Document and Entity Information
Document and Entity Information - USD ($) | 12 Months Ended | |
Dec. 31, 2019 | Mar. 12, 2020 | |
Document And Entity Information | ||
Entity Registrant Name | Super League Gaming, Inc. | |
Entity Central Index Key | 0001621672 | |
Document Type | 10-K | |
Document Period End Date | Dec. 31, 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 Well-known Seasoned Issuer | No | |
Entity Voluntary Filers | No | |
Entity Shell Company | false | |
Entity Common Stock, Shares Outstanding | 8,573,922 | |
Entity Public Float | $ 0 | |
Document Fiscal Period Focus | FY | |
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 $0.001 per share | |
Trading Symbol | SLGG | |
Security Exchange Name | NASDAQ |
CONDENSED BALANCE SHEETS
CONDENSED BALANCE SHEETS - USD ($) | Dec. 31, 2019 | Dec. 31, 2018 |
Current Assets | ||
Cash and cash equivalents | $ 8,442,000 | $ 2,774,000 |
Accounts receivable | 293,000 | 488,000 |
Prepaid expenses and other current assets | 924,000 | 487,000 |
Total current assets | 9,659,000 | 3,749,000 |
Property and equipment, net | 239,000 | 531,000 |
Intangible and other assets, net | 1,984,000 | 707,000 |
Goodwill | 2,565,000 | 0 |
Total assets | 14,447,000 | 4,987,000 |
Current Liabilities | ||
Accounts payable and accrued expenses | 853,000 | 813,000 |
Deferred revenue | 151,000 | 45,000 |
Convertible debt and accrued interest, net | 0 | 10,923,000 |
Total current liabilities | 1,004,000 | 11,781,000 |
Commitments and contingencies (Note 10) | ||
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; 8,573,922 and 4,610,109 shares issued and outstanding as of December 31, 2019 and 2018, respectively. | 18,000 | 14,000 |
Additional paid-in capital | 99,237,000 | 48,325,000 |
Accumulated deficit | (85,812,000) | (55,133,000) |
Total stockholders' equity (deficit) | 13,443,000 | (6,794,000) |
Total liabilities and stockholders' equity | $ 14,447,000 | $ 4,987,000 |
CONDENSED BALANCE SHEETS (Paren
CONDENSED BALANCE SHEETS (Parenthetical) - $ / shares | Dec. 31, 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 | 8,573,922 | 4,610,109 |
Common stock, outstanding | 8,573,922 | 4,610,109 |
CONDENSED STATEMENTS OF OPERATI
CONDENSED STATEMENTS OF OPERATIONS - USD ($) | 12 Months Ended | |
Dec. 31, 2019 | Dec. 31, 2018 | |
Income Statement [Abstract] | ||
Revenues | $ 1,084,000 | $ 1,046,000 |
Cost of revenues | 513,000 | 684,000 |
Gross profit | 571,000 | 362,000 |
OPERATING EXPENSES | ||
Selling, marketing and advertising | 4,488,000 | 4,319,000 |
Technology platform and infrastructure | 4,520,000 | 4,183,000 |
General and administrative | 12,333,000 | 8,020,000 |
Total operating expenses | 21,341,000 | 16,522,000 |
Net operating loss | (20,770,000) | (16,160,000) |
OTHER INCOME (EXPENSE) | ||
Interest expense | (9,938,000) | (4,469,000) |
Other | 29,000 | 2,000 |
Total other income (expense) | (9,909,000) | (4,467,000) |
Net loss | $ (30,679,000) | $ (20,627,000) |
Net loss attributable to common stockholders - basic and diluted | ||
Basic and diluted loss per common share | $ (3.89) | $ (4.48) |
Weighted-average number of shares outstanding, basic and diluted | 7,894,326 | 4,606,961 |
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 | $ (34,506,000) | $ 3,698,000 |
Issuance of warrants with convertible notes (Note 5) | 6,156,000 | 6,156,000 | ||
Framerate acquisition shares, amount | 0 | |||
Stock-based compensation, shares | 6,666 | |||
Stock-based compensation, amount | $ 0 | 3,978,000 | 3,978,000 | |
Net loss | (20,627,000) | (20,627,000) | ||
Ending balance, shares at Dec. 31, 2018 | 4,610,109 | |||
Ending 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 7), shares | 2,272,727 | |||
Initial public offering of common stock, net of issuance costs (Note 7), amount | $ 2,000 | 22,456,000 | 22,458,000 | |
Automatic conversion of convertible debt to common stock (Note 6), shares | 1,475,164 | |||
Automatic conversion of convertible debt to common stock (Note 6), amount | $ 2,000 | 13,791,000 | 13,793,000 | |
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 | 14,833 | |||
Stock-based compensation, amount | $ 0 | 6,124,000 | 6,124,000 | |
Warrant exercises, shares | 66,667 | |||
Warrant exercises, amount | $ 0 | 20,000 | 20,000 | |
Net loss | (30,679,000) | (30,679,000) | ||
Ending balance, shares at Dec. 31, 2019 | 8,573,922 | |||
Ending balance, amount at Dec. 31, 2019 | $ 18,000 | $ 99,237,000 | $ (85,812,000) | $ 13,443,000 |
CONDENSED STATEMENTS OF CASH FL
CONDENSED STATEMENTS OF CASH FLOWS - USD ($) | 12 Months Ended | |
Dec. 31, 2019 | Dec. 31, 2018 | |
CASH FLOWS FROM OPERATING ACTIVITIES | ||
Net loss | $ (30,679,000) | $ (20,627,000) |
