Document and Entity Information
Document and Entity Information - shares | 9 Months Ended | |
Sep. 30, 2019 | Nov. 09, 2019 | |
Document And Entity Information | ||
Entity Registrant Name | Super League Gaming, Inc. | |
Entity Central Index Key | 0001621672 | |
Document Type | 10-Q | |
Document Period End Date | Sep. 30, 2019 | |
Amendment Flag | false | |
Current Fiscal Year End Date | --12-31 | |
Is Entity's Reporting Status Current? | Yes | |
Is Entity Emerging Growth Company? | true | |
Elected Not To Use the Extended Transition Period | false | |
Entity Filer Category | Non-accelerated Filer | |
Entity Small Business | true | |
Entity Common Stock, Shares Outstanding | 8,569,922 | |
Document Fiscal Period Focus | Q3 | |
Document Fiscal Year Focus | 2019 | |
Entity Interactive Data Current | Yes | |
Entity Incorporation State Country Code | DE | |
Entity File Number | 001-38819 | |
Title of 12b security | Common Stock, par value $0.001 per share | |
Trading Symbol | SLGG | |
Security Exchange Name | NASDAQ |
CONDENSED BALANCE SHEETS
CONDENSED BALANCE SHEETS - USD ($) | Sep. 30, 2019 | Dec. 31, 2018 |
Current Assets | ||
Cash | $ 12,586,000 | $ 2,774,000 |
Accounts receivable | 332,000 | 488,000 |
Prepaid expenses and other current assets | 1,146,000 | 487,000 |
Total current assets | 14,064,000 | 3,749,000 |
Property and equipment, net | 257,000 | 531,000 |
Intangible and other assets, net | 1,887,000 | 707,000 |
Goodwill | 2,565,000 | 0 |
Total assets | 18,773,000 | 4,987,000 |
Current Liabilities | ||
Accounts payable and accrued expenses | 1,454,000 | 813,000 |
Deferred revenue | 113,000 | 45,000 |
Convertible debt and accrued interest, net | 0 | 10,923,000 |
Total current liabilities | 1,567,000 | 11,781,000 |
Stockholders' Equity (Deficit) | ||
Preferred stock, par value $0.001 per share; 10,000,000 shares authorized; no shares issued or outstanding | 0 | 0 |
Common stock, par value $0.001 per share; 100,000,000 shares authorized; 8,569,802 and 4,610,109 shares issued and outstanding as of September 30, 2019 and December 31, 2018, respectively. | 18,000 | 14,000 |
Additional paid-in capital | 98,312,000 | 48,325,000 |
Accumulated deficit | (81,124,000) | (55,133,000) |
Total stockholders' equity (deficit) | 17,206,000 | (6,794,000) |
Total liabilities and stockholders' equity | $ 18,773,000 | $ 4,987,000 |
CONDENSED BALANCE SHEETS (Paren
CONDENSED BALANCE SHEETS (Parenthetical) - $ / shares | Sep. 30, 2019 | Dec. 31, 2018 |
Statement of Financial Position [Abstract] | ||
Preferred stock, par value | $ .001 | $ 0.001 |
Preferred stock, authorized | 10,000,000 | 10,000,000 |
Preferred stock, issued | 0 | 0 |
Preferred stock, outstanding | 0 | 0 |
Common stock, par value | $ .001 | $ 0.001 |
Common stock, authorized | 100,000,000 | 100,000,000 |
Common stock, issued | 8,569,922 | 8,569,922 |
Common stock, outstanding | 4,610,109 | 4,610,109 |
CONDENSED STATEMENTS OF OPERATI
CONDENSED STATEMENTS OF OPERATIONS - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2019 | Sep. 30, 2018 | Sep. 30, 2019 | Sep. 30, 2018 | |
Income Statement [Abstract] | ||||
Revenues | $ 350,000 | $ 153,000 | $ 822,000 | $ 640,000 |
Cost of revenues | 192,000 | 70,000 | 379,000 | 375,000 |
Gross profit | 158,000 | 83,000 | 443,000 | 265,000 |
OPERATING EXPENSES | ||||
Selling, marketing and advertising | 215,000 | 327,000 | 687,000 | 996,000 |
Technology platform development | 638,000 | 567,000 | 2,030,000 | 1,682,000 |
General and administrative | 3,730,000 | 2,747,000 | 13,792,000 | 8,884,000 |
Total operating expenses | 4,583,000 | 3,641,000 | 16,509,000 | 11,562,000 |
Net operating loss | (4,425,000) | (3,558,000) | (16,066,000) | (11,297,000) |
OTHER INCOME (EXPENSE) | ||||
Accrued interest expense | 0 | (212,000) | (187,000) | (311,000) |
Accretion of debt discount | 0 | (1,239,000) | (2,684,000) | (1,537,000) |
Beneficial conversion feature | 0 | 0 | (7,067,000) | 0 |
Other | 8,000 | 0 | 13,000 | 2,000 |
Total other income (expense) | 8,000 | (1,451,000) | (9,925,000) | (1,846,000) |
Net loss | $ (4,417,000) | $ (5,009,000) | $ (25,991,000) | $ (13,143,000) |
Net loss attributable to common stockholders - basic and diluted | ||||
Basic and diluted loss per common share | $ (0.52) | $ (1.09) | $ (3.39) | $ (2.85) |
Weighted-average number of shares outstanding, basic and diluted | 8,569,922 | 4,610,111 | 7,663,243 | 4,605,962 |
CONDENSED STATEMENTS OF STOCKHO
CONDENSED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT) - USD ($) | Common Stock | Additional Paid-In Capital | Accumulated Deficit | Total |
Beginning balance, shares at Dec. 31, 2017 | 4,603,443 | |||
Beginning balance, amount at Dec. 31, 2017 | $ 14,000 | $ 38,191,000 | $ (34,507,000) | $ 3,698,000 |
Issuance of warrants with convertible notes (Note 6) | 5,206,000 | 5,206,000 | ||
Framerate acquisition shares, amount | 0 | |||
Stock-based compensation, shares | 6,666 | |||
Stock-based compensation, amount | $ 0 | 2,505,000 | 2,505,000 | |
Net loss | (13,143,000) | (13,143,000) | ||
Ending balance, shares at Sep. 30, 2018 | 4,610,109 | |||
Ending balance, amount at Sep. 30, 2018 | $ 14,000 | 45,902,000 | (47,650,000) | (1,734,000) |
Beginning balance, shares at Jun. 30, 2018 | 4,610,109 | |||
Beginning balance, amount at Jun. 30, 2018 | $ 14,000 | 42,030,000 | (42,641,000) | (5,009,000) |
Issuance of warrants with convertible notes (Note 6) | 3,055,000 | 3,055,000 | ||
Stock-based compensation, amount | 817,000 | 817,000 | ||
Net loss | (5,009,000) | |||
Ending balance, shares at Sep. 30, 2018 | 4,610,109 | |||
Ending balance, amount at Sep. 30, 2018 | $ 14,000 | 45,902,000 | (47,650,000) | (1,734,000) |
Beginning balance, shares at Dec. 31, 2018 | 4,610,109 | |||
Beginning balance, amount at Dec. 31, 2018 | $ 14,000 | 48,325,000 | (55,133,000) | (6,794,000) |
Initial public offering of common stock, net of issuance costs (Note 6), shares | 2,272,727 | |||
Initial public offering of common stock, net of issuance costs (Note 6), amount | $ 2,000 | 22,456,000 | 22,456,000 | |
Automatic conversion of convertible debt to common stock (Note 5), shares | 1,475,164 | |||
Automatic conversion of convertible debt to common stock (Note 5), amount | $ 2,000 | 13,791,000 | 13,791,000 | |
Beneficial conversion feature (Note 5) | 7,067,000 | 7,067,000 | ||
Framerate acquisition shares, shares | 134,422 | |||
Framerate acquisition shares, amount | $ 0 | 1,000,000 | 1,000,000 | |
Framerate Earn-Out (Note 5) | 454,000 | 454,000 | ||
Stock-based compensation, shares | 10,833 | |||
Stock-based compensation, amount | $ 0 | 5,199,000 | 5,199,000 | |
Warrant exercises, shares | 66,667 | |||
Warrant exercises, amount | $ 0 | 20,000 | 20,000 | |
Net loss | (25,991,000) | (25,991,000) | ||
Ending balance, shares at Sep. 30, 2019 | 8,569,922 | |||
Ending balance, amount at Sep. 30, 2019 | $ 18,000 | 98,312,000 | (81,124,000) | 17,206,000 |
Beginning balance, shares at Jun. 30, 2019 | 8,569,922 | |||
Beginning balance, amount at Jun. 30, 2019 | $ 18,000 | 97,598,000 | (76,707,000) | 20,909,000 |
Stock-based compensation, amount | 714,000 | 714,000 | ||
Net loss | (4,417,000) | (4,417,000) | ||
Ending balance, shares at Sep. 30, 2019 | 8,569,922 | |||
Ending balance, amount at Sep. 30, 2019 | $ 18,000 | $ 98,312,000 | $ (81,124,000) | $ 17,206,000 |
CONDENSED STATEMENTS OF CASH FL
CONDENSED STATEMENTS OF CASH FLOWS - USD ($) | 9 Months Ended | |
Sep. 30, 2019 | Sep. 30, 2018 | |
CASH FLOWS FROM OPERATING ACTIVITIES | ||
Net loss | $ (25,991,000) | $ (13,143,000) |
Adjustments to reconcile net loss to net cash used in operating activities: | ||
Depreciation and amortization | 657,000 | 791,000 |
Stock-based compensation | 5,266,000 | 2,451,000 |
Amortization of discount on convertible notes (Note 6) | 2,684,000 | 1,537,000 |
Beneficial conversion feature | 7,067,000 | 0 |
In-kind contribution of services | 0 | 481,000 |
Changes in assets and liabilities: | ||
Accounts receivable | 171,000 | 4,000 |
Prepaid expenses and other current assets | (852,000) | (362,000) |
Accounts payable and accrued expenses | 601,000 | 50,000 |
Deferred revenue | 68,000 | 0 |
Accrued interest on convertible notes | 187,000 | 311,000 |
Net cash used in operating activities | (10,142,000) | (7,880,000) |
CASH FLOWS FROM INVESTING ACTIVITIES | ||
Framerate acquisition | (1,491,000) | 0 |
Purchase of property and equipment | (56,000) | (190,000) |
Capitalization of software development costs | (839,000) | (192,000) |
Acquisition of other intangible assets | (138,000) | (67,000) |
Net cash used in investing activities | (2,524,000) | (449,000) |
CASH FLOWS FROM FINANCING ACTIVITIES | ||
Proceeds from issuance of common stock, net of issuance costs | 22,458,000 | 0 |
Proceeds from convertible note payable, net | 0 | 12,611,000 |
Proceeds from common stock purchase warrant exercises | 20,000 | 0 |
Net cash provided by financing activities | 22,478,000 | 12,611,000 |
Increase in cash | 9,812,000 | 4,282,000 |
Cash - beginning of period | 2,774,000 | 1,709,000 |
Cash - end of period | 12,586,000 | 5,991,000 |
SUPPLEMENTAL NONCASH FINANCING ACTIVITIES | ||
Automatic conversion of convertible debt to common stock (Note 6) | 13,793,000 | 3,000,000 |
Issuance of common stock for Framerate Acquisition (Note 5) | 1,000,000 | 0 |
Common stock purchase warrants - discount on convertible debt | 0 | 5,207,000 |
Common stock issued for prepaid services | $ 0 | $ 72,000 |
1. DESCRIPTION OF BUSINESS
1. DESCRIPTION OF BUSINESS | 9 Months Ended |
Sep. 30, 2019 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
DESCRIPTION OF BUSINESS | Super League Gaming, Inc. (“Super League,” the “Company,” “we” or “our”) is a global leader in the mission to bring live and digital esports entertainment and experiences directly to everyday gamers around the world. Utilizing our proprietary technology platform, Super League operates physical and digital experiences in partnership with publishers of top-tier game titles. In addition to providing premium experiences by operating city-vs-city amateur esports leagues and producing thousands of live competitive and social gaming experiences around the country, the Super League Network features multiple forms of content celebrating the love of play via social media, live streaming, video-on-demand, and website-based offerings. As a content producer with a dedicated esports studio, Super League publishes live streaming and on-demand video content on all major platforms including YouTube, Twitch and Instagram. In addition, with exclusive proprietary platforms like Minehut, the avid Minecraft community, Framerate, one of the largest independent social video networks in esports and gaming, and through our partnerships with high-profile venue owners such as Topgolf, Cinemark Theatres and independent fast-casual restaurants, Super League is committed to supporting the development of local, grassroots player communities all while providing a global framework for competition and community engagement. Super League was incorporated on October 1, 2014 as Nth Games, Inc. under the laws of the State of Delaware and changed its name to Super League Gaming, Inc. on June 15, 2015. We are an “emerging growth company” as defined by the Jumpstart Our Business Startups Act of 2012, as amended. Initial Public Offering On February 27, 2019, Super League completed its initial public offering (“IPO”) of shares of its common stock, pursuant to which an aggregate of 2,272,727 shares were offered and sold at a public offering price of $11.00 per share, resulting in net proceeds of $22,458,000 after deducting underwriting discounts, commissions and offering costs of $2,542,000. Concurrent with the closing of the IPO on February 27, 2019 (the “IPO Closing Date”), in accordance with the related agreements, all outstanding principal and interest of the 9.00% convertible notes outstanding, totaling $13,793,000, was automatically converted into 1,475,164 shares of the Company’s common stock at a conversion price of $9.35. |
