 30, 2022 and
2021

The next desk units forth a abstract of our outcomes of operations for the
three and 9 months ended September 30, 2022 and 2021 ({dollars} in hundreds):

Three Months 9 Months
Ended September 30, Change Ended September 30, Change
2022 2021 $ % 2022 2021 $ %
REVENUE $ 4,508 $ 3,605 $ 903 25 %

$ 12,555 $ 5,478 $ 7,077 129 %
COST OF REVENUE

2,719 2,250 469 21 %

7,086 3,125 3,961 127 %
GROSS PROFIT

1,789 1,355 434 32 % 5,469 2,353 3,116 132 %
OPERATING EXPENSE
Promoting,
advertising and marketing and
promoting 2,958 2,818 140 5 % 8,693 6,236 2,457 39 %

Engineering,

expertise and
improvement 3,827 3,113 714 23 % 12,607 7,215 5,392 75 %
Common and
administrative 5,085 2,397 2,688 112 % 10,954 6,814 4,140 61 %
Impairment of
goodwill 42,000 – 42,000 100 % 42,000 – 42,000 100 %
Complete working
expense 53,870 8,328 45,542 547 %

74,254 20,265 53,989 266 %
NET LOSS FROM
OPERATIONS

(52,081 ) (6,973 ) (45,108 ) 647 % (68,785 ) (17,912 ) (50,873 ) 284 %
OTHER INCOME
(EXPENSE), NET (521 ) 4 (525 ) (N/A )% (499 ) 1,219 (1,718 ) (141 )%
Loss earlier than
profit from
earnings taxes (52,602 ) (6,969 ) (45,633 ) 655 %

(69,284 ) (16,693 ) (52,591 ) 315 %
Profit from
earnings taxes

– 5 (5 ) (100 )%

46 3,078 (3,032 ) (99 )%
NET LOSS

$ (52,602 ) $ (6,964 ) $ (45,638 ) 655 %

$ (69,238 ) $ (13,615 ) $ (55,623 ) 409 %

Comparability of the Outcomes of Operations for the Three and 9 Months Ended
September 30, 2022 and 2021

Income ({dollars} in desk in hundreds)

Three Months 9 Months
Ended September 30, Change Ended September 30, Change
2022 2021 $ % 2022 2021 $ %
Promoting and
sponsorships $ 3,538 $ 2,360 $ 1,178 50 % $ 8,913 $ 3,279 $ 5,634 172 %
Content material gross sales 553 618 (65 ) (11 )% 2,245 1,273 972 76 %
Direct to
client 417 627 (210 ) (33 )% 1,397 926 471 51 %
$ 4,508 $ 3,605 $ 903 25 % $ 12,555 $ 5,478 $ 7,077 129 %

Three Months 9 Months
Ended September 30, Ended September 30,
2022 2021 2022 2021
Variety of clients > 10% of income /
p.c of income Two / 26% Two / 34% One / 12% Two / 25%
By income class:
Promoting and sponsorships Two / 26% One / 19% One / 12% One / 12%
Content material Gross sales – – – –
Direct to client – One / 15% – One / 13%

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Desk of Contents

Three Months Ended September 30, 2022, In comparison with the Three Months Ended
September 30, 2021:

? Promoting and sponsorship income elevated primarily attributable to a 100%
improve in our direct gross sales promoting income producing clients for
the three months ended September 30, 2022, as in comparison with the prior yr
comparable quarter.

? Content material gross sales income decreased 11% throughout the three months ended September

30, 2022 primarily attributable to a slight lower in content material gross sales income
producing clients, which was partially offset by a 12% improve in
common content material gross sales income per buyer. Content material gross sales income for the

three months ended September 30, 2022 have been primarily comprised of broadcast

and gameplay initiatives with Topgolf Leisure Group, iHeartMedia +

Leisure, Inc., Bytedance Pte. Ltd, and NHL Enterprises, L.P., Viacom

Worldwide Inc., and Hamilton IP, LLC. Through the three months ended

September 30, 2021, content material gross sales income was primarily comprised of

broadcast and gameplay initiatives with Endemol Shine North America, a division

of Banijay, AVY Leisure (DBA Tempo Storm), Aftershock Media Group,

Topgolf Leisure Group, Hitbox, LLC d/b/a Subsequent Era Esports and

GenG.

? Direct to client income for the three months ended September 30, 2022

decreased $210,000, or 33%, in comparison with the comparable prior yr quarter.

Direct to client income is comprised of income generated from our

Minehut digital property, which supplies varied Minecraft server internet hosting

companies on a subscription foundation and different digital items to the Minecraft

gaming neighborhood, and direct to client in-game platform gross sales income

by way of the sale of digital items, together with beauty gadgets, sturdy items,

participant ranks and sport modes, inside our Mineville and Pixel Paradise gaming

servers, which leverage the pliability of the Microsoft Minecraft Bedrock

platform, are powered by our InPvP cloud structure expertise, and

signify two of the seven official Microsoft Minecraft companion servers.

Income is generated when transactions are facilitated between Microsoft and

the tip person, both by way of in-game forex or money.

9 Months Ended September 30, 2022, In comparison with the 9 Months Ended
September 30, 2021:

? Promoting and sponsorship income elevated primarily attributable to a 95%
improve in our direct gross sales promoting income producing
clients, pushed by the expansion of our premium in-game and in-stream

promoting stock, due partially to a full 9 months of revenues associated

to our FY 2021 Acquisitions, and an roughly 54% improve within the

common income per buyer for the 9 months ended September 30, 2022,

as in comparison with the prior yr comparable interval.

? Content material gross sales income elevated primarily attributable to a 33% improve in content material

gross sales income producing clients, and a 32% improve in common content material

gross sales income per buyer. The rise additionally included $919,000 of product

design and software program improvement package associated income pursuant to a

improvement settlement with a buyer, which was accomplished throughout the first

quarter of 2022

? Direct to client income for the 9 months ended September 30, 2022

elevated $471,000, or 51%, in comparison with the comparable prior yr quarter,

due primarily to a full 9 months of direct to client in-game platform

gross sales income inside our Mineville and Pixel Paradise gaming servers, which

was acquired in June 2021.

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Price of Income

Price of income consists of direct prices incurred in reference to the
satisfaction of efficiency obligations underneath our income preparations together with
inner and third-party engineering, inventive, content material, broadcast and different
personnel, expertise and influencers, content material seize and manufacturing companies,
direct advertising and marketing, cloud companies, software program, prizing, income sharing charges and
venue charges. Price of income fluctuates interval to interval based mostly on the particular
applications and income streams contributing to income every interval and the associated
value profile of our bodily and digital experiences, promoting campaigns and
content material gross sales actions occurring every interval.

Three Months Ended September 30, 2022, In comparison with the Three Months Ended
September 30, 2021:

? Price of income elevated $469,000, or 21%, due primarily to the 25%
improve in associated income for a similar interval.

9 Months Ended September 30, 2022, In comparison with the 9 Months Ended
September 30, 2021:

? Price of income elevated $3,961,000, or 127%, comparatively according to
the 129% improve in associated income for a similar interval.