Adjustments to reconcile net loss to net cash used in operating activities: | ||
Depreciation and amortization | 862,000 | 1,106,000 |
Stock-based compensation | 6,217,000 | 3,942,000 |
Amortization of discount on convertible notes (Note 6) | 2,684,000 | 0 |
Beneficial conversion feature | 7,067,000 | 3,863,000 |
In-kind contribution of services | 0 | 667,000 |
Changes in assets and liabilities: | ||
Accounts receivable | 199,000 | (374,000) |
Prepaid expenses and other current assets | (329,000) | (340,000) |
Accounts payable and accrued expenses | 40,000 | 432,000 |
Deferred revenue | 106,000 | 45,000 |
Accrued interest on convertible notes | 187,000 | 606,000 |
Net cash used in operating activities | (13,646,000) | (10,680,000) |
CASH FLOWS FROM INVESTING ACTIVITIES | ||
Framerate acquisition | (1,506,000) | 0 |
Purchase of property and equipment | (73,000) | (255,000) |
Capitalization of software development costs | (1,079,000) | (519,000) |
Acquisition of other intangible assets | (506,000) | (92,000) |
Net cash used in investing activities | (3,164,000) | (866,000) |
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 of issuance costs | 0 | 12,611,000 |
Proceeds from warrant exercise | 20,000 | 0 |
Net cash provided by financing activities | 22,478,000 | 12,611,000 |
INCREASE IN CASH AND CASH EQUIVALENTS | 5,668,000 | 1,065,000 |
CASH AND CASH EQUIVALIENTS - beginning of year | 2,774,000 | 1,709,000 |
CASH AND CASH EQUIVALIENTS - end of year | 8,442,000 | 2,774,000 |
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 | $ 18,000 | $ 72,000 |
1. DESCRIPTION OF BUSINESS
1. DESCRIPTION OF BUSINESS | 12 Months Ended |
Dec. 31, 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 competitive 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 and owners/operators of a distributed footprint of venues, a network of digital social and viewing channels, and an association/organization of city-based amateur gaming clubs and teams. In addition to providing premium experiences by operating city-vs-city amateur esports leagues and producing thousands of social gaming experiences across North America and our ever-expanding international footprint, the Super League Network features multiple forms of content celebrating the love of play via social media, live streaming and video-on-demand, along with continuous gameplay and leaderboards. Inside our network is Framerate, a large independent social video esports network powered by user-generated highlight reels, and our exclusive proprietary platform Minehut, providing a social and gameplay forum for the avid Minecraft community. Through our partnerships with high-profile venue owners such as Wanda Theatres in China, and Topgolf and Cinemark Theatres in North America, along with ggCircuit, an esports services company that provides gaming center management software solutions and access to a global network of gaming centers, Super League is committed to supporting the development of local, grassroots player communities, while providing a global, scalable infrastructure for esports competition and engagement. We address not only a wide range of gamers across game titles, ages and skill levels, but also a wide range of content-capture beyond just gameplay. This positions Super League as more than a tournament operator; we are a lifestyle and media company focused on capturing, generating, aggregating and distributing content across the genre of all things esports. 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. The principal purposes of the IPO were 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 have and may continue to use a portion of the net proceeds for the strategic 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 (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 | 12 Months Ended |
Dec. 31, 2019 | |
Accounting Policies [Abstract] | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | Basis of Presentation The financial statements and accompanying notes have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). 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 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 financial statements, the Company incurred net losses of $30.7 million and $20.6 million during the years ended December 31, 2019 and 2018, respectively, and had an accumulated deficit of $85.8 million as of December 31, 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 $16.2 million and $8.4 million for the years ended December 31, 2019 and 2018, respectively. Net cash used in operating activities totaled $13.6 million and $10.7 million, for the years ended December 31, 2019 and 2018, respectively. As of December 31, 2019, the Company had cash and cash equivalents of approximately $8.4 million. The Company has used 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. We are focused on expanding our service offerings and revenue growth opportunities through internal development, collaborations, and through one or more strategic acquisitions. Management is currently exploring several alternatives for raising capital to facilitate our growth and execute our business strategy, including strategic partnerships or other forms of equity or debt financings. 