2. SUMMARY OF SIGNIFICANT ACCOU
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 9 Months Ended |
Sep. 30, 2019 | |
Accounting Policies [Abstract] | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | Basis of Presentation The accompanying condensed financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information and with the instructions to Form 10-Q and Rule 8-03 of Regulation S-X. Accordingly, certain information and footnotes required by U.S. GAAP in annual financial statements have been omitted or condensed in accordance with quarterly reporting requirements of the Securities and Exchange Commission (“SEC”). These interim financial statements should be read in conjunction with our audited financial statements for the year ended December 31, 2018 included in our Registration Statement on Form S-1, declared effective by the Securities and Exchange Commission on February 25, 2019 (File No. 333-229144). The condensed interim financial statements of Super League include all adjustments of a normal recurring nature which, in the opinion of management, are necessary for a fair statement of Super League’s financial position as of September 30, 2019, and results of its operations and its cash flows for the interim periods presented. The results of operations for the three and nine months ended September 30, 2019 are not necessarily indicative of the results to be expected for the entire fiscal year. Use of Estimates The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates. The Company believes that, of the significant accounting policies described herein, the accounting policies associated with revenue recognition, the valuation of convertible notes and related common stock purchase warrants (hereinafter, “warrants”) discussed at Note 6, stock-based compensation expense, accounting for business combinations as discussed at Note 5, income taxes and valuation allowances against net deferred tax assets, require its most difficult, subjective or complex judgments. Going Concern The accompanying interim condensed 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. As presented in the interim condensed financial statements, the Company incurred net losses of $26.0 million and $13.1 million during the nine months ended September 30, 2019 and 2018, respectively, and had an accumulated deficit of $81.1 million as of September 30, 2019. Noncash expenses (excluding depreciation and amortization of fixed and intangible assets, respectively) included in net loss, primarily comprised of noncash interest charges and stock-based compensation, totaled $15.2 million and $4.8 million for the nine months ended September 30, 2019 and September 30, 2018, respectively. Net cash used in operating activities totaled $10.1 million and $7.9 million, for the nine months ended September 30, 2019 and September 30, 2018, respectively. As of September 30, 2019, the Company had cash and cash equivalents of approximately $12.6 million. The Company has and will continue to use significant capital for the growth and development of its business. The Company’s management expects operating losses to continue in the near term in connection with the pursuit of its strategic objectives. As such, management believes its current cash position, absent receipt of additional capital either from operations or that may be available from future issuance(s) of common stock or debt financings, is not sufficient to fund our planned operations for the twelve months following the issuance of these financial statements. As a result, our current financial condition raises substantial doubt about our ability to continue as a going concern. The Company considers historical operating results, capital resources and financial position, in combination with current projections and estimates, as part of its plan to fund operations over a reasonable period. Management's considerations assume, among other things, that the Company will continue to be successful implementing its business strategy, that there will be no material adverse developments in the business, liquidity or capital requirements and, if necessary, the Company will be able to raise additional equity or debt financing on acceptable terms. If one or more of these factors do not occur as expected, it could cause a reduction or delay of its business activities, sales of material assets, default on its obligations, or forced insolvency. The accompanying financial statements do not contain any adjustments which might be necessary if the Company were unable to continue as a going concern. No assurance can be given that any future financing will be available or, if available, that it will be on terms that are satisfactory to the Company. On February 27, 2019, we completed our IPO, pursuant to which we issued and sold an aggregate of 2,272,727 shares of our common stock at a public offering price of $11.00 per share pursuant to a registration statement on Form S-1, declared effective by the Securities and Exchange Commission on February 25, 2019 (File No. 333-229144). We received net proceeds of approximately $22,458,000 after underwriting discounts, commissions and other offering costs of $2,542,000. The principal purposes of the IPO was to obtain additional capital to support our operations, to create a public market for our common stock and to facilitate our future access to the public equity markets. We have and continue to use the net proceeds received from the IPO for working capital and general corporate purposes, including sales and marketing activities, product development and capital expenditures. We may also use a portion of the net proceeds for the acquisition of, or investment in, technologies, solutions or businesses that may complement our business and or accelerate our growth. The amounts and timing of our actual expenditures, including expenditure related to sales and marketing and product development will depend on numerous factors, including the status of our product development efforts, our sales and marketing activities, expansion internationally, the amount of cash generated or used by our operations, competitive pressures and other factors. Concurrent with the closing of the IPO on February 27, 2019, in accordance with the related agreements, all outstanding principal and interest for the 9.00% convertible notes outstanding, totaling $13,793,000, was automatically converted into 1,475,164 shares of the Company’s common stock at a conversion price of $9.35. Revenue Recognition Revenue is recognized when the Company transfers promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods and services. 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. Super League generates revenues and related cash flows from (i) brand and media sponsorships, (ii) Platform-As-A-Service arrangements, and (iii) direct to consumer offers including tournament fees for participation in our physical and online multiplayer gaming experiences, digital subscriptions and merchandise sales. Brand and Media Sponsorships. For brand and media sponsorship arrangements that include performance obligations satisfied over time, customers typically simultaneously receive and consume the benefits under the agreement as the Company satisfies its 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). Platform-As-A-Service. Direct to Consumer Revenue. Revenue billed or collected in advance is recorded as deferred revenue until the event occurs or until applicable performance obligations are satisfied as described above. For the three and nine months ended September 30, 2019, 45% and 43% of revenues were recognized at a single point in time, and 55% and 57% of revenues were recognized over time, respectively. For the three and nine months ended September 30, 2018, 41% and 20% of revenues were recognized at a single point in time, and 59% and 80% of revenues were recognized over time, respectively. Advertising Gaming experience and Super League brand related advertising costs include the cost of ad production, social media, print media, marketing, promotions, and merchandising. The Company expenses advertising costs as incurred. Advertising expenses for the three and nine months ended September 30, 2019 were $81,000 and $270,000, respectively, and are included in selling, marketing and advertising expenses in the condensed statements of operations. Advertising expenses for the three and nine months ended September 30, 2018 were $163,000 and $362,000, respectively. Technology Platform Development Costs Technology platform development costs include (i) allocated personnel costs, including salaries, taxes and benefits related to our internal software developers and engineers, employed by Super League, engaged in the operation, maintenance, management, administration, testing and enhancement of our proprietary gaming and content technology platform, and (ii) the amortization of capitalized internal use software costs primarily comprised of capitalized costs for internal and third-party contract software development and engineering resources engaged in developing and enhancing our proprietary gaming and content technology platform. Deferred Financing Costs Specific incremental costs directly attributable to a proposed or actual offering of securities or debt are deferred and charged against the gross proceeds of the financing. In the event that the proposed or actual financing is not completed, or is deemed not likely to be completed, such costs are expensed in the period that such determination is made. Deferred costs related to proposed offerings of securities totaled $0 and $154,354 at September 30, 2019 and December 31, 2018, respectively. Deferred financing costs, if any, are included in other current assets in the condensed balance sheet. Deferred financing costs charged against gross proceeds in connection with the close of the Company’s IPO totaled $517,000. Property and Equipment Property and equipment are recorded at cost. Major additions and improvements that materially extend useful lives of property and equipment are capitalized. Maintenance and repairs are charged against the results of operations as incurred. When these assets are sold or otherwise disposed of, the asset and related depreciation are relieved, and any gain or loss is included in the statements of operations for the period of sale or disposal. Depreciation and amortization are computed on a straight-line basis over the estimated useful lives of the assets, typically over a three- to five-year period. Intangible Assets Intangible assets primarily consist of (i) internal-use software development costs, (ii) domain name, copyright and patent registration costs, (iii) commercial licenses and branding rights and (iv) other intangible assets, which are recorded at cost and amortized using the straight-line method over the estimated useful lives of the assets, ranging from three to 10 years. Software development costs incurred to develop internal-use software during the application development stage are capitalized and amortized on a straight-line basis over the software’s estimated useful life, which is generally three years. Software development costs incurred during the preliminary stages of development are charged to expense as incurred. Maintenance and training costs are charged to expense as incurred. Upgrades or enhancements to existing internal-use software that result in additional functionality are capitalized and amortized on a straight-line basis over the applicable estimated useful life. 