Working Expense

Confer with the desk summarizing our outcomes of operations for the three and 9
months ended September 30, 2022 and 2021 above.

Noncash stock-based compensation expense for the intervals introduced was included
within the following working expense line gadgets ({dollars} in desk in hundreds):

Three Months 9 Months
Ended September 30, Change Ended September 30, Change
2022 2021 $ % 2022 2021 $ %
Gross sales, advertising and marketing and
promoting $ 295 $ 288 $ 7 2 % $ 776 $ 708 $ 68 10 %
Engineering,
expertise and
improvement 115 41 74 180 % 377 98 279 285 %
Common and
administrative 776 307 469 153 % 2,131 803 1,328 165 %
Complete noncash inventory
compensation expense $ 1,186 $ 636 $ 550 86 % $ 3,284 $ 1,609 $ 1,675 104 %

On January 1, 2022, the Firm issued 1,350,000 efficiency inventory items
(“PSUs”) underneath the Firm’s 2014 Amended and Restated Inventory Possibility and
Incentive Plan, which vest in 5 equal increments of 270,000 PSUs, based mostly on
satisfaction of market associated vesting situations throughout the three-year interval
commencing on January 1, 2022, as described at Notice 2 to the consolidated
monetary statements included elsewhere herein. A market situation is mirrored
within the grant-date honest worth of an award, and subsequently, a Monte Carlo
simulation mannequin is utilized to find out the estimated honest worth of the
equity-based award. Compensation value is acknowledged for awards with a market
situation, supplied the requisite service interval is happy, no matter
whether or not the market situation is ever happy. Noncash inventory compensation
expense associated to the PSUs totaled $570,000 and $1,691,000 for the three and
9 months ended September 30, 2022.

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Promoting, Advertising and Promoting

Three Months Ended September 30, 2022, In comparison with the Three Months Ended
September 30, 2021:

? Promoting, advertising and marketing and promoting expense was comparatively flat for the three

months ended September 30, 2022, in comparison with the three months ended
September 30, 2021.

? Promoting, advertising and marketing and promoting expense included the amortization of
companion, buyer and advertiser associated intangible belongings acquired in

reference to the FY 2021 Acquisitions totaling $526,000 and $503,000 for

the three months ended September 30, 2022 and 2021, respectively.

9 Months Ended September 30, 2022, In comparison with the 9 Months Ended
September 30, 2021:

The rise in promoting, advertising and marketing and promoting expense was primarily attributable to
the next:

? Enhance in personnel prices related to the Mobcrush Acquisition and the

addition of a complete of 11 former Mobcrush staff, efficient June 1, 2021,

to our direct gross sales operate. The year-to-date 2022 interval consists of 9

months of web expense associated to staff acquired in reference to the

FY 2021 Acquisitions, in comparison with 4 months for the year-to-date 2021

interval.

? Along with the affect on personnel prices arising from the Mobcrush

Acquisition, the change displays a web improve for the reason that finish of the prior

yr comparable quarter of roughly 11 web full-time staff in

reference to the rise in our inhouse direct gross sales and advertising and marketing group,

targeted on monetization and personnel in our inventive and content material features.

? The rise in promoting, advertising and marketing and promoting expense additionally included the

amortization of companion, buyer and advertiser associated intangible belongings

acquired in reference to the FY 2021 Acquisitions totaling $1,578,000 for

the 9 months ended September 30, 2022. FY 2021 Acquisition associated

amortization of companion, buyer and advertiser associated intangible belongings

for the 9 months ended September 30, 2021 totaled $654,000, reflecting FY

2021 Acquisition associated amortization for the interval from June 1, 2021 to

September 30, 2021.

Engineering, Expertise and Improvement

Parts of our platform can be found on a “free to make use of,” “all the time on foundation,”
and are utilized and supplied as an viewers acquisition instrument, as a way of
rising our viewers, engagement, viewership, gamers and neighborhood.
Engineering, expertise and improvement associated working expense embody the
prices described under, incurred in reference to our viewers acquisition and
viewership growth actions. Engineering, expertise and improvement associated
working expense consists of (i) allotted inner engineering personnel expense,
together with salaries, noncash inventory compensation, taxes and advantages, (ii)
third-party contract software program improvement and engineering expense, (iii)
inner use software program value amortization expense, and (iv) expertise platform
associated cloud companies, broadband and different platform expense, incurred in
reference to our viewers acquisition and viewership growth actions,
together with instruments and product providing improvement, testing, minor upgrades and
options, free to make use of companies, company info expertise and common
platform upkeep and help. Capitalized inner use software program improvement
prices are amortized on a straight-line foundation over the software program’s estimated
helpful life.

Three Months Ended September 30, 2022, In comparison with the Three Months Ended
September 30, 2021:

The rise in engineering, expertise and improvement prices was primarily due
to the next:

? A rise of roughly 9 web full-time staff for the reason that finish of

the prior yr interval, in reference to a rise in staffing of our
in-house product and engineering group targeted on the event and
enhancement of our product and expertise platforms.

? The rise additionally included the amortization of developed expertise associated

intangible belongings acquired in reference to the FY 2021 Acquisitions

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

Acquisition associated amortization of developed expertise associated intangible

belongings for the three months ended September 30, 2021 totaled $231,000.

? The change in engineering, expertise and improvement prices for the three

months ended September 30, 2022 included a lower in cloud companies and
different expertise platform prices totaling $370,000, or 23%, reflecting the
preliminary affect of ongoing value discount and optimization actions.

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9 Months Ended September 30, 2022, In comparison with the 9 Months Ended
September 30, 2021:

The rise in engineering, expertise and improvement prices was primarily due
to the next:

? Enhance in personnel prices related to the FY 2021 Acquisitions which

included a rise in engineering and product operate personnel totaling

16 full-time staff, efficient June 30, 2021. The year-to-date 2022

interval consists of 9 months of web expense associated to staff acquired in

reference to the FY 2021 Acquisitions, in comparison with 4 months for the

year-to-date 2021 interval.

? Along with the affect on personnel prices arising from the FY 2021

Acquisitions, the change displays a web improve for the reason that finish of the prior

yr comparable quarter of roughly 12 full-time staff in

reference to a rise in staffing of our in-house product and

engineering group targeted on the event and enhancement of our product

and expertise choices and platforms.

? The rise in engineering, expertise and improvement prices for the 9

months ended September 30, 2022 additionally mirrored a rise in cloud companies

and different expertise platform prices totaling $1,082,000, primarily

reflecting prices ensuing from our FY 2021 Acquisitions, in addition to

continued robust engagement throughout our digital properties. The year-to-date

2022 interval consists of 9 months of web expense associated to staff
acquired in reference to the FY 2021 Acquisitions, in comparison with 4
months for the year-to-date 2021 interval.

? The rise additionally included the
amortization of developed
expertise associated intangible
belongings acquired in reference to
the FY 2021 Acquisitions totaling
$1,012,000 for the 9 months
ended September 30, 2022. FY 2021
Acquisition associated amortization
of developed expertise associated
intangible belongings for the 9
months ended September 30, 2021
totaled $294,000.