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. 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, (iii) advertising and third-party content Sponsorships and Advertising: 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). Payments are typically due from customers during the term of the arrangement. Platform-As-A-Service. Revenue for PaaS arrangements for one-off branded experiences and/or the development of content tailored specifically for the Company’s partners’ distribution channels that provide for a contractual delivery or performance date, is recognized when performance is substantially complete and or delivery occurs. Revenue for PaaS arrangements that include performance obligations satisfied over time whereby customers simultaneously receive and consume the benefits under the agreement as the Company satisfies its performance obligations over the applicable contract term, is recognized over the contract term based upon estimates of progress toward complete satisfaction of the contract performance obligations (typically utilizing a time, effort or delivery-based method of estimation). Payments are typically due from customers during the term of the arrangement. Advertising and Third-Party Content Revenue For advertising and third-party content arrangements that include performance obligations satisfied over time, customers typically simultaneously receive and consume the benefits under the arrangement as we satisfy our performance obligations, over the applicable contract term. As such, revenue is recognized over the contract term based upon estimates of progress toward complete satisfaction of the contract performance obligations (typically utilizing a time, effort or delivery-based method of estimation). Payments are typically due from customers during the term of the arrangement for longer-term campaigns, and once delivery is complete for shorter-term campaigns. Direct to Consumer Direct to consumer revenues include tournament fees, digital subscriptions and merchandise. Direct to consumer revenues have primarily consisted of the sale of season passes to gamers for participation in Super League’s in-person and or online multiplayer gaming experiences. For the applicable periods presented herein, season passes for gaming experiences were primarily comprised of multi-week packages and one-time, single experience admissions. For the year ended December 31, 2019, digital subscription revenues included revenues related to the Company’s Minehut asset acquisition in June 2018, which provides various Minecraft server hosting services on a subscription basis to the Minecraft gaming community, and Super League Prime subscription offer which was launched in beta in the fourth quarter of 2019. Revenue from single experiences is recognized when the experience occurs. Revenue from multi-week packages is recognized over time as the multi-week experiences occur based on estimates of the progress toward complete satisfaction of the applicable offer and related performance obligations. Subscription revenue is recognized over the applicable subscription term. Payments are typically due from customers at the point of sale. 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. Revenue was comprised of the following for the periods presented: 2019 2018 Brand and Media Sponsorships $ 451,000 $ 549,000 Platform-as-a-service 532,000 291,000 Advertising and content sales 68,000 69,000 Direct to Consumer 33,000 137,000 $ 1,084,000 $ 1,046,000 For the years ended December 31, 2019 and 2018, 33% and 39% of revenues were recognized at a single point in time, and 67% and 61% of revenues were recognized over time, respectively. Cost of Revenues Cost of sales includes direct costs incurred in connection with the production of Super League’s in-person and online gaming events, including venue rental, venue entertainment, licenses, direct marketing, prizing, talent and contract services. 