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 (October 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. The Company considers its market capitalization and the carrying value of its assets and liabilities, including goodwill, when performing its goodwill impairment test. When conducting its annual goodwill impairment assessment, the Company initially performs a qualitative evaluation of whether it is more likely than not that goodwill is impaired. If it is determined by a qualitative evaluation that it is more likely than not that goodwill is impaired, the Company then applies a two-step impairment test. The two-step impairment test first compares the fair value of the Company’s reporting unit to its carrying or book value. If the fair value of the reporting unit exceeds its carrying value, goodwill is not impaired, and the Company is not required to perform further testing. If the carrying value of the reporting unit exceeds its fair value, the Company determines the implied fair value of the reporting unit’s goodwill and if the carrying value of the reporting unit’s goodwill exceeds its implied fair value, then an impairment loss equal to the difference is recorded in the statement of operations. The Company operates in one reporting segment. Impairment of Long-Lived Assets The Company assesses the recoverability of long-lived assets whenever events or changes in circumstances indicate that their carrying value may not be recoverable. If the cost basis of a long-lived asset is greater than the projected future undiscounted net cash flows from such asset, an impairment loss is recognized. Impairment losses are calculated as the difference between the cost basis of an asset and its estimated fair value. Management believes that there was no impairment of long-lived assets for the periods presented herein. There can be no assurance, however, that market conditions or demand for the Company’s products or services will not change, which could result in long-lived asset impairment charges in the future. Stock-Based Compensation Compensation expense for stock-based awards is measured at the grant date, based on the estimated fair value of the award, and is recognized as an expense, typically on a straight-line basis over the employee’s requisite service period (generally the vesting period of the equity award) which is generally two to four years. Compensation expense for awards with performance conditions that affect vesting is recorded only for those awards expected to vest or when the performance criteria are met. The fair value of restricted stock and restricted stock unit awards is determined by the product of the number of shares or units granted and the grant date market price of the underlying common stock. The fair value of stock option and common stock purchase warrant awards is estimated on the date of grant utilizing the Black-Scholes-Merton option pricing model. The Company accounts for forfeitures of awards as they occur. Grants of equity-based awards (including warrants) to non-employees in exchange for consulting or other services are accounted for using the fair value of the consideration received (i.e., the value of the goods or services) or the fair value of the equity instruments issued, whichever is more reliably measurable. Noncash stock-based compensation expense, included in general and administrative expense, for the periods presented was comprised of the following: Three Months Ended September 30, Nine Months Ended September 30, 2019 2018 2019 2018 Stock options $ 374,000 $ 512,000 $ 3,004,000 $ 1,741,000 Warrants 263,000 229,000 1,918,000 682,000 Restricted stock units 75,000 23,000 311,000 28,000 Earn-out compensation expense (Note 5) 25,000 - 33,000 - Total noncash stock compensation expense $ 737,000 $ 764,000 $ 5,266,000 $ 2,451,000 Noncash stock-based compensation expense for the three and nine months ended September 30, 2019 included compensation expense resulting from the vesting of certain performance-based options and warrants previously granted to two of the Company’s executives which vested upon completion of the IPO and the satisfaction of certain other operational performance metrics, pursuant to October 2018 amended employee agreements and related vesting provisions of the underlying equity grant agreements. During the nine months ended September 30, 2019, 300,000 of performance-based stock options and warrants vested, with a weighted-average grant date fair value of $8.50, resulting in noncash stock compensation expense of $2,549,000. The fair value of these equity awards was estimated on October 31, 2018, their original grant date, using the Black Scholes-Merton option pricing model and the following weighted-average assumptions: (i) volatility of 93%, (ii) risk-free interest rate of 3.0%, and (iii) expected term of 6.5 years. Risks and Uncertainties Concentrations For the three and nine months ended September 30, 2019, five customers accounted for 90% and three customers accounted for 49% of revenues, respectively. For the three and nine months ended September 30, 2018, two and four customers accounted for 72% and 77% of revenues, respectively. At September 30, 2019 and December 31, 2018, four and three customers accounted for 87% and 96% of accounts receivable. At September 30, 2019 and December 31, 2018, one vendor accounted for 46% and three vendors accounted for 43% of accounts payable, respectively. Segment Information The Company operates in one segment. Earnings (Loss) Per Share Basic earnings (loss) per share is computed by dividing the income or loss by the weighted-average number of outstanding shares of common stock for the applicable period. Diluted earnings per share is computed by dividing the income or loss by the weighted-average number of outstanding shares of common stock for the applicable period, including the dilutive effect of common stock equivalents. Potentially dilutive common stock equivalents primarily consist of employee stock options, warrants issued to employees and non-employees in exchange for services and warrants issued in connection with financings. All outstanding stock options and warrants for the periods presented have been excluded from the computation of diluted loss per share because the effect of inclusion would have been anti-dilutive. Income Taxes Income taxes are accounted for using an asset and liability approach that requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been recognized in the Company’s financial statements or income tax returns. A valuation allowance is established to reduce deferred tax assets if all, or some portion, of such assets will more than likely not be realized, or if it is determined that there is uncertainty regarding future realization of such assets. The provision for income taxes for interim periods is determined using an estimate of Super League’s annual effective tax rate, adjusted for discrete items, if any, that are considered in the relevant period. Each quarter, the Company updates the estimate of the annual effective tax rate, and if the estimated tax rate changes, a cumulative adjustment is recorded. On December 22, 2017, new U.S. federal tax legislation was enacted that significantly changed the U.S. federal income taxation of U.S. corporations, including by reducing the U.S. corporate income tax rate from 35% to 21%, revising the rules governing net operating losses and foreign tax credits, and introducing new anti-base erosion provisions. Many of the changes were effective immediately, without any transition periods or grandfathering for existing transactions. The legislation is unclear in many respects and could be subject to potential amendments and technical corrections, as well as interpretations and implementing regulations by the U.S. Department of the Treasury and the Internal Revenue Service (“IRS”), any of which could decrease or increase certain adverse impacts of the legislation. In addition, it is unclear how these U.S. federal income tax changes will affect state and local taxation, which often uses federal taxable income as a starting point for computing state and local tax liabilities. The new legislation reduced the corporate income tax rate from 35% to 21% effective January 1, 2018. As a result, all deferred income tax assets and liabilities, including net operating losses, have been measured using the new rate under and are reflected in the valuation of these assets as of December 31, 2018 and 2017. As a result, as of December 31, 2017, the value of our deferred tax assets was reduced by $4,278,626 and the related valuation allowance was reduced by the same amount. Given the full valuation allowance provided for net deferred tax assets for the periods presented herein, the change in tax law did not have a material impact on the Company’s financial statements provided herein. There may be additional tax impacts identified in subsequent periods throughout the Company’s fiscal year ending December 31, 2019 in accordance with subsequent interpretive guidance issued by the SEC or the IRS. Further, there may be other material adverse effects resulting from the legislation that we have not yet identified. No estimated tax provision has been recorded for tax attributes that are incomplete or subject to change. Fair Value Measurements Fair value is defined as the exchange price that would be received from selling an asset or paid to transfer a liability in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. The Company measures financial assets and liabilities at fair value at each reporting period using a fair value hierarchy which requires the Company to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. A financial instrument’s classification within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. Three levels of inputs may be used to measure fair value: Level 1. Level 2 Level 3. The fair value of accounts receivable and other current assets approximated their carrying value at the date of acquisition. Acquired intangible assets and the Earn-Out were valued using Level 3 inputs. Recent Accounting Guidance Recent Accounting Pronouncements - Recently Adopted. In May 2014, the FASB issued a new accounting standard update (“ASU”) addressing revenue from contracts with customers, which clarifies existing accounting literature relating to how and when a company recognizes revenue. Under the standard, a company will recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods and services. In doing so, the Company is required to use more judgment and make more estimates in connection with the accounting for revenue contracts with customers than under previous guidance. Such