Common and Administrative

Common and administrative expense for the intervals introduced was comprised of
the next ({dollars} in desk in hundreds):

Three Months 9 Months
Ended September 30, Change Ended September 30, Change
2022 2021 $ % 2022 2021 $ %
Personnel prices $ 738 $ 577 $ 161 28 % $ 2,042 $ 1,569 $ 473 30 %
Workplace and
services 63 53 10 19 % 193 108 85 79 %
Skilled
charges 207 317 (110 ) (35 )% 952 1,162 (210 ) (18 )%
Inventory-based
compensation 776 307 469 153 % 2,132 802 1,330 166 %
Depreciation and
amortization 639 170 469 276 % 1,096 308 788 256 %
Different 826 973 (147 ) (15 )% 2,703 2,865 (162 ) (5 )%
Contingent
consideration
(Notice 4) 1,836 – 1,836 100 % 1,836 – 1,836 100 %
Complete common
and
administrative
expense $ 5,085 $ 2,397 $ 2,688 112 % $ 10,954 $ 6,814 $ 4,140 61 %

A abstract of the principle drivers of the change normally and administrative
expense for the intervals introduced is as follows:

For the Three Months Ended September 30, 2022, In comparison with the Three Months
Ended September 30, 2021:

? Personnel prices elevated primarily attributable to a slight improve in headcount in

our finance and accounting, human assets and operations features.

? Noncash inventory compensation expense included normally and administrative

expense elevated $469,000, primarily as a result of amortization of noncash

inventory compensation in reference to performance-based inventory items granted

on January 1, 2022, which vest in 5 equal tranches of 270,000 based mostly on

the achievement of sure Firm inventory value targets as described at Notice

2 to the condensed consolidated monetary statements elsewhere herein.

? Depreciation and amortization expense elevated due primarily to the

amortization of developer associated intangible belongings acquired in connection

with the acquisition of Superbiz in October 2021, totaling $47,000. In

addition, throughout the three months ended September 30, 2022, sure merchandise

and choices acquired in reference to the Mobcrush Acquisition have been

rebranded. Because of this, the Firm recorded a write down of trademark

associated intangible belongings acquired in reference to the Mobcrush
Acquisition totaling $423,000.

? Different common and administrative expense decreased primarily attributable to a 38%

lower in D&O insurance coverage premiums for the 2022-2023 coverage interval, which

covers the interval from March 2022 to February 2023.

? As of September 30, 2022, the Firm decided that it was possible that

the contingency related to the Preliminary Earn Out Interval (as outlined at

Notice 4 to the condensed consolidated monetary statements) can be met in

accordance with the phrases of the Superbiz Buy Settlement (as outlined at

Notice 4 to the condensed consolidated monetary statements), and the

relevant quantities have been moderately estimable as of September 30, 2022,

leading to a cost to compensation expense totaling $1,836,000 (together with

roughly 512,000 shares of widespread inventory valued at $0.68, the value of

our widespread inventory as of September 30, 2022), which is mirrored normally

and administrative expense within the condensed consolidated assertion of

operations for 3 and 9 months ended September 30, 2022. Confer with Notice

4 for added info.

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For the 9 Months Ended September 30, 2022, In comparison with the 9 Months Ended
September 30, 2021:

? Personnel prices elevated primarily attributable to a slight improve in headcount in

our finance and accounting operate, human assets and operations

features.

? Noncash inventory compensation expense included normally and administrative

expense elevated primarily as a result of web annual and discretionary grant of

incentive equity-based awards to staff in Might 2022, in reference to

our board-approved compensation and retention applications, the discretionary

grant of incentive equity-based awards to personnel in reference to the

FY 2021 Acquisitions in June 2021, and noncash inventory compensation

amortization in reference to efficiency based mostly inventory items granted on

January 1, 2022, which vest in 5 equal tranches of 270,000 based mostly on the

achievement of sure Firm inventory value targets as described at Notice 2 to

the condensed consolidated monetary statements elsewhere herein.

? Depreciation and amortization expense elevated due primarily to the

amortization of trademark, developer and influencer associated intangible

belongings acquired in reference to the FY 2021 Acquisitions, totaling
$899,000.

? As of September 30, 2022, the Firm decided that it was possible that

the contingency related to the Preliminary Earn Out Interval (as outlined at

Notice 4 to the condensed consolidated monetary statements) can be met in

accordance with the phrases of the Superbiz Buy Settlement (as outlined at

Notice 4 to the condensed consolidated monetary statements), and the

relevant quantities have been moderately estimable as of September 30, 2022,

leading to a cost to compensation expense totaling $1,836,000 (together with

roughly 512,000 shares of widespread inventory valued at $0.68, the value of

our widespread inventory as of September 30, 2022), which is mirrored normally

and administrative expense within the condensed consolidated assertion of

operations for 3 and 9 months ended September 30, 2022. Confer with Notice

4 for added info.

Impairment of Goodwill

As described at Notice 2 to the condensed consolidated monetary statements
elsewhere herein, we carried out a goodwill impairment check as of September 30,
2022. We utilized the market capitalization of the Firm (Stage 1 observable
enter) as of September 30, 2022, to estimate the honest worth of the Firm’s
single reporting unit. The estimated market capitalization was decided by
multiplying our September 30, 2022 inventory value and the widespread shares excellent
as of September 30, 2022. The market capitalization strategy was utilized to
estimate the honest worth of our single reporting unit as of September 30, 2022
attributable to significance of the decline in inventory value as of September 30, 2022,
leading to a market capitalization that was 38% of the web e-book worth of our
single reporting unit as of September 30, 2022. Primarily based on the evaluation, the
estimated honest worth of our reporting unit was $25.2 million, in comparison with a
carrying worth of our single reporting unit of $67.3 million as of September 30,
2022. As such, the honest worth of our single reporting unit was deemed to be
under its carrying worth as of September 30, 2022, leading to a goodwill
impairment cost of $42.0 million, which is mirrored within the condensed
consolidated assertion of operations for the three and 9 months ended
September 30, 2022.

Liquidity and Capital Sources

Common

Money and money equivalents totaled roughly $1.1 million and $14.5 million
at September 30, 2022 and December 31, 2021, respectively. The change in money
and money equivalents for the intervals introduced displays the affect of working,
investing and financing money circulation associated actions as described under.

The accompanying condensed consolidated monetary statements have been ready
assuming the Firm will proceed as a going concern, which contemplates the
realization of belongings and satisfaction of liabilities within the regular course of
enterprise. Together with a noncash goodwill impairment cost of $42.0 million, the
Firm incurred web losses of $52.6 million and $69.2 million throughout the three
and 9 months ended September 30, 2022, respectively, and had an collected
deficit of $194.5 million (together with the third quarter 2022 noncash goodwill
impairment cost of $42.0 million) as of September 30, 2022. For the 9
months ended September 30, 2022, web money utilized in working actions totaled
$16.0 million.