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 years ended December 31, 2019 and 2018 were $409,000 and $614,000, respectively, and are included in selling, marketing and advertising expenses in the accompanying statements of operations. Technology Platform and Infrastructure Costs Technology platform and infrastructure costs include (i) allocated personnel costs, including salaries, noncash stock compensation, 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, (ii) third-party contract software development and engineering resources engaged in developing and enhancing our proprietary gaming and content technology platform (iii) the amortization of capitalized internal use software costs, and (iv) technology platform related cloud services and broadband costs. Cash and Cash Equivalents Super League considers all highly liquid, short-term investments with original maturities of three months or less when purchased to be cash equivalents. As of December 31, 2019, the Company’s cash equivalents consisted of investments in AAA rated money market funds. As of December 31, 2018, the Company did not have any cash equivalents. Accounts Receivable Accounts receivable are recorded at the original invoice amount, less an estimate made for doubtful accounts, if any. The Company provides an allowance for doubtful accounts for potential credit losses based on its evaluation of the collectability and the customers’ creditworthiness. Accounts receivable are written off when they are determined to be uncollectible. As of December 31, 2019 and 2018, no allowance for doubtful accounts was considered necessary. 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 Company does not have any instruments that are measured at fair value on a recurring basis. However, the Company measured certain acquired intangible assets and the Earn-Out using Level 3 inputs on a nonrecurring basis. Concentration of Credit Risks The Company maintains its cash on deposit with a bank that is insured by the Federal Deposit Insurance Corporation. At various times, the Company maintained balances in excess of insured amounts. The Company has not experienced any significant losses on its cash held in banks. Deferred Equity 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 December 31, 2019 and 2018, respectively. Deferred financing costs, if any, are included in other current assets in the accompanying balance sheet. Total 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 (December 31) and between annual tests if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying value. 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 utilizes the simplified method for estimating the expected term for options granted to employees due to the lack of available or sufficient historical exercise data for the Company for the applicable options terms. 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. Risks and Uncertainties Concentrations For the years ended December 31, 2019 and 2018, 5 customers accounted for 69% and four customers accounted for 82% of revenue, respectively. At December 31, 2019, one customer accounted for 70% of accounts receivable. At December 31, 2018, three customers accounted for 96% of accounts receivable. At December 31, 2019, one vendor accounted for 21% of accounts payable. At December 31, 2018, three vendors accounted for 43% of accounts payable. 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, restricted stock units and warrants, totaling 4,096,000 and 4,117,000 at December 31, 2019 and 2018, respectively, 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. Under U.S. GAAP, a tax position is a position in a previously filed tax return, or a position expected to be taken in a future tax filing that is reflected in measuring current or deferred income tax assets and liabilities. Tax positions are recognized only when it is more likely than not, based on technical merits, that the position will be sustained upon examination. Tax positions that meet the more likely than not thresholds are measured using a probability weighted approach as the largest amount of tax benefit being realized upon settlement. The Company considers many factors when evaluating and estimating its tax positions and tax benefits, which may require periodic adjustments, and which may not accurately forecast actual outcomes. Management believes the Company has no uncertain tax positions for the years ended December 31, 2019 and 2018. The Company has elected to include interest and penalties related to its tax contingences as a component of income tax expense. There were no accruals for interest and penalties related to uncertain tax positions for the periods presented. Income tax returns remain open for examination by applicable authorities, generally three years from filing for federal and four years for state. The Company is not currently under examination by any taxing authority nor has it been notified of an impending examination. 