areas may include: (i) identifying performance obligations in the contract, (ii) estimating the timing of satisfaction of performance obligations, (iii) determining whether a promised good or service is distinct from other promised goods or services, including whether the customer can benefit from the good or service on its own and whether the promise to transfer a good or service is separately identifiable from other promises in the contract, (iv) evaluating whether performance obligations are satisfied at a point in time or over time, (v) allocating the transaction price to separate performance obligations, and (vi) determining whether contracts contain a significant financing component. The Company used the modified retrospective method of adoption, which would require the cumulative effect of initially applying the new revenue standard as an adjustment to the opening balance of retained earnings on January 1, 2019. Comparative prior year periods would not be adjusted. The new accounting standard was applied to all contracts at the date of initial application. There was no cumulative effect of applying the new revenue standard to contracts executed in prior periods. As such, the adoption of the new accounting standard had no impact of on the balance sheet and statement of operations in the current or prior periods. Recent Accounting Pronouncements – Not Yet Adopted. In February 2016, the FASB issued an ASU that requires lessees to present right-of-use assets and lease liabilities on the balance sheet. The new guidance is to be applied using a modified retrospective approach at the beginning of the earliest comparative periods in the financial statements and is effective for fiscal years beginning after December 15, 2019 and early adoption is permitted. The Company is evaluating the impact that this guidance will have on its financial position, results of operations and financial statement disclosures. In June 2016, the FASB issued guidance on the measurement and recognition of credit losses on most financial assets. For trade receivables, loans, and held-to-maturity debt securities, the current probable loss recognition methodology is being replaced by an expected credit loss model. For available-for-sale debt securities, the recognition model on credit losses is generally unchanged, except the losses will be presented as an adjustable allowance. The guidance will be applied retrospectively with the cumulative effect recognized as of the date of adoption. The guidance will become effective at the beginning of the Company’s first quarter of the fiscal year ending December 31, 2021 but can be adopted as early as the beginning of the first quarter of fiscal year ending December 31, 2020. The Company is currently assessing the impact that adopting this new accounting guidance will have on its financial statements and footnote disclosures. |
3. PROPERTY AND EQUIPMENT
3. PROPERTY AND EQUIPMENT | 9 Months Ended |
Sep. 30, 2019 | |
Property, Plant and Equipment [Abstract] | |
PROPERTY AND EQUIPMENT | Property and equipment consisted of the following for the periods presented: September 30, 2019 December 31, 2018 (Unaudited) Furniture and fixtures $ 332,000 $ 297,000 Computer hardware 3,126,000 3,105,000 3,458,000 3,402,000 Less: accumulated depreciation (3,201,000 ) (2,871,000 ) Property and equipment, net $ 257,000 $ 531,000 Depreciation expense for property and equipment was $38,000 and $330,000 for the three and nine months ended September 30, 2019, respectively. Depreciation expense for property and equipment was $190,000 and $620,000 for the three and nine months ended September 30, 2018, respectively. |
4. INTANGIBLE AND OTHER ASSETS
4. INTANGIBLE AND OTHER ASSETS | 9 Months Ended |
Sep. 30, 2019 | |
Finite-Lived Intangible Assets, Net [Abstract] | |
INTANGIBLE AND OTHER ASSETS | Intangible and other assets consisted of the following for the periods presented: September 30, 2019 December 31, 2018 (Unaudited) Capitalized software development costs $ 2,122,000 $ 1,281,000 Licenses 340,000 - Domain 70,000 68,000 Trade name (Note 5) 189,000 - Copyrights and other 260,000 126,000 2,981,000 1,475,000 Less: accumulated amortization (1,094,000 ) (768,000 ) Intangible and other assets, net $ 1,887,000 $ 707,000 Amortization expense totaled $134,000 and $326,000 for the three and nine months ended September 30, 2019, respectively. Amortization expense totaled $64,000 and $171,000 for the three and nine months ended September 30, 2018, respectively. Future amortization expense of intangible and other assets is expected to be as follows: For the years ending December 31: Remainder of 2019 $ 161,000 2020 625,000 2021 557,000 2022 252,000 2023 143,000 Thereafter 149,000 Total $ 1,887,000 On September 23, 2019, the Company and ggCircuit, LLC (“ ggCircuit esports services company that provides gaming center management software solutions and other esports offerings, Expanded Agreement Super League will become the primary consumer-facing brand within ggCircuit’s software platform. In consideration for the rights granted by ggCircuit to Super League, Super League will pay an upfront fee of $340,000 and quarterly fees over the term of the Agreement ranging from $0 to $150,000, based on predetermined contractual revenue levels. Pursuant to the terms and conditions of the Expanded Agreement, revenues generated in connection with applicable activities under the Expanded Agreement will be shared between Super League and ggCircuit based on contractual revenue sharing percentages. The initial term of the Expanded Agreement commences on October 1, 2019, the effective date and concludes on the fifth anniversary of the effective date, subject to certain automatic renewal provisions. The upfront fee is included as “Licenses” in intangible assets and other assets, net (and accrued liabilities) in the accompanying balance sheet and will be amortized over the initial term of the Expanded Agreement of five years, commencing October 1, 2019. |
5. AQUISITION OF FRAMERATE, INC
5. AQUISITION OF FRAMERATE, INC. | 9 Months Ended |
Sep. 30, 2019 | |
Business Combinations [Abstract] | |
AQUISITION OF FRAMERATE, INC. | On June 3, 2019, Super League and SLG Merger Sub, Inc., a Delaware corporation and wholly-owned subsidiary of the Company (“Merger Sub”), entered into an agreement and plan of merger (the “Merger Agreement”) with Framerate, Inc., a Delaware corporation (“Framerate”), pursuant to which Framerate merged with and into Merger Sub, with Merger Sub continuing as the surviving corporation (the “Acquisition”). The Acquisition was consummated on June 6, 2019 when the certificate of merger of Merger Sub and Framerate was filed with the Secretary of State of the State of Delaware (the “Effective Date”). As consideration for the Acquisition, the Company ratably paid and/or issued to the former shareholders of Framerate an aggregate of (i) $1.5 million paid in cash and (ii) $1.0 million paid by the issuance of a total of 134,422 shares of the Company’s common stock, at a price per share of $7.4395 (the “Closing Shares”). The Acquisition was approved by the board of directors of each of the Company and Framerate, and was approved by the stockholders of Framerate. Transaction costs incurred relating to this acquisition were not material for the three and nine months ended September 30, 2019. The acquisition of Framerate expands the Company’s digital programming footprint and enhances the Company’s ability to provide value to its gaming and spectator communities through multiple forms of engagement. In addition to the issuance of the Closing Shares, the Merger Agreement provides for the issuance of up to an additional $980,000 worth of shares of the Company’s common stock at the same price per share as the Closing Shares (the “Earn-Out Shares”) in the event Framerate achieves certain performance-based milestones during the two-year period following the closing of the Acquisition, or June 6, 2021 (the “Earn-Out”). One-half of the Earn-Out Shares will be issuable on the one-year anniversary of the Effective Date, and the remaining one-half will be issuable on the second anniversary of the Effective Date. The fair value of the Earn-Out on the Effective Date was estimated to be $454,000. The Company has determined that the Acquisition constitutes a business acquisition as defined by Accounting Standards Codification (“ASC”) 805, Business Combinations Fair Value Measurements and Disclosures The Company hired the former Chief Executive of Framerate (“Framerate Executive”), who was also a selling shareholder of Framerate. Pursuant to the provisions of the Earn-Out included in the Merger Agreement, in the event that the Framerate Executive is terminated for cause or resigns from his employment with the Company at any time on or before the second anniversary of the Effective Date, and any such resignation is without “Good Reason” as such term is defined in his employment agreement, then the maximum amount of any portion of the Earn-Out that has not yet been earned as of the date of resignation shall be reduced by 44.0164%. Under ASC 805, a contingent consideration arrangement in which the payments are automatically forfeited if employment terminates is considered to be compensation for post-combination services, and not acquisition consideration. As such approximately 44% of the estimated fair value of the Earn-Out, or $200,000, is accounted for as deferred compensation expense and being amortized in the statement of operations over the two-year period ending on the second anniversary of the Effective date. Noncash compensation expense related to the portion of the Earn-Out treated as compensation for the three and nine months ended September 30, 2019 was $25,000 and $33,000. The portion of the Earn-Out included as consideration was $254,000. The Earn-Out arrangement does not meet the liability classification criteria outlined in ASC 480, “Distinguishing Liabilities from Equity,” and is both (i) indexed to the Company’s own shares and (ii) classified in shareholders’ equity in the accompanying condensed balance sheet. Equity-classified contingent consideration is measured initially at fair value on the acquisition date and is not remeasured subsequent to initial recognition. As such, the initial value recognized for the Earn-Out on the acquisition date is not adjusted for changes in the fair value of the Earn-Out as of any future settlement date. Subsequent differences between the estimated fair value of the Earn-Out recorded at the acquisition date and the actual amount of Earn-Out paid based on actual performance will be reflected as a charge or credit, as applicable, in the statement of operations. The following table summarizes the fair value of purchase price consideration paid to acquire Framerate: Amount Cash consideration at closing $ 1,515,000 Equity consideration at closing 1,000,000 Fair value of Earn-Out shares 254,000 Total $ 2,769,000 The purchase price allocation is based upon an estimate of the fair value of the assets acquired and the liabilities assumed by the Company in connection with the acquisition of Framerate, as follows: Amount Accounts receivable $ 15,000 Intangible assets - trade name 189,000 Goodwill 2,565,000 Total purchase price $ 2,769,000 The identifiable intangible asset acquired, totaling $189,000, was comprised of Framerate’s trade name with