To this point, our principal sources of capital used to fund our operations and development
have been the web proceeds acquired from fairness and debt financings. We now have and
will proceed to make use of vital capital for the expansion and improvement of our
enterprise, and, as such, we count on to hunt further capital both from
operations or which may be accessible from future issuance(s) of widespread inventory or
debt financings, to fund our deliberate operations. Accordingly, our outcomes of
operations and the implementation of our long-term enterprise methods have been
and will proceed to be adversely affected by common situations within the world
economic system, together with situations which might be exterior of our management. The newest
world monetary disaster brought on by extreme geopolitical situations, together with
conflicts overseas, and the lingering results of COVID-19 and threats of different
outbreaks, have resulted in excessive volatility, disruptions and downward
stress on inventory costs and buying and selling volumes throughout the capital and credit score
markets through which we historically function. A extreme or extended financial
downturn might end in quite a lot of dangers to our enterprise and will have a
materials hostile impact on us, together with limiting our capacity to acquire
further funding from the capital and credit score markets. In administration’s
judgement, these situations elevate substantial doubt concerning the capacity of the
Firm to proceed as a going concern as contemplated by ASC 205-40, “Going
Concern.”

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Administration’s Plans

The Firm skilled vital development in fiscal yr 2021 by way of natural
and inorganic development actions, together with the growth of our premium
promoting stock and quarter over quarter and yr over yr will increase in
acknowledged income throughout our three main income streams. In 2022, we’re
targeted on the continued growth of our service choices and income development
alternatives by way of inner improvement, collaborations, and thru
opportunistic strategic acquisitions, in addition to administration and discount of
prices. Administration is at present exploring a number of options for elevating
capital to facilitate our development and execute our enterprise technique, together with
strategic partnerships and or different types of fairness or debt financings.

Securities Buy Settlement

On Might 16, 2022, the Firm entered right into a securities buy settlement (the
“SPA”) with three institutional traders (collectively, the “Notice Holders”)
offering for the sale and issuance of a brand new sequence of senior convertible notes
within the mixture unique principal quantity of $4,320,000, of which 8% is an
unique concern low cost (every, a “Notice,” and, collectively, the “Notes,” and
such financing, the “Notice Providing”). Every Notice will accrue curiosity at a
assured annual price of 9% each year, mature 12 months from the date of
issuance, and is convertible on the choice of the Notice Holders into that quantity
of shares of the Firm’s widespread inventory, equal to the sum of the excellent
principal steadiness, accrued and unpaid curiosity, and accrued and unpaid late
costs (the “Conversion Quantity”), divided by $4.00, topic to adjustment upon
the incidence of sure occasions as extra particularly set forth within the Notice;
supplied, nonetheless, in no occasion will the Firm be permitted to concern greater than
19.99% of the shares of widespread inventory issued and excellent instantly previous to
the Notice Providing, which variety of shares shall be decreased, on a share-for-share
foundation, by the variety of shares of widespread inventory issued or issuable pursuant to
any transaction or sequence of transactions which may be aggregated with the Notice
Providing.

As well as, the Firm could also be required to redeem all or a portion of the Notes
underneath sure circumstances, and, within the occasion the Firm sells widespread inventory,
the Notice Holders can have the suitable, however not the duty, to require the
Firm to make use of 50% of the gross proceeds raised from such sale to redeem all or
any portion of the Conversion Quantity then remaining underneath the Notes, in money, at
a value equal to the Conversion Quantity being redeemed. The Firm could, at its
choice, redeem all or a portion of the Notes at a value equal to 110% of the
Conversion Quantity being redeemed.

Concurrently with the SPA, the Firm and the Notice Holders entered right into a
Registration Rights Settlement, pursuant to which the Firm agreed to file a
Registration Assertion on Kind S-3 inside 30 days after the closing of the Notice
Providing. See Notice 5 to the condensed consolidated monetary statements
contained elsewhere on this Report for added details about the Notice
Financing.

Widespread Inventory Buy Settlement

On March 25, 2022, we entered into a typical inventory buy settlement (the
“Buy Settlement”) with Tumim Stone Capital, LLC (“Tumim”), pursuant to which
we now have the suitable, however not the duty, to promote to Tumim, and Tumim is
obligated to buy as much as as much as $10,000,000 of newly issued shares (the “Complete
Dedication”) now and again throughout the time period of the Buy Settlement. As
consideration for Tumim’s dedication to buy shares of widespread inventory underneath
the Buy Settlement, we issued to Tumim 50,000 shares of widespread inventory (the
“Dedication Shares”), valued at $100,000, following the execution of the
Buy Settlement.

The Buy Settlement initially precludes us from issuing and promoting greater than
7,361,833 shares of our widespread inventory, together with the Dedication Shares, which
quantity equals 19.99% of our widespread inventory issued and excellent as of March 25,
2022, until we acquire stockholder approval to concern further shares, or
until sure exceptions apply. As well as, a helpful possession limitation
within the settlement initially limits us from directing Tumim to buy shares of
widespread inventory if such purchases would end in Tumim beneficially proudly owning extra
than 4.99% of the then-outstanding shares of our widespread inventory (topic to an
improve to 9.99% at Tumim’s choice upon at the very least 61 calendar days’ discover). See
Notice 6 to the condensed consolidated monetary statements contained elsewhere in
this Report for added details about the Tumim Providing.

Fairness Distribution Settlement

On September 3, 2021, we entered into an Fairness Distribution Settlement (the
“Gross sales Settlement”) with two funding banks (the “Brokers”), pursuant to which
we could provide and promote, now and again, by way of the Brokers (the “ATM
Providing”), as much as $75 million of shares of our widespread inventory (the “Shares”). Any
Shares supplied and offered within the ATM Providing might be issued pursuant to our
Registration Assertion on Kind S-3 filed with the SEC on September 7, 2021.

Topic to the phrases and situations of the Gross sales Settlement, the Brokers will use
their commercially cheap efforts to promote the Shares now and again,
based mostly upon our directions. Beneath the Gross sales Settlement, the Brokers could promote the
Shares by any technique permitted by legislation deemed to be an “at-the-market” providing
as outlined in Rule 415 promulgated underneath the Securities Act, together with, with out
limitation, gross sales made immediately on the Nasdaq Capital Market, on every other
present buying and selling marketplace for our widespread inventory or to or by way of a market maker.
The Brokers may additionally promote Shares in privately negotiated transactions, supplied
that the Brokers obtain our prior written approval.

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We now have no obligation to promote any of the Shares and should at any time droop
gives underneath the Gross sales Settlement. The ATM Providing will terminate upon the
earlier of (a) the sale of all the Shares, (b) the termination by the mutual
written settlement of the managing agent and the Firm, or (c) November 16,
2022, one yr from the date that the Kind S-3 was declared efficient by the
SEC.

Beneath the phrases of the Gross sales Settlement, the Brokers might be entitled to an
mixture fee at a set price of three.0% of the product sales value of Shares
offered underneath the Gross sales Settlement.

We intent to make use of the web proceeds from any “at-the-market” providing, if any,
primarily for working capital and common company functions, together with gross sales
and advertising and marketing actions, product improvement and capital and acquisition
associated expenditures. We may additionally use a portion of the web proceeds for the
acquisition of, or funding in, applied sciences, options or companies. As of
the date of this Report, there have been no gross sales of any Shares in connection
with the ATM Providing.