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 on the balance sheet and statement of operations in the current or prior periods. Recent Accounting Pronouncements – Not Yet Adopted. In January 2017, the FASB issued new guidance that eliminates Step 2 from the goodwill impairment test. Instead, if an entity forgoes a Step 0 test, that entity will be required to perform its annual or interim goodwill impairment test by comparing the fair value of a reporting unit, as determined in Step 1 from the goodwill impairment test, with its carrying amount and recognize an impairment charge, if any, for the amount by which the carrying amount exceeds the reporting unit’s fair value, not to exceed the total amount of goodwill allocated to the reporting unit. The new standard is effective for fiscal years beginning after December 15, 2019, and should be applied prospectively. Early adoption is permitted. The effect of adoption should be reflected as of the beginning of the fiscal year of adoption. The Company does not currently expect this new accounting guidance to have a material impact on our financial statements upon adoption. 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, 2020 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 | 12 Months Ended |
Dec. 31, 2019 | |
Property, Plant and Equipment [Abstract] | |
PROPERTY AND EQUIPMENT | Property and equipment consisted of the following at December 31, 2019 and 2018 : 2019 2018 Furniture and fixtures $ 334,000 $ 207,000 Computer hardware 3,141,000 3,195,000 3,475,000 3,402,000 Less: accumulated depreciation and amortization (3,236,000 ) (2,871,000 ) $ 239,000 $ 531,000 Depreciation and amortization expense for property and equipment was $365,000 and $861,214 for the years ended December 31, 2019 and 2018, respectively. |
4. INTANGIBLE AND OTHER ASSETS
4. INTANGIBLE AND OTHER ASSETS | 12 Months Ended |
Dec. 31, 2019 | |
Finite-Lived Intangible Assets, Net [Abstract] | |
INTANGIBLE AND OTHER ASSETS | Intangible and other assets consisted of the following at December 31, 2019 and 2018: 2019 2018 Capitalized software development costs $ 2,363,000 $ 1,281,000 Licenses 340,000 - Tradename 189,000 - Domain 68,000 67,000 Copyrights and other 289,000 127,000 3,249,000 1,475,000 Less: accumulated amortization (1,265,000 ) (768,000 ) $ 1,984,000 $ 707,000 Amortization expense totaled $497,000 and $245,000 for the years ended December 31, 2019 and 2018, respectively. Future amortization expense of intangible and other assets is expected to be as follows: For the years ending December 31: 2020 $ 711,000 2021 643,000 2022 328,000 2023 149,000 2024 105,000 Thereafter 48,000 $ 1,984,000 On September 23, 2019, the Company and ggCircuit, LLC (“ggCircuit”), an esports services company that provides gaming center management software solutions and other esports offerings, entered into an expanded commercial partnership agreement (the “Expanded Agreement”) pursuant to which Super League became the primary consumer-facing brand within ggCircuit’s B2B gaming center software platform. ggCircuit’s software platform is a B2B platform and B2C application created and owned by ggCircuit, which is licensed and distributed to owners and operators of video gaming centers throughout the world. In consideration for the rights granted by ggCircuit to Super League, Super League paid an upfront fee of $340,000 and will pay quarterly fees over the term of the Agreement, commencing with the first quarter of 2020, 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, 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. | 12 Months Ended |
Dec. 31, 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 Merger Sub was dissolved subsequent to the consummation of the Acquisition. 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. 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 year ended December 31, 2019 was $58,000. The portion of the Earn-Out included as purchase 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 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 preliminary purchase price allocation was 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 accompanying balance sheet. The trade name intangible asset is being amortized over the estimated useful life on a straight-line basis. Amortization expense for the year ended December 31, 2019 was $22,000. Goodwill recognized primarily reflects anticipated cost and growth synergies associated with the combined operations. 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. The historical balance sheets and statements of operations of Framerate were not material. |