an estimated useful life of approximately five years, and is included in intangible and other assets, net in the condensed balance sheet. The trade name intangible asset is being amortized over the estimated useful life on a straight-line basis. Amortization expense for the three and nine months ended September 30, 2019 was $3,000 and $10,000 respectively. Management is responsible for determining the fair value of the identifiable intangible assets acquired as of the Effective Date. Management considered a number of factors, including reference to an analysis under ASC 805 solely for the purpose of allocating the purchase price to the assets acquired. The fair values of the acquired intangible asset, as described above, was determined using the following methods: Description Valuation Method Valuation Method Description Assumptions Trade Name Relief-from-Royalty method under the income approach Under the Relief-from-Royalty method, the royalty savings is calculated by estimating a reasonable royalty rate that a third party would negotiate in a licensing agreement. Such royalties are most commonly expressed as a percentage of total revenue involving a trade name. Useful life: 5 years; Royalty Rate: 05%; Discount Rate: 50% Earn-Out Scenario Based Model The payoff structure was determined to be linear and the Earn-Out is payable within two years. Revenue scenarios were estimated and a probability for each scenario based on the likelihood of achieving the forecasted revenues was estimated. The estimated payments from the scenarios were then discounted based on the Company's credit risk and the related risk-free rate. The value per share was then adjusted for the time period through the payout date. The option methodology employed was the Black-Scholes Option Model. Volatility: 75% - 100%; Term 1 -2 years; Risk Free Rate 2.21% - 1.95%; The Acquisition was treated for tax purposes as a nontaxable transaction and as such, the historical tax bases of the acquired assets, net operating losses, and other tax attributes of Framerate will carryover. As a result, no new goodwill for tax purposes was be created in connection with the Acquisition as there is no step-up to fair value of the underlying tax bases of the acquired net assets. |
6. CONVERTIBLE NOTES PAYABLE
6. CONVERTIBLE NOTES PAYABLE | 9 Months Ended |
Sep. 30, 2019 | |
Debt Disclosure [Abstract] | |
CONVERTIBLE NOTES PAYABLE | In February through April 2018, the Company issued 9.00% secured convertible promissory notes with a collective face value of $3,000,000 (the “Initial 2018 Notes”). The Initial 2018 Notes (i) accrued simple interest at the rate of 9.00% per annum, (ii) matured on the earlier of December 31, 2018 or the close of a $15,000,000 equity financing (“Qualifying Equity Financing”) by the Company, and (iii) all outstanding principal and accrued interest was automatically convertible into equity or equity-linked securities sold in a Qualifying Equity Financing based upon a conversion rate equal to (x) a 10% discount to the price per share of a Qualifying Equity Financing, with (y) a floor of $10.80 per share. In addition, the holders of the Initial 2018 Notes were collectively issued warrants to purchase approximately 55,559 shares of common stock, at an exercise price of $10.80 per share and a term of five years (the “Initial 2018 Warrants”). In May through August 2018, the Company issued additional 9.00% secured convertible promissory notes with a collective face value of $10,000,000 (the “Additional 2018 Notes”). In May 2018, all of the Initial 2018 Notes and related accrued interest, totaling $3,056,000, were converted into the Additional 2018 Notes, resulting in an aggregate principal amount of $13,056,000 (hereinafter collectively, the “2018 Notes”). The holders of the converted Initial 2018 Notes retained their respective Initial 2018 Warrants. The 2018 Notes (i) accrued simple interest at the rate of 9.00% per annum, (ii) matured on the earlier of the closing of an initial public offering of the Company’s common stock on a national securities exchange or April 30, 2019, and (iii) all outstanding principal and accrued interest was automatically convertible into shares of common stock upon the closing of an IPO at the lesser of (x) $10.80 per share or (y) a 15% discount to the price per share of the IPO. In addition, the holders of the 2018 Notes were collectively issued 1,396,420 warrants to purchase common stock equal to 100% of the aggregate principal amount of the 2018 Notes divided by $9.35 per share (the “2018 Warrants”). The 2018 Warrants are exercisable for a term of five years, commencing on the close of an IPO, at an exercise price of $9.35 and are callable at the election of the Company at any time following the closing of an IPO. The 2018 Notes are secured by a security interest in all of the assets, tangible and intangible, of the Company. The proceeds from the sale of the 2018 Notes, the 2018 Warrants and the Initial 2018 Warrants, were allocated to the instruments based on the relative fair values of the convertible debt instrument without the warrants and of the warrants themselves at the time of issuance. The portion of the proceeds, totaling $5,933,000 allocated to the 2018 Warrants, was accounted for as a discount to the debt, with the offsetting credit to additional paid-in capital. The remainder of the proceeds were allocated to the convertible debt instrument portion of the transaction. The resulting debt discount is amortized over the period from issuance to April 30, 2019, the stated maturity date of the debt. Debt issuance costs were comprised of $389,000 of cash commissions and warrants with a fair value of $223,000, paid and issued, respectively, to third-parties in connection with the debt financing, and are reflected as a discount to the debt instrument, net of accumulated amortization, in the December 31, 2018 balance sheet. Debt issuance costs are amortized over the term of the debt as interest expense in the statement of operations. Concurrent with the closing of the IPO on February 27, 2019, all outstanding principal and accrued interest outstanding under the 2018 Notes totaling $13,793,000, was automatically converted into 1,475,164 shares of the Company’s common stock at a conversion price per share of $9.35. As a result of the automatic conversion of the 2018 Notes and the application of conversion accounting, the Company recorded an immediate charge to interest expense of $1,384,000 for the nine months ended September 30, 2019, representing the write-off of the unamortized balance of debt discounts associated with the 2018 warrants and cash commissions and Warrants issued to third parties. Unamortized debt discounts at September 30, 2019 and December 31, 2018 totaled $0 and $2,684,000, respectively. The non-detachable conversion feature embedded in the 2018 Notes provides for a conversion rate that is below market value at the commitment date, and therefore, represents a beneficial conversion feature (“BCF”). The BCF is generally recognized separately at issuance by allocating a portion of the debt proceeds equal to the intrinsic value of the BCF to additional paid-in capital. The resulting convertible debt discount is recognized as interest expense using the effective yield method. The BCF is measured using the commitment date stock price. However, the conversion feature associated with the 2018 Notes was not exercisable until the consummation of an initial public offering by the Company of its common stock, and therefore, was not required to be recognized in earnings until the IPO related contingency was resolved, which occurred on the IPO Closing Date. The commitment date is the IPO Closing Date and the commitment date stock price was $11.00 per share. The intrinsic value of the BCF on the IPO Closing Date, which was limited to the net proceeds allocated to the debt on a relative fair value basis, was approximately $7,067,000, and is reflected as additional interest expense in the condensed statement of operations for the nine months ended September 30, 2019. |
7. STOCKHOLDERS' EQUITY
7. STOCKHOLDERS' EQUITY | 9 Months Ended |
Sep. 30, 2019 | |
Stockholders' Equity (Deficit) | |
STOCKHOLDERS' EQUITY | Initial Public Offering On February 27, 2019, Super League completed its initial public offering (“IPO”) of its common stock, pursuant to which the Company issued and sold an aggregate of 2,272,727 shares of common stock at $11.00 per share, raising aggregate net proceeds of $22,458,000 after deducting underwriting discounts, commissions and offering costs of $2,542,000. Concurrent with the closing of the IPO on February 27, 2019 (the “IPO Closing Date”), in accordance with the related agreements, all outstanding principal and interest for the 9.00% convertible notes outstanding, totaling $13,793,000, was automatically converted into 1,475,164 shares of the Company’s common stock at a conversion price of $9.35. Super League has and continues to use the net proceeds received from the offering for working capital and general corporate purposes, including sales and marketing activities, product development and capital expenditures. Super League may also use a portion of the net proceeds for the acquisition of, or investment in, technologies, solutions or businesses that may compliment the Company’s business and or accelerate the Company’s growth. Upon closing of the IPO, 83,333 options and 125,000 warrants previously granted to the CEO (with an average grant date fair value of $8.50) became fully vested. As a result, the Company recorded an additional $1,770,000 of stock-based compensation during the nine months ended September 30, 2019. Pursuant to the related underwriting agreement, in connection with the completion of the IPO, for the purchase price of $50.00, the Company issued a warrant to purchase shares of our common stock equal to 3.0% of the shares sold in the IPO, or 68,182 shares, at an exercise price of $11.00 per share (the “Underwriters’ Warrants”). The Underwriters’ Warrants are exercisable during the period commencing from the date of the close of the IPO and ending five years from the closing date of the IPO. The Underwriters’ Warrants represent additional noncash offering costs, with an estimated grant date fair value of $547,000, which was reflected in additional-paid-in capital when issued and as a corresponding offering cost in the condensed statement of shareholders equity for the three and nine months ended September 30, 2019. The fair value of the Underwriters’ Warrant was estimated on February 27, 2019, the grant date, using the Black Scholes-Merton option pricing model and the following weighted-average assumptions: (i) volatility of 95%, (ii) risk-free interest rate of 2.5%, and (iii) expected term of five years. Reverse Stock Split On February 8, 2019, the Company filed an amendment to the Company’s amended and restated certificate of incorporation to effect a reverse split of shares of the Company’s common stock on a one-for-three basis (the “Reverse Stock Split”). All references to common stock, warrants to purchase common stock, options to purchase common stock, early exercised options, restricted stock, share data, per share data and related information contained in the financial statements have been retrospectively adjusted to reflect the effect of the Reverse Stock Split for all periods presented. No fractional shares were issued in connection with the Reverse Stock Split. Any fractional shares resulting from the Reverse Stock Split will be rounded down to a whole share, and any effected stockholders will receive a cash payment equal to the value of such fractional shares. In-Kind Contribution of Services In June 2017, the Company entered into an arrangement with a major media network for $1,000,000 of in-kind contributions of media services in exchange for 92,592 shares of common stock. This prepaid advertising cost was amortized over an 18-month period ending as of December 31, 2018. Expense included in selling, marketing and advertising expenses in the statement of operations for usage of the in-kind media services for the three and nine months ended September 30, 2018 was $186,000 and $481,000, respectively. |