We could proceed to judge potential strategic acquisitions. To finance such
strategic acquisitions, we could discover it needed to lift further fairness
capital, incur debt, or each. Any efforts to hunt further funding could possibly be
made by way of issuances of fairness or debt, or different exterior financing. Nevertheless,
further funding is probably not accessible on favorable phrases, or in any respect. The
capital and credit score markets have skilled excessive volatility and disruption
periodically and such volatility and disruption could happen sooner or later. If we
fail to acquire further financing when wanted, we could not be capable of execute
our enterprise plans which, in flip, would have a cloth hostile affect on our
monetary situation, our capacity to fulfill our obligations, and our capacity to
pursue our enterprise methods.

Money Flows for the 9 Months Ended September 30, 2022 and 2021

The next desk summarizes the change in money balances for the intervals
introduced ({dollars} in desk in hundreds):

9 Months Ended
September 30,
2022 2021
Web money utilized in working actions $ (16,036 ) $ (16,273 )
Web money utilized in investing actions (1,514 ) (658 )
Web money supplied by financing actions 4,160 33,501
(Lower) Enhance in money (13,390 ) 16,570

Money and money equivalents, at starting of interval 14,533 7,942
Money and money equivalents, at finish of interval $ 1,143 $ 24,512

Money Flows from Working Actions.

Web money utilized in working actions throughout the 9 months ended September 30,
2022, primarily mirrored our web GAAP loss for the 9 months ended September
30, 2022 of ($69,238,000), web of changes to reconcile web GAAP loss to web
money utilized in working actions totaling $53,202,000, which included
$42,000,000 of goodwill impairment costs, $3,284,000 of noncash inventory
compensation costs and depreciation and amortization of $4,478,000. Web money
utilized in working actions throughout the 9 months ended September 30, 2021
primarily mirrored our web GAAP loss for the 9 months ended September 30,
2021 of ($13,615,000), web of changes to reconcile web GAAP loss to web money
utilized in working actions totaling ($2,658,000), which included $1,609,000 of
noncash inventory compensation costs, depreciation and amortization of $1,962,000,
a noncash achieve totaling $1,213,000 in reference to the forgiveness of our PPP
Mortgage in Might 2021 and adjustments in valuation allowance totaling $3,078,000. Modifications
in working capital for the intervals introduced mirrored the affect of the
settlement of receivables and payables within the odd course.

Money Flows from Investing Actions.

Money flows from investing actions have been comprised of the next for the
intervals introduced ({dollars} in desk in hundreds):

9 Months Ended
September 30,
2022 2021

Money acquired in reference to Merger with Mobcrush $ – $ 586
Money paid in reference to Bannerfy Acquisition, web

– (496 )
Buy of property and tools (149 ) (12 )
Buy of third-party sport properties (500 )

Capitalization of software program improvement prices (766 ) (560 )
Acquisition of different intangible and different belongings (99 ) (176 )
Web money utilized in investing actions $ (1,514 ) $ (658 )

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Through the 9 months ended September 30, 2022, the Firm bought Anime
Battlegrounds X, one of many highest rated video games on Roblox, from a third-party
sport developer. The whole buy value of $500,000 was capitalized and is
being amortized to value of income over the relevant helpful lifetime of 5 years.

Capitalized Inside Use Software program Prices.

Software program improvement prices incurred to develop internal-use software program throughout the
software improvement stage are capitalized and amortized on a straight-line
foundation over the software program’s estimated helpful life, which is mostly three years.
Software program improvement prices incurred throughout the preliminary levels of improvement
are charged to expense as incurred. Upkeep and coaching prices are charged
to expense as incurred. Upgrades or enhancements to present internal-use
software program that end in further performance are capitalized and amortized
on a straight-line foundation over the relevant estimated helpful life.

Acquisition of Mobcrush.

On June 1, 2021, we accomplished the Mobcrush Acquisition pursuant to which we
acquired all the issued and excellent shares of Mobcrush. At closing, the
Firm issued to the previous stockholders of Mobcrush an mixture complete
of 12,067,571 shares of widespread inventory and reserved an mixture complete
of 514,633 shares of widespread inventory for issuance pursuant to inventory choices to be
granted to Mobcrush staff retained in reference to the Mobcrush
Acquisition, leading to a complete of 12,582,204 shares of widespread inventory issued
and reserved as consideration for the Mobcrush Acquisition. Upon completion of
the Mobcrush Acquisition, Mobcrush turned a completely owned subsidiary of the
Firm. Confer with Notice 4 to the consolidated condensed monetary statements
herein for info relating to belongings acquired and liabilities assumed in
reference to the Mobcrush Acquisition.

Acquisition of Bannerfy, LTD. On August 24, 2021, the Firm accomplished the
acquisition of Bannerfy, Ltd., (“Bannerfy”) pursuant to which the Firm
acquired all the issued and excellent widespread shares of Bannerfy. Pursuant
to the Share Buy Settlement, dated August 11, 2021 (the “Bannerfy Buy
Settlement”), the Firm paid preliminary consideration of $2.45 million (the
“Bannerfy Closing Consideration”), as follows: (i) $525,000 within the type of a
money cost, and (ii) $1.925 million within the type of shares of the Firm’s
widespread inventory at a value per share of $4.10, the closing value of the Firm’s
widespread inventory on the date of the Bannerfy Buy Settlement, as reported on the
Nasdaq Capital Market. Pursuant to the phrases of the Bannerfy Buy Settlement,
$275,000 of the Bannerfy Closing Consideration (the “Holdback Quantity”), was
withheld from the Bannerfy Closing Consideration to fulfill any indemnifiable
Losses incurred by the Firm (as outlined within the Bannerfy Buy Settlement)
previous to the primary anniversary of the Bannerfy Closing Date. The Firm
incurred no indemnifiable losses previous to the primary anniversary of the Bannerfy
Closing Date, and subsequently throughout the three months ended September 30, 2022,
the Firm launched to the Sellers the Holdback Quantity as follows: (i) $55,000
payable within the type of money, and (ii) roughly $220,000 within the type of
shares of the Firm’s widespread inventory at a value of $4.10.

In accordance with the Bannerfy Buy Settlement, all remaining parts of
the Bannerfy Buy Value subsequent to the cost of the Bannerfy Closing
Consideration, as much as roughly $4.55 million (the “Contingent
Consideration”), is payable upon the achievement of sure income and gross
revenue thresholds for the rest of the 2021 fiscal yr, and every of the
fiscal years ending December 31, 2022, and December 31, 2023 (“Earnout
Durations”). Confer with Notice 4 to the consolidated condensed monetary statements
herein for added info.

Money Flows from Financing Actions.

Money flows from financing actions have been comprised of the next for the
intervals introduced ({dollars} in desk in hundreds):

9 Months Ended
September 30,
2022 2021

Proceeds from issuance of widespread inventory, web $ 320 $ 33,390
Proceeds from convertible notes, web

4,000 –
Funds on convertible notes (160 ) –
Proceeds from inventory choice workouts – 111

Web money supplied by financing actions $ 4,160 $ 33,501

Convertible Debt.

On Might 16, 2022, as summarized above and additional described at Notice 5, the
Firm entered right into a securities buy settlement with three institutional
traders, offering for the sale and issuance of a brand new sequence of senior
convertible notes within the mixture unique principal quantity of $4,320,000, of
which 8% is an unique concern low cost.