6. CONVERTIBLE NOTES PAYABLE
6. CONVERTIBLE NOTES PAYABLE | 12 Months Ended |
Dec. 31, 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 were 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 year ended December 31, 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 December 31, 2019 and 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 statement of operations for the year ended December 31, 2019. The weighted-average grant date fair value of 2018 Warrants issued during the year ended December 31, 2018 was $7.98. The aggregate fair value of 2018 Warrants that vested during the year ended December 31, 2018 was $10,296,926. The weighted-average exercise price and weighted-average remaining contractual term for the 2018 Warrants was $9.41 and 4.5 years. At December 31, 2019 the aggregate intrinsic value of the 2018 Warrants totaled $(10,230,000). The fair value of Debt Warrants issued was estimated on their respective issue dates using the Black Scholes-Merton option pricing model and the following weighted-average assumptions: Volatility 96 % Risk–free interest rate 2.75 Dividend yield 0 % Expected life of options (in years) 5 Weighted-average fair value of common stock $ 9.41 |
7. STOCKHOLDERS' EQUITY
7. STOCKHOLDERS' EQUITY | 12 Months Ended |
Dec. 31, 2019 | |
Stockholders' Equity (Deficit) | |
STOCKHOLDERS' EQUITY | Preferred Stock The Company’s initial certificate of incorporation authorized 5,000,000 shares of preferred stock, par value $0.001 per share. No preferred stock had been issued and outstanding since inception of the Company. In October 2016, the Company’s Board of Directors and a majority of the holders of the Company’s common stock approved an amendment and restatement of the certificate of incorporation which, in part, eliminated the authorized preferred stock. In August 2018, the Company’s Board of Directors approved a second amendment and restatement of the Company’s amended and restated certificate of incorporation (the “Amended and Restated Charter”) to, in part, increase the Company’s authorized capital to a total of 110.0 million shares, including 10.0 million shares of newly created preferred stock, par value $0.001 per share (“Preferred Stock”), authorize the Company’s Board of Directors to fix the designation and number of each series of Preferred Stock, and to determine or change the designation, relative rights, preferences, and limitations of any series of Preferred Stock. The Amended and Restated Charter was approved by a majority of the Company’s stockholders in September 2018, and was filed with the State of Delaware in November 2018. All references in the accompanying financial statements to Preferred Stock have been restated to reflect the Amended and Restated Charter. Common Stock The Amended and Restated Charter also increased the Company’s authorized capital to include 100.0 million shares of common stock, par value $0.001, and removed the deemed liquidation provision, as such term is defined in the Amended and Restated Charter. Each holder of common stock is entitled to one vote for each share of common stock held at all meetings of stockholders. Initial Public Offering On February 27, 2019, Super League completed its 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 year ended December 31, 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 statement of shareholders equity for the year ended December 31, 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. |
8. STOCK-BASED INCENTIVE PLANS
8. STOCK-BASED INCENTIVE PLANS | 12 Months Ended |
Dec. 31, 2019 | |
Retirement Benefits [Abstract] | |
STOCK-BASED INCENTIVE PLANS | The Super League 2014 Stock Option and Incentive Plan (the “Plan” or “SOP”) was approved by the Board of Directors and the stockholders of Super League in October 2014. The Plan was subsequently amended in May 2015, May 2016, July 2017 and October 2018. The Plan allows grants of stock options, stock awards and performance shares with respect to common stock of the Company to eligible individuals, which generally includes directors, officers, employees, advisors and consultants. The Plan provides for both the direct award and sale of shares of common stock and for the grant of options to purchase shares of common stock. Options granted under the Plan include non-statutory options as well as incentive options intended to qualify under Section 422 of the Internal Revenue Code of 1986, as amended. The Board of Directors administers the Plan and determines which eligible individuals are to receive option grants or stock issuances under the Plan, the times when the grants or issuances