8. SUBSEQUENT EVENTS
8. SUBSEQUENT EVENTS | 9 Months Ended |
Sep. 30, 2019 | |
Subsequent Events [Abstract] | |
SUBSEQUENT EVENTS | The Company evaluated subsequent events for their potential impact on the financial statements and disclosures through the date the financial statements were available to be issued and determined that no subsequent events occurred that were reasonably expected to impact the financial statements presented herein. |
2. SUMMARY OF SIGNIFICANT ACC_2
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) | 9 Months Ended |
Sep. 30, 2019 | |
Accounting Policies [Abstract] | |
Basis of Presentation | The accompanying condensed financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information and with the instructions to Form 10-Q and Rule 8-03 of Regulation S-X. Accordingly, certain information and footnotes required by U.S. GAAP in annual financial statements have been omitted or condensed in accordance with quarterly reporting requirements of the Securities and Exchange Commission (“SEC”). These interim financial statements should be read in conjunction with our audited financial statements for the year ended December 31, 2018 included in our Registration Statement on Form S-1, declared effective by the Securities and Exchange Commission on February 25, 2019 (File No. 333-229144). The condensed interim financial statements of Super League include all adjustments of a normal recurring nature which, in the opinion of management, are necessary for a fair statement of Super League’s financial position as of September 30, 2019, and results of its operations and its cash flows for the interim periods presented. The results of operations for the three and nine months ended September 30, 2019 are not necessarily indicative of the results to be expected for the entire fiscal year. |
Use of Estimates | The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates. The Company believes that, of the significant accounting policies described herein, the accounting policies associated with revenue recognition, the valuation of convertible notes and related common stock purchase warrants (hereinafter, “warrants”) discussed at Note 6, stock-based compensation expense, accounting for business combinations as discussed at Note 5, income taxes and valuation allowances against net deferred tax assets, require its most difficult, subjective or complex judgments. |
Going Concern | The accompanying interim condensed 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. As presented in the interim condensed financial statements, the Company incurred net losses of $26.0 million and $13.1 million during the nine months ended September 30, 2019 and 2018, respectively, and had an accumulated deficit of $81.1 million as of September 30, 2019. Noncash expenses (excluding depreciation and amortization of fixed and intangible assets, respectively) included in net loss, primarily comprised of noncash interest charges and stock-based compensation, totaled $15.2 million and $4.8 million for the nine months ended September 30, 2019 and September 30, 2018, respectively. Net cash used in operating activities totaled $10.1 million and $7.9 million, for the nine months ended September 30, 2019 and September 30, 2018, respectively. As of September 30, 2019, the Company had cash and cash equivalents of approximately $12.6 million. The Company has and will continue to use significant capital for the growth and development of its business. The Company’s management expects operating losses to continue in the near term in connection with the pursuit of its strategic objectives. As such, management believes its current cash position, absent receipt of additional capital either from operations or that may be available from future issuance(s) of common stock or debt financings, is not sufficient to fund our planned operations for the twelve months following the issuance of these financial statements. As a result, our current financial condition raises substantial doubt about our ability to continue as a going concern. The Company considers historical operating results, capital resources and financial position, in combination with current projections and estimates, as part of its plan to fund operations over a reasonable period. Management's considerations assume, among other things, that the Company will continue to be successful implementing its business strategy, that there will be no material adverse developments in the business, liquidity or capital requirements and, if necessary, the Company will be able to raise additional equity or debt financing on acceptable terms. If one or more of these factors do not occur as expected, it could cause a reduction or delay of its business activities, sales of material assets, default on its obligations, or forced insolvency. The accompanying financial statements do not contain any adjustments which might be necessary if the Company were unable to continue as a going concern. No assurance can be given that any future financing will be available or, if available, that it will be on terms that are satisfactory to the Company. On February 27, 2019, we completed our IPO, pursuant to which we issued and sold an aggregate of 2,272,727 shares of our common stock at a public offering price of $11.00 per share pursuant to a registration statement on Form S-1, declared effective by the Securities and Exchange Commission on February 25, 2019 (File No. 333-229144). We received net proceeds of approximately $22,458,000 after underwriting discounts, commissions and other offering costs of $2,542,000. The principal purposes of the IPO was to obtain additional capital to support our operations, to create a public market for our common stock and to facilitate our future access to the public equity markets. We have and continue to use the net proceeds received from the IPO for working capital and general corporate purposes, including sales and marketing activities, product development and capital expenditures. We may also use a portion of the net proceeds for the acquisition of, or investment in, technologies, solutions or businesses that may complement our business and or accelerate our growth. The amounts and timing of our actual expenditures, including expenditure related to sales and marketing and product development will depend on numerous factors, including the status of our product development efforts, our sales and marketing activities, expansion internationally, the amount of cash generated or used by our operations, competitive pressures and other factors. Concurrent with the closing of the IPO on February 27, 2019, in accordance with the related agreements, all outstanding principal and interest for the 9.00% convertible notes outstanding, totaling $13,793,000, was automatically converted into 1,475,164 shares of the Company’s common stock at a conversion price of $9.35. |
Revenue Recognition | Revenue is recognized when the Company transfers promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods and services. 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. Super League generates revenues and related cash flows from (i) brand and media sponsorships, (ii) Platform-As-A-Service arrangements, and (iii) direct to consumer offers including tournament fees for participation in our physical and online multiplayer gaming experiences, digital subscriptions and merchandise sales. Brand and Media Sponsorships. For brand and media sponsorship arrangements that include performance obligations satisfied over time, customers typically simultaneously receive and consume the benefits under the agreement as the Company satisfies its 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). Platform-As-A-Service. Direct to Consumer Revenue. Revenue billed or collected in advance is recorded as deferred revenue until the event occurs or until applicable performance obligations are satisfied as described above. For the three and nine months ended September 30, 2019, 45% and 43% of revenues were recognized at a single point in time, and 55% and 57% of revenues were recognized over time, respectively. For the three and nine months ended September 30, 2018, 41% and 20% of revenues were recognized at a single point in time, and 59% and 80% of revenues were recognized over time, respectively. |
Advertising | Gaming experience and Super League brand related advertising costs include the cost of ad production, social media, print media, marketing, promotions, and merchandising. The Company expenses advertising costs as incurred. Advertising expenses for the three and nine months ended September 30, 2019 were $81,000 and $270,000, respectively, and are included in selling, marketing and advertising expenses in the condensed statements of operations. Advertising expenses for the three and nine months ended September 30, 2018 were $163,000 and $362,000, respectively. |
Technology Platform Development Costs | Technology platform development costs include (i) allocated personnel costs, including salaries, taxes and benefits related to our internal software developers and engineers, employed by Super League, engaged in the operation, maintenance, management, administration, testing and enhancement of our proprietary gaming and content technology platform, and (ii) the amortization of capitalized internal use software costs primarily comprised of capitalized costs for internal and third-party contract software development and engineering resources engaged in developing and enhancing our proprietary gaming and content technology platform. |
Concentration of Credit Risks | Concentrations For the three and nine months ended September 30, 2019, five customers accounted for 90% and three customers accounted for 49% of revenues, respectively. For the three and nine months ended September 30, 2018, two and four customers accounted for 72% and 77% of revenues, respectively. At September 30, 2019 and December 31, 2018, four and three customers accounted for 87% and 96% of accounts receivable. At September 30, 2019 and December 31, 2018, one vendor accounted for 46% and three vendors accounted for 43% of accounts payable, respectively. |
Deferred Financing Costs | Specific incremental costs directly attributable to a proposed or actual offering of securities or debt are deferred and charged against the gross proceeds of the financing. In the event that the proposed or actual financing is not completed, or is deemed not likely to be completed, such costs are expensed in the period that such determination is made. Deferred costs related to proposed offerings of securities totaled $0 and $154,354 at September 30, 2019 and December 31, 2018, respectively. Deferred financing costs, if any, are included in other current assets in the condensed balance sheet. Deferred financing costs charged against gross proceeds in connection with the close of the Company’s IPO totaled $517,000. |