Fairness Financings.

Through the 9 months ended September 30, 2022, we issued 331,000 shares of
widespread inventory at a median value of $0.97, elevating web proceeds of roughly
$320,000, primarily underneath the Fairness Distribution Settlement.

In January 2021, the Firm issued 3,076,924 shares of widespread inventory at a value
of $2.60 per share, elevating mixture web proceeds of roughly $8.0
million, after deducting providing expense totaling $73,000.

In February 2021, the Firm issued 2,926,830 shares of widespread inventory at a value
of $4.10 per share, elevating mixture web proceeds of roughly $12.0
million, after deducting providing expense totaling $70,000.

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In March 2021, the Firm issued 1,512,499 shares of widespread inventory at a value of
$9.00 per share, elevating mixture web proceeds of roughly $13.6 million,
after deducting providing expense totaling $72,000.

The choices described above have been made pursuant to an efficient shelf
registration assertion on Kind S-3, which was initially filed with the
Securities and Alternate Fee on April 10, 2020 (File No. 333-237626). The
web proceeds from these choices are supposed for use for working capital
and different common company functions, together with gross sales and advertising and marketing actions,
product improvement and capital expenditures. The Firm may additionally use a portion
of the web proceeds for the acquisition of, or funding in, applied sciences,
options or companies.

Contractual Obligations

As of September 30, 2022, besides as described under and at Notice 5 to the
condensed consolidated monetary statements elsewhere herein, we had no
vital commitments for capital expenditures, nor do we now have any dedicated
strains of credit score, noncancelable working leases obligations, different dedicated
funding or long-term debt, and no ensures. In June 2020, we terminated the
lease for almost all of our company headquarters (roughly 4,965 sq.
ft). As of September 30, 2022 we keep roughly 3,200 sq. ft of
workplace house, 1650 sq. ft of which is on a month-to-month foundation, and 1550
sq. ft of which is topic to a two-year lease, commencing on August 1,
2021. The next desk lists our materials recognized future money commitments as of
September 30, 2022 ({dollars} in hundreds):

Funds Due by Interval
Lower than 1 Greater than 3
Complete yr 1-3 years years
Working lease $ 73 $ 73 $ – $ –
Insurance coverage premium financing 283 283 – –
Complete contractual obligations $ 356 $ 356 $ – $ –

Off-Stability Sheet Commitments and Preparations

We now have not entered into any off-balance sheet monetary ensures or
different off-balance sheet commitments to ensure the cost obligations of any
third events. We now have not entered into any by-product contracts which might be
listed to our shares and categorized as stockholder’s fairness or that aren’t
mirrored in our condensed consolidated monetary statements included elsewhere
herein. Moreover, we should not have any retained or contingent curiosity in
belongings transferred to an unconsolidated entity that serves as credit score, liquidity
or market danger help to such entity. We should not have any variable curiosity in
any unconsolidated entity that gives financing, liquidity, market danger or
credit score help to us or engages in leasing, hedging or product improvement
companies with us.

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Contingencies

Sure situations could exist as of the date the condensed consolidated monetary
statements are issued, which can end in a loss to the Firm, however which is able to
solely be resolved when a number of future occasions happen or fail to happen. The
Firm’s administration, in session with its authorized counsel as acceptable,
assesses such contingent liabilities, and such evaluation inherently includes an
train of judgment. In assessing loss contingencies associated to authorized
proceedings which might be pending towards the Firm or unasserted claims which will
end in such proceedings, the Firm, in session with authorized counsel,
evaluates the perceived deserves of any authorized proceedings or unasserted claims, as
effectively because the perceived deserves of the quantity of aid sought or anticipated to be
sought therein. If the evaluation of a contingency signifies it’s possible that
a cloth loss has been incurred and the quantity of the legal responsibility will be
estimated, then the estimated legal responsibility can be accrued within the Firm’s
condensed consolidated monetary statements. If the evaluation signifies a
doubtlessly materials loss contingency isn’t possible, however is fairly
attainable, or is possible, however can’t be estimated, then the character of the
contingent legal responsibility, along with an estimate of the vary of attainable loss,
if determinable and materials, can be disclosed. Loss contingencies thought-about
distant are typically not disclosed until they contain ensures, through which case
the ensures can be disclosed.

Current Accounting Pronouncements

Confer with Notice 2 to the accompany condensed consolidated monetary statements
contained elsewhere on this Report.

Essential Accounting Estimates

Our unaudited interim condensed consolidated monetary statements have been
ready in accordance with accounting ideas typically accepted within the
United States of America. Preparation of those condensed consolidated statements
requires administration to make judgments and estimates. Some accounting insurance policies
have a big affect on quantities reported in these condensed consolidated
monetary statements. The SEC has outlined an organization’s essential accounting
insurance policies as those which might be most vital to the portrayal of an organization’s
monetary situation and outcomes of operations, and which require an organization to
make its most tough and subjective judgments. A abstract of great
accounting insurance policies and an outline of accounting insurance policies which might be thought-about
essential could also be discovered within the audited monetary statements and notes thereto
included in our Annual Report on Kind 10-Ok for the yr ended December 31, 2021,
filed with the SEC on March 31, 2022. As well as, discuss with Notice 2 to the
condensed consolidated monetary statements included on this Report. The
following accounting insurance policies have been recognized throughout the present interval, based mostly
on actions occurring throughout the present interval, as essential and requiring
vital judgments and estimates.

Income Recognition

Income is acknowledged after we switch promised items or companies to clients
in an quantity that displays the consideration to which we count on to be entitled
in trade for these items and companies. On this regard, income is acknowledged
when: (i) the events to the contract have permitted the contract (in writing,
orally, or in accordance with different customary enterprise practices) and are
dedicated to carry out their respective obligations; (ii) the entity can establish
every get together’s rights relating to the products or companies to be transferred; (iii) the
entity can establish the cost phrases for the products or companies to be
transferred; (iv) the contract has business substance (that’s, the danger,
timing, or quantity of the entity’s future money flows is anticipated to alter as a
results of the contract);and (v) it’s possible that the entity will acquire
considerably all the consideration to which will probably be entitled in trade
for the products or companies that might be transferred to the shopper.

Transaction costs are based mostly on the quantity of consideration to which we count on
to be entitled in trade for transferring promised items or companies to a
buyer, excluding quantities collected on behalf of third events, if any. We
contemplate the express phrases of the income contract, that are usually written
and executed by the events, our customary enterprise practices, the character,
timing, and the quantity of consideration promised by a buyer, in connection
with figuring out the transaction value for our income preparations.

We report income on a gross or web foundation based mostly on administration’s evaluation of
whether or not we act as a principal or agent within the transaction and is evaluated on a
transaction-by-transaction foundation. To the extent we act because the principal, income
is reported on a gross foundation web of any gross sales tax from clients, when
relevant. The dedication of whether or not we act as a principal or an agent in a
transaction relies on an analysis of whether or not we management the nice or service
previous to switch to the shopper. The place relevant, we now have decided that it
acts because the principal in all of its promoting and sponsorships, content material and
direct to client income streams, besides in conditions the place we make the most of a
reseller companion with respect to direct promoting gross sales preparations.