Property and Equipment | Property and equipment are recorded at cost. Major additions and improvements that materially extend useful lives of property and equipment are capitalized. Maintenance and repairs are charged against the results of operations as incurred. When these assets are sold or otherwise disposed of, the asset and related depreciation are relieved, and any gain or loss is included in the statements of operations for the period of sale or disposal. Depreciation and amortization are computed on a straight-line basis over the estimated useful lives of the assets, typically over a three- to five-year period. |
Intangible Assets | Intangible assets primarily consist of (i) internal-use software development costs, (ii) domain name, copyright and patent registration costs, (iii) commercial licenses and branding rights and (iv) other intangible assets, which are recorded at cost and amortized using the straight-line method over the estimated useful lives of the assets, ranging from three to 10 years. Software development costs incurred to develop internal-use software during the application development stage are capitalized and amortized on a straight-line basis over the software’s estimated useful life, which is generally three years. Software development costs incurred during the preliminary stages of development are charged to expense as incurred. Maintenance and training costs are charged to expense as incurred. Upgrades or enhancements to existing internal-use software that result in additional functionality are capitalized and amortized on a straight-line basis over the applicable estimated useful life. |
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 (October 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. The Company considers its market capitalization and the carrying value of its assets and liabilities, including goodwill, when performing its goodwill impairment test. When conducting its annual goodwill impairment assessment, the Company initially performs a qualitative evaluation of whether it is more likely than not that goodwill is impaired. If it is determined by a qualitative evaluation that it is more likely than not that goodwill is impaired, the Company then applies a two-step impairment test. The two-step impairment test first compares the fair value of the Company’s reporting unit to its carrying or book value. If the fair value of the reporting unit exceeds its carrying value, goodwill is not impaired, and the Company is not required to perform further testing. If the carrying value of the reporting unit exceeds its fair value, the Company determines the implied fair value of the reporting unit’s goodwill and if the carrying value of the reporting unit’s goodwill exceeds its implied fair value, then an impairment loss equal to the difference is recorded in the statement of operations. The Company operates in one reporting segment. |
Impairment of Long-Lived Assets | The Company assesses the recoverability of long-lived assets whenever events or changes in circumstances indicate that their carrying value may not be recoverable. If the cost basis of a long-lived asset is greater than the projected future undiscounted net cash flows from such asset, an impairment loss is recognized. Impairment losses are calculated as the difference between the cost basis of an asset and its estimated fair value. Management believes that there was no impairment of long-lived assets for the periods presented herein. There can be no assurance, however, that market conditions or demand for the Company’s products or services will not change, which could result in long-lived asset impairment charges in the future. |
Stock-Based Compensation | Compensation expense for stock-based awards is measured at the grant date, based on the estimated fair value of the award, and is recognized as an expense, typically on a straight-line basis over the employee’s requisite service period (generally the vesting period of the equity award) which is generally two to four years. Compensation expense for awards with performance conditions that affect vesting is recorded only for those awards expected to vest or when the performance criteria are met. The fair value of restricted stock and restricted stock unit awards is determined by the product of the number of shares or units granted and the grant date market price of the underlying common stock. The fair value of stock option and common stock purchase warrant awards is estimated on the date of grant utilizing the Black-Scholes-Merton option pricing model. The Company accounts for forfeitures of awards as they occur. Grants of equity-based awards (including warrants) to non-employees in exchange for consulting or other services are accounted for using the fair value of the consideration received (i.e., the value of the goods or services) or the fair value of the equity instruments issued, whichever is more reliably measurable. Noncash stock-based compensation expense, included in general and administrative expense, for the periods presented was comprised of the following: Three Months Ended September 30, Nine Months Ended September 30, 2019 2018 2019 2018 Stock options $ 374,000 $ 512,000 $ 3,004,000 $ 1,741,000 Warrants 263,000 229,000 1,918,000 682,000 Restricted stock units 75,000 23,000 311,000 28,000 Earn-out compensation expense (Note 5) 25,000 - 33,000 - Total noncash stock compensation expense $ 737,000 $ 764,000 $ 5,266,000 $ 2,451,000 Noncash stock-based compensation expense for the three and nine months ended September 30, 2019 included compensation expense resulting from the vesting of certain performance-based options and warrants previously granted to two of the Company’s executives which vested upon completion of the IPO and the satisfaction of certain other operational performance metrics, pursuant to October 2018 amended employee agreements and related vesting provisions of the underlying equity grant agreements. During the nine months ended September 30, 2019, 300,000 of performance-based stock options and warrants vested, with a weighted-average grant date fair value of $8.50, resulting in noncash stock compensation expense of $2,549,000. The fair value of these equity awards was estimated on October 31, 2018, their original grant date, using the Black Scholes-Merton option pricing model and the following weighted-average assumptions: (i) volatility of 93%, (ii) risk-free interest rate of 3.0%, and (iii) expected term of 6.5 years. |
Risks and Uncertainties | Concentrations For the three and nine months ended September 30, 2019, five customers accounted for 90% and three customers accounted for 49% of revenues, respectively. For the three and nine months ended September 30, 2018, two and four customers accounted for 72% and 77% of revenues, respectively. At September 30, 2019 and December 31, 2018, four and three customers accounted for 87% and 96% of accounts receivable. At September 30, 2019 and December 31, 2018, one vendor accounted for 46% and three vendors accounted for 43% of accounts payable, respectively. |
Segment Information | The Company operates in one segment. |
Earnings (Loss) Per Share | Basic earnings (loss) per share is computed by dividing the income or loss by the weighted-average number of outstanding shares of common stock for the applicable period. Diluted earnings per share is computed by dividing the income or loss by the weighted-average number of outstanding shares of common stock for the applicable period, including the dilutive effect of common stock equivalents. Potentially dilutive common stock equivalents primarily consist of employee stock options, warrants issued to employees and non-employees in exchange for services and warrants issued in connection with financings. All outstanding stock options and warrants for the periods presented have been excluded from the computation of diluted loss per share because the effect of inclusion would have been anti-dilutive. |
Income Taxes | Income taxes are accounted for using an asset and liability approach that requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been recognized in the Company’s financial statements or income tax returns. A valuation allowance is established to reduce deferred tax assets if all, or some portion, of such assets will more than likely not be realized, or if it is determined that there is uncertainty regarding future realization of such assets. The provision for income taxes for interim periods is determined using an estimate of Super League’s annual effective tax rate, adjusted for discrete items, if any, that are considered in the relevant period. Each quarter, the Company updates the estimate of the annual effective tax rate, and if the estimated tax rate changes, a cumulative adjustment is recorded. On December 22, 2017, new U.S. federal tax legislation was enacted that significantly changed the U.S. federal income taxation of U.S. corporations, including by reducing the U.S. corporate income tax rate from 35% to 21%, revising the rules governing net operating losses and foreign tax credits, and introducing new anti-base erosion provisions. Many of the changes were effective immediately, without any transition periods or grandfathering for existing transactions. The legislation is unclear in many respects and could be subject to potential amendments and technical corrections, as well as interpretations and implementing regulations by the U.S. Department of the Treasury and the Internal Revenue Service (“IRS”), any of which could decrease or increase certain adverse impacts of the legislation. In addition, it is unclear how these U.S. federal income tax changes will affect state and local taxation, which often uses federal taxable income as a starting point for computing state and local tax liabilities. The new legislation reduced the corporate income tax rate from 35% to 21% effective January 1, 2018. As a result, all deferred income tax assets and liabilities, including net operating losses, have been measured using the new rate under and are reflected in the valuation of these assets as of December 31, 2018 and 2017. As a result, as of December 31, 2017, the value of our deferred tax assets was reduced by $4,278,626 and the related valuation allowance was reduced by the same amount. Given the full valuation allowance provided for net deferred tax assets for the periods presented herein, the change in tax law did not have a material impact on the Company’s financial statements provided herein. There may be additional tax impacts identified in subsequent periods throughout the Company’s fiscal year ending December 31, 2019 in accordance with subsequent interpretive guidance issued by the SEC or the IRS. Further, there may be other material adverse effects resulting from the legislation that we have not yet identified. No estimated tax provision has been recorded for tax attributes that are incomplete or subject to change. |