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We generate income from (i) promoting, serving as a advertising and marketing channel for
manufacturers and advertisers to succeed in their goal audiences of avid gamers throughout our
community, (ii) content material, curating and distributing esports and gaming-centric
leisure content material for our personal community of digital channels and media and
leisure companion channels and (iii) direct to client gives together with
digital subscriptions, in-game digital items, and gameplay entry charges.

Income billed or collected prematurely is recorded as deferred income till the
occasion happens or till relevant efficiency obligations are happy.

Promoting and Sponsorships:

Promoting income primarily consists of direct gross sales exercise together with gross sales
of programmatic show and video promoting items to third-party advertisers
and exchanges. Promoting preparations usually embody contract phrases for
time intervals starting from a number of days to a number of weeks in size.

For promoting preparations that embody efficiency obligations happy over
time, clients usually concurrently obtain and eat the advantages underneath
the association as we fulfill our efficiency obligations, over the relevant
contract time period. As such, income is acknowledged over the contract time period based mostly upon
estimates of progress towards full satisfaction of the contract efficiency
obligations (usually using a time, effort or delivery-based technique of
estimation). Income from shorter time period promoting preparations that present for
a contractual supply or efficiency date is acknowledged when efficiency is
considerably full and or supply happens. Funds are usually due from
clients throughout the time period of the association for longer-term campaigns, and as soon as
supply is full for shorter-term campaigns.

Sponsorship income preparations could embody unique or non-exclusive title
sponsorships, advertising and marketing advantages, official product standing exclusivity, product
visibly and extra infrastructure placement, social media rights, rights to
on-screen activations and promotions, show materials rights, media rights,
hospitality and tickets and merchandising rights. Sponsorship income additionally
consists of income pursuant to preparations with model and media companions, retail
venues, sport publishers and broadcasters that enable our companions to run novice
esports experiences, and or seize particularly curated gameplay content material that
is personalized for our companions’ distribution channels. Sponsorship preparations
usually embody contract phrases for time intervals starting from a number of weeks or
months to phrases of twelve months in size.

For sponsorship preparations that embody efficiency obligations happy over
time, clients usually concurrently obtain and eat the advantages underneath
the settlement as we fulfill our efficiency obligations, over the relevant
contract time period. As such, income is acknowledged over the contract time period based mostly upon
estimates of progress towards full satisfaction of the contract efficiency
obligations (usually using a time, effort or delivery-based technique of
estimation). Funds are usually due from clients throughout the time period of the
association.

Income from sponsorship preparations for one-off branded experiences and/or the
improvement of content material tailor-made particularly for our companions’ distribution
channels that present for a contractual supply or efficiency date, is
acknowledged at a time limit, when efficiency is considerably full and or
supply happens.

Content material Gross sales:

Content material-related income is generated in reference to our curation and
distribution of esports and leisure content material for our personal community of digital
channels and media and leisure companion channels. We distribute three
main kinds of content material for syndication and licensing, together with: (1) our personal
unique programming content material, (2) person generated content material (“UGC”), together with
on-line gameplay and gameplay highlights, and (3) the creation of content material for
third events using our distant manufacturing and broadcast expertise.

For content material preparations that embody efficiency obligations happy over
time, clients usually concurrently obtain and eat the advantages underneath
the association as we fulfill our efficiency obligations, over the relevant
contract time period. As such, income is acknowledged over the contract time period based mostly upon
estimates of progress towards full satisfaction of the contract efficiency
obligations (usually using a time, effort or delivery-based technique of
estimation). Income from shorter-term content material gross sales preparations that present
for a contractual supply or efficiency date is acknowledged when efficiency is
considerably full and or supply happens. Funds are usually due from
clients throughout the time period of the association for longer-term campaigns, and as soon as
supply is full for shorter-term campaigns.

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Direct to Shopper:

Direct to client income primarily consists of digital subscription charges,
in-game digital items, and gameplay entry charges. Subscription income is
acknowledged within the interval the companies are rendered. Funds are usually due
from clients on the level of sale.

Platform Generated Gross sales Transactions. Our Mobcrush subsidiary generates in-game
Platform gross sales income by way of digital items offered inside the platform, together with
beauty gadgets, sturdy items, participant ranks and sport modes, leveraging the
flexibility of the Microsoft Minecraft Bedrock platform, and powered by the
InPvP cloud structure expertise platform. Income is generated when
transactions are facilitated between Microsoft and the tip person, both by way of
in-game forex or money.

Income for digital items offered on the platform is acknowledged when Microsoft (our
companion) collects the income and facilitates the transaction on the platform.
Income for such preparations consists of all income generated, dangerous debt, make
items, and refunds of all transactions managed by way of the platform by Microsoft.
The income is acknowledged on a month-to-month foundation. Funds are made to the Firm
month-to-month based mostly on the reconciled gross sales income generated.

We make estimates and judgments when figuring out whether or not we’ll acquire
considerably all the consideration to which we might be entitled in trade
for the products or companies that might be transferred to the shopper. We assess
the collectability of receivables based mostly on a number of components, together with previous
transaction historical past and the creditworthiness of our clients. Whether it is
decided that assortment isn’t moderately assured, quantities due are acknowledged
when collectability turns into moderately assured, assuming all different income
recognition standards have been met, which is mostly upon receipt of money for
transactions the place collectability could have been a difficulty. Administration’s estimates
relating to collectability affect the precise income acknowledged every interval and
the timing of the popularity of income. Our assumptions and judgments
relating to future collectability might differ from precise occasions and thus
materially affect our monetary place and outcomes of operations.

Relying on the complexity of the underlying income association and associated
phrases and situations, vital judgments, assumptions and estimates could also be
required to find out every events rights relating to the products or companies to be
transferred, every events efficiency obligations, whether or not efficiency
obligations are happy at a time limit or over time, estimates of
completion methodologies, the timing of satisfaction of efficiency obligations,
and the suitable interval or intervals through which, or throughout which, the completion
of the earnings course of happens. Relying on the magnitude of particular income
preparations, if totally different judgments, assumptions and estimates are made
relating to income preparations in any particular interval, our periodic monetary
outcomes could also be materially affected.

Accounting for Enterprise Mixtures

Acquisition Methodology. Acquisitions that meet the definition of a enterprise
underneath ASC 805 are accounted for utilizing the acquisition technique of accounting.
Beneath the acquisition technique of accounting, belongings acquired, liabilities
assumed, contractual contingencies, and contingent consideration, when
relevant, are recorded at honest worth on the acquisition date. Any extra of
the acquisition value over the honest worth of the web belongings acquired is recorded as
goodwill. The appliance of the acquisition technique of accounting requires
administration to make vital estimates and assumptions within the dedication of
the honest worth of belongings acquired and liabilities assumed in reference to the
allocation of the acquisition value consideration to the belongings acquired and
liabilities assumed. Transaction prices related to enterprise combos are
expensed as incurred and are included normally and administrative expense in
the consolidated statements of operations. Contingent consideration, if any, is
acknowledged and measured at honest worth as of the acquisition date.