Fair Value Measurements | Fair value is defined as the exchange price that would be received from selling an asset or paid to transfer a liability in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. The Company measures financial assets and liabilities at fair value at each reporting period using a fair value hierarchy which requires the Company to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. A financial instrument’s classification within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. Three levels of inputs may be used to measure fair value: Level 1. Level 2 Level 3. The fair value of accounts receivable and other current assets approximated their carrying value at the date of acquisition. Acquired intangible assets and the Earn-Out were valued using Level 3 inputs. |
Recent Accounting Guidance | Recent Accounting Pronouncements - Recently Adopted. In May 2014, the FASB issued a new accounting standard update (“ASU”) addressing revenue from contracts with customers, which clarifies existing accounting literature relating to how and when a company recognizes revenue. Under the standard, a company will recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods and services. In doing so, the Company is required to use more judgment and make more estimates in connection with the accounting for revenue contracts with customers than under previous guidance. Such areas may include: (i) identifying performance obligations in the contract, (ii) estimating the timing of satisfaction of performance obligations, (iii) determining whether a promised good or service is distinct from other promised goods or services, including whether the customer can benefit from the good or service on its own and whether the promise to transfer a good or service is separately identifiable from other promises in the contract, (iv) evaluating whether performance obligations are satisfied at a point in time or over time, (v) allocating the transaction price to separate performance obligations, and (vi) determining whether contracts contain a significant financing component. The Company used the modified retrospective method of adoption, which would require the cumulative effect of initially applying the new revenue standard as an adjustment to the opening balance of retained earnings on January 1, 2019. Comparative prior year periods would not be adjusted. The new accounting standard was applied to all contracts at the date of initial application. There was no cumulative effect of applying the new revenue standard to contracts executed in prior periods. As such, the adoption of the new accounting standard had no impact of on the balance sheet and statement of operations in the current or prior periods. Recent Accounting Pronouncements – Not Yet Adopted. In February 2016, the FASB issued an ASU that requires lessees to present right-of-use assets and lease liabilities on the balance sheet. The new guidance is to be applied using a modified retrospective approach at the beginning of the earliest comparative periods in the financial statements and is effective for fiscal years beginning after December 15, 2019 and early adoption is permitted. The Company is evaluating the impact that this guidance will have on its financial position, results of operations and financial statement disclosures. In June 2016, the FASB issued guidance on the measurement and recognition of credit losses on most financial assets. For trade receivables, loans, and held-to-maturity debt securities, the current probable loss recognition methodology is being replaced by an expected credit loss model. For available-for-sale debt securities, the recognition model on credit losses is generally unchanged, except the losses will be presented as an adjustable allowance. The guidance will be applied retrospectively with the cumulative effect recognized as of the date of adoption. The guidance will become effective at the beginning of the Company’s first quarter of the fiscal year ending December 31, 2021 but can be adopted as early as the beginning of the first quarter of fiscal year ending December 31, 2020. The Company is currently assessing the impact that adopting this new accounting guidance will have on its financial statements and footnote disclosures. |
2. SUMMARY OF SIGNIFICANT ACC_3
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables) | 9 Months Ended |
Sep. 30, 2019 | |
Accounting Policies [Abstract] | |
Noncash stock-based compensation expense | Three Months Ended September 30, Nine Months Ended September 30, 2019 2018 2019 2018 Stock options $ 374,000 $ 512,000 $ 3,004,000 $ 1,741,000 Warrants 263,000 229,000 1,918,000 682,000 Restricted stock units 75,000 23,000 311,000 28,000 Earn-out compensation expense (Note 5) 25,000 - 33,000 - Total noncash stock compensation expense $ 737,000 $ 764,000 $ 5,266,000 $ 2,451,000 |
3. PROPERTY AND EQUIPMENT (Tabl
3. PROPERTY AND EQUIPMENT (Tables) | 9 Months Ended |
Sep. 30, 2019 | |
Property, Plant and Equipment [Abstract] | |
Property and equipment | September 30, 2019 December 31, 2018 (Unaudited) Furniture and fixtures $ 332,000 $ 297,000 Computer hardware 3,126,000 3,105,000 3,458,000 3,402,000 Less: accumulated depreciation (3,201,000 ) (2,871,000 ) Property and equipment, net $ 257,000 $ 531,000 |
4. INTANGIBLE AND OTHER ASSETS
4. INTANGIBLE AND OTHER ASSETS (Tables) | 9 Months Ended |
Sep. 30, 2019 | |
Finite-Lived Intangible Assets, Net [Abstract] | |
Intangible and other assets | September 30, 2019 December 31, 2018 (Unaudited) Capitalized software development costs $ 2,122,000 $ 1,281,000 Licenses 340,000 - Domain 70,000 68,000 Trade name (Note 5) 189,000 - Copyrights and other 260,000 126,000 2,981,000 1,475,000 Less: accumulated amortization (1,094,000 ) (768,000 ) Intangible and other assets, net $ 1,887,000 $ 707,000 |
Future amortization expense of intangible and other assets | Remainder of 2019 $ 161,000 2020 625,000 2021 557,000 2022 252,000 2023 143,000 Thereafter 149,000 Total $ 1,887,000 |
5. AQUISITION OF FRAMERATE, I_2
5. AQUISITION OF FRAMERATE, INC. (Tables) | 9 Months Ended |
Sep. 30, 2019 | |
Business Combinations [Abstract] | |
Purchase price consideration | Amount Cash consideration at closing $ 1,515,000 Equity consideration at closing 1,000,000 Fair value of Earn-Out shares 254,000 Total $ 2,769,000 |
Assets acquired | Amount Accounts receivable $ 15,000 Intangible assets - trade name 189,000 Goodwill 2,565,000 Total purchase price $ 2,769,000 |
2. SUMMARY OF SIGNIFICANT ACC_4
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2019 | Sep. 30, 2018 | Sep. 30, 2019 | Sep. 30, 2018 | |
Accounting Policies [Abstract] | ||||
Stock options | $ 374,000 | $ 512,000 | $ 3,004,000 | $ 1,741,000 |
Warrants | 263,000 | 229,000 | 1,918,000 | 682,000 |
Restricted stock units | 75,000 | 23,000 | 311,000 | 28,000 |
Earn-out compensation expense (Note 5) | 25,000 | 0 | 33,000 | 0 |
Total noncash stock compensation expense | $ 737,000 | $ 764,000 | $ 5,266,000 | $ 2,451,000 |
2. SUMMARY OF SIGNIFICANT ACC_5
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details Narrative) - USD ($) | 3 Months Ended | 9 Months Ended | 12 Months Ended | ||
Sep. 30, 2019 | Sep. 30, 2018 | Sep. 30, 2019 | Sep. 30, 2018 | Dec. 31, 2018 | |
Advertising expense | $ 81,000 | $ 270,000 | $ 163,000 | $ 362,000 | |
Deferred costs related to proposed offerings of securities | $ 0 | $ 0 | $ 154,344 | ||
Revenue | Five Customers | |||||
Concentration risk | 90.00% | ||||
Revenue | Three Customers | |||||
Concentration risk | 49.00% | ||||
Revenue | Two Customers | |||||
Concentration risk | 72.00% | ||||
Revenue | Four Customers | |||||
Concentration risk | 77.00% | ||||
Accounts Receivable | Three Customers | |||||
Concentration risk | 96.00% | ||||
Accounts Receivable | Four Customers | |||||
Concentration risk | 87.00% | ||||
Accounts Payable | One vendor | |||||
Concentration risk | 46.00% | ||||
Accounts Payable | Three vendors | |||||
Concentration risk | 43.00% |
3. PROPERTY AND EQUIPMENT (Deta
3. PROPERTY AND EQUIPMENT (Details) - USD ($) | Sep. 30, 2019 | Dec. 31, 2018 |
Property and equipment, gross | $ 3,458,000 | $ 3,402,000 |
Less: accumulated depreciation and amortization | (3,201,000) | (2,871,000) |
Property and equipment, net | 257,000 | 531,000 |
Furniture and Fixtures | ||
Property and equipment, gross | 332,000 | 207,000 |
Computer Hardware | ||
Property and equipment, gross | $ 3,126,000 | $ 3,195,000 |
3. PROPERTY AND EQUIPMENT (De_2
3. PROPERTY AND EQUIPMENT (Details Narrative) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2019 | Sep. 30, 2018 | Sep. 30, 2019 | Sep. 30, 2018 | |
Property, Plant and Equipment [Abstract] | ||||
Depreciation and amortization expense | $ 38,000 | $ 190,000 | $ 330,000 | $ 620,000 |
4. INTANGIBLE AND OTHER ASSET_2
4. INTANGIBLE AND OTHER ASSETS (Details) - USD ($) | Sep. 30, 2019 | Dec. 31, 2018 |
Intangible assets, gross | $ 2,981,000 | $ 1,475,000 |
Less: accumulated amortization | (1,094,000) | (768,000) |
Intangible assets, net | 1,887,000 | 707,000 |
Capitalized Software Development Costs | ||
Intangible assets, gross | 2,122,000 | 1,281,000 |
Licenses | ||
Intangible assets, gross | 340,000 | 0 |
Domain | ||
Intangible assets, gross | 70,000 | 68,000 |
Copyrights and Other | ||
Intangible assets, gross | 189,000 | 126,000 |
Trade Name | ||
Intangible assets, gross | $ 260,000 | $ 0 |
4. INTANGIBLE AND OTHER ASSET_3
4. INTANGIBLE AND OTHER ASSETS (Details 1) - USD ($) | Sep. 30, 2019 | Dec. 31, 2018 |
Finite-Lived Intangible Assets, Net [Abstract] | ||
Remainder of 2019 | $ 161,000 | |
2020 | 625,000 | |
2021 | 557,000 | |
2022 | 252,000 | |
2023 | 143,000 | |
Thereafter | 149,000 | |
Total | $ 1,887,000 | $ 707,000 |
4. INTANGIBLE AND OTHER ASSET_4
4. INTANGIBLE AND OTHER ASSETS (Details Narrative) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2019 | Sep. 30, 2018 | Sep. 30, 2019 | Sep. 30, 2018 | |
Finite-Lived Intangible Assets, Net [Abstract] | ||||
Amortization expense | $ 134,000 | $ 64,000 | $ 326,000 | $ 171,000 |
5. AQUISITION OF FRAMERATE, I_3
5. AQUISITION OF FRAMERATE, INC. (Details) | 9 Months Ended |
Sep. 30, 2019USD ($) | |
Business Combinations [Abstract] | |
Cash consideration at closing | $ 1,515,000 |
Equity consideration at closing | 1,000,000 |
Fair value of Earn-Out shares | 254,000 |
Total | $ 2,769,000 |
5. AQUISITION OF FRAMERATE, I_4
5. AQUISITION OF FRAMERATE, INC. (Details 1) - USD ($) | 9 Months Ended | |
Sep. 30, 2019 | Dec. 31, 2018 | |
Business Combinations [Abstract] | ||
Accounts receivable | $ 15,000 | |
Intangible assets - Trade Name | 189,000 | |
Goodwill | 2,565,000 | $ 0 |
Total purchase price | $ 2,769,000 |
5. AQUISITION OF FRAMERATE, I_5
5. AQUISITION OF FRAMERATE, INC. (Details Narrative) | 3 Months Ended | 9 Months Ended |
Sep. 30, 2019USD ($) | Sep. 30, 2019USD ($) | |
Business Combinations [Abstract] | ||
Identifiable Intangible assets acquired | $ 189,000 | $ 189,000 |
Amortization expense | $ 3,000 | $ 10,000 |
6. CONVERTIBLE NOTES PAYABLE (D
6. CONVERTIBLE NOTES PAYABLE (Details Narrative) - USD ($) | 9 Months Ended | |
Sep. 30, 2019 | Dec. 31, 2018 | |
Debt Disclosure [Abstract] | ||
Interest expense | $ 1,384,000 | |
Unamortized debt discounts | $ 0 | $ 2,684,000 |
7. STOCKHOLDERS' EQUITY (Detail
7. STOCKHOLDERS' EQUITY (Details Narrative) - USD ($) | 9 Months Ended | |
Sep. 30, 2019 | Sep. 30, 2018 | |
Stockholders' Equity (Deficit) | ||
In-kind contribution of services | $ 0 | $ 481,000 |