Price Accumulation Mannequin. Acquisitions that don’t meet the definition of a
enterprise underneath ASC 805 are accounted for as an asset acquisition, using a
value accumulation mannequin. Property acquired and liabilities assumed are acknowledged
at value, which is the consideration the acquirer transfers to the vendor,
together with direct transaction prices, on the acquisition date. The price of the
acquisition is then allotted to the belongings acquired based mostly on their relative
honest values. Goodwill isn’t acknowledged in an asset acquisition. Direct
transaction prices embody these third-party prices that may be immediately
attributable to the asset acquisition and wouldn’t have been incurred absent
the acquisition transaction.

Contingent consideration, representing an obligation of the acquirer to switch
further belongings or fairness pursuits to the vendor if future occasions happen or
situations are met, is acknowledged when possible and fairly estimable.
Contingent consideration acknowledged is included within the preliminary value of the
belongings acquired, with subsequent adjustments within the recorded quantity of contingent
consideration acknowledged as an adjustment to the associated fee foundation of the acquired
belongings. Subsequent adjustments are allotted to the acquired belongings based mostly on their
relative honest worth. Depreciation and/or amortization of adjusted belongings are
acknowledged as a cumulative catch-up adjustment, as if the extra quantity of
consideration that’s not contingent had been accrued from the outset of
the association.

Contingent consideration that’s paid to sellers that stay employed by the
acquirer and linked to future companies is mostly thought-about compensation value
and recorded within the assertion of operations within the post-combination interval.

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Goodwill

Goodwill represents the surplus of the acquisition value of the acquired enterprise
over the acquisition date honest worth of the web belongings acquired. Goodwill is
examined for impairment on the reporting unit degree (working section or one
degree under an working section) on an annual foundation (December 31) and between
annual checks if an occasion happens or circumstances change that will extra probably
than not cut back the honest worth of a reporting unit under its carrying worth. We
contemplate our market capitalization and the carrying worth of our belongings and
liabilities, together with goodwill, when performing our goodwill impairment checks.
We function in a single reporting section.

If a possible impairment exists, a calculation is carried out to find out the
honest worth of present goodwill. This calculation will be based mostly on quoted market
costs and / or valuation fashions, which contemplate the estimated future
undiscounted money flows ensuing from the reporting unit, and a reduction price
commensurate with the dangers concerned. Third-party appraised values may additionally be
utilized in figuring out whether or not impairment doubtlessly exists. In assessing goodwill
impairment, vital judgment is required in reference to estimates of
market values, estimates of the quantity and timing of future money flows, and
estimates of different components which might be used to find out the honest worth of our
reporting unit. If these estimates or associated projections change in future
intervals, future goodwill impairment checks could end in costs to earnings.

When conducting the Firm’s annual or interim goodwill impairment evaluation,
we initially carry out a qualitative analysis of whether or not it’s extra probably than
not that goodwill is impaired. In evaluating whether or not it’s extra probably than not
that the honest worth of our reporting unit is lower than its carrying quantity, we
contemplate the steerage set forth in ASC 350, “Intangibles Goodwill and Different,”
(“ASC 350”) which requires an entity to evaluate related occasions and
circumstances, together with macroeconomic situations, business and market
concerns, value components, monetary efficiency and different related occasions or
circumstances.

September 30, 2022 Goodwill Impairment Testing

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

At September 30, 2022, from a qualitative standpoint, we thought-about the
Firm’s historical past of reported losses and damaging money flows from working
actions, and in addition thought-about the sustained downturn in business and
macroeconomic situations, together with inflation and reductions in promoting
spending and the sustained downturn of the broader mid-cap and micro-cap fairness
markets in 2022. We additionally thought-about that the Firm skilled vital
inorganic and natural development in fiscal 2021, together with the affect of the
acquisitions of Mobcrush, Bannerfy and Superbiz on our premium promoting
stock, product choices to advertisers, present interval income acknowledged
and future income producing alternatives. Given the Firm’s current
vital development administration doesn’t consider that the present market
capitalization of the Firm is indicative of any basic change within the
Firm’s underlying enterprise or future prospects as of the measurement date.

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Nevertheless, the Firm’s inventory value has been risky, and the volatility
continued throughout the three months ended September 30, 2022, declining 34% to
$0.68 as of September 30, 2022, reflecting a market capitalization that was
roughly 38% of the Firm’s September 30, 2022 web e-book worth. To evaluate
whether or not the decline in our market capitalization was an indicator requiring an
interim goodwill impairment check, we thought-about the importance of the decline
and the size of time our widespread inventory has been buying and selling at a depressed worth
together with the macro components described above. The importance of the decline is
according to the broader microcap market. As of September 30, 2022 the
decline in our inventory value and different components have been deemed to be sustained, and
subsequently a triggering occasion requiring a goodwill impairment check as of
September 30, 2022 was deemed to have occurred.

We utilized the market capitalization of the Firm as of September 30, 2022, a
Stage 1 enter as described above, to estimate the honest worth of the Firm’s
single reporting unit. The estimated market capitalization was decided by
multiplying our September 30, 2022 inventory value and the widespread shares excellent
as of September 30, 2022. The market capitalization strategy was utilized to
estimate the honest worth of our single reporting unit as of September 30, 2022
attributable to significance of the decline in inventory value as of September 30, 2022,
leading to a market capitalization that was 38% of the web e-book worth of our
single reporting unit. Primarily based on the evaluation, the estimated honest worth of our
reporting unit was $25.2 million, in comparison with a carrying worth of our single
reporting unit of $67.3 million as of September 30, 2022. As such, the honest
worth of our single reporting unit was deemed to be under its carrying worth as
of September 30, 2022, leading to a goodwill impairment cost of $42.0
million, which is mirrored within the condensed consolidated assertion of
operations for the three and 9 months ended September 30, 2022.

Relaxed Ongoing Reporting Necessities

Upon the completion of our preliminary public providing, we elected to report as an
“rising development firm” (as outlined within the JOBS Act) underneath the reporting guidelines
set forth underneath the Alternate Act. For as long as we stay an “rising development
firm,” we could benefit from sure exemptions from varied reporting
necessities which might be relevant to different Alternate Act reporting corporations that
will not be “rising development corporations,” together with however not restricted to:

? not being required to adjust to the auditor attestation necessities of

Part 404 of the Sarbanes-Oxley Act;

? profiting from extensions of time to adjust to sure new or revised

monetary accounting requirements;

? being permitted to adjust to decreased disclosure obligations relating to

government compensation in our periodic stories and proxy statements; and

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

government compensation and stockholder approval of any golden parachute

funds not beforehand permitted.

We’re topic to ongoing public reporting necessities which might be much less rigorous
than Alternate Act guidelines for corporations that aren’t “rising development corporations,”
and our stockholders might obtain much less info than they may count on to
obtain from extra mature public corporations.

We count on to benefit from these reporting exemptions till we’re not
an rising development firm. We’ll stay an “rising development firm” for up
to 5 years, though if the market worth of our Widespread Inventory that’s held by
non-affiliates exceeds $700 million as of any June 30 earlier than that point, we might
stop to be an “rising development firm” as of the next December 31.

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