are to be made, the number of shares of common stock subject to each grant or issuance, the status of any granted option as either an incentive stock option or a non-statutory stock option under the federal tax laws, the vesting schedule to be in effect for the option grant or stock issuance and the maximum term for which any granted option is to remain outstanding. The exercise price of options is generally equal to the fair market value of common stock of the Company on the date of grant. Options generally begin to be exercisable six months to one year after grant and typically expire 10 years after grant. Stock options and restricted shares generally vest over two to four years (generally representing the requisite service period). The Plan terminates automatically on July 1, 2027. The Plan provides for the following programs: Option Grants Under the discretionary option grant program, Super League’s compensation committee may grant (1) non-statutory options to purchase shares of common stock to eligible individuals in the employ or service of Super League or its affiliates (including employees, non-employee members of the Board of Directors and consultants) at an exercise price not less than 85% of the fair market value of such shares on the grant date, and (2) incentive stock options to purchase shares of common stock to eligible employees at an exercise price not less than 100% of the fair market value of such shares on the grant date (not less than 110% of fair market value if such employee actually or constructively owns more than 10% of Super League’s voting stock or the voting stock of any of its subsidiaries). Stock Awards or Sales Under the stock award or sales program, eligible individuals may be issued shares of common stock of the Company directly, upon the attainment of performance milestones or the completion of a specified period of service or as a bonus for past services. Under this program, the purchase price for the shares will not be less than 100% of the fair market value of the shares on the date of issuance, and payment may be in the form of cash or past services rendered. Eligible individuals will have no stockholder rights with respect to any unvested restricted shares or restricted stock units issued to them under the stock award or sales program; however, eligible individuals will have the right to receive any regular cash dividends paid on such shares. As of December 31, 2019, 308,479 shares remained available for issuance under the Plan. The initial reserve under the Plan was 583,334 shares of common stock, which reserve was subsequently increased to 1,000,000 shares upon stockholders’ approval in May 2016. In July 2017, the Company amended and restated the SOP to increase the number of shares of common stock reserved thereunder from1,000,000 shares to 1,500,000 shares. In October 2018, the Company amended and restated the SOP to increase the number of shares of common stock reserved thereunder from 1,500,000 shares to 1,833,334 shares. Super League issues new shares of common stock upon the exercise of stock options, the grant of restricted stock, or the delivery of shares pursuant to vested restricted stock units. The compensation committee of the Board of Directors may amend or modify the Plan at any time, subject to any required approval by the stockholders of the Company, pursuant to the terms therein. Stock Options The fair value of stock options granted were estimated on their respective grant dates using the Black-Scholes-Merton option pricing model and the following weighted-average assumptions for the years ended December 31, 2019 and 2018: 2019 2018 Volatility 95 % 96 % Risk–free interest rate 1.99 % 2.82 % Dividend yield - % - % Expected life of options (in years) 6.08 5.78 Weighted-average fair value of common stock $ 7.45 $ 10.80 A summary of stock option activity for the year ended December 31, 2019 is as follows: Weighted-Average Options (#) Exercise Price Per Share ($) Remaining Contractual Term (Years) Aggregate Intrinsic Value ($) Outstanding at December 31, 2018 1,524,000 $ 9.18 7.34 $ (10,327,000 ) Granted 165,000 $ 7.45 Exercised - - Canceled / forfeited (138,000 ) $ 10.60 Outstanding at December 31, 2019 1,551,000 $ 8.86 7.51 $ (10,088,000 ) Vested and exercisable at December 31, 2019 1,153,000 $ 8.66 7.04 $ (7,259,000 ) The weighted-average grant date fair value of stock options granted during the years ended December 31, 2019 and 2018 was $5.76 and $8.85, respectively. The aggregate fair value of stock options that vested during the years ended December 31, 2019 and 2018 was $3,989,000 and $4,720,000, respectively. As of December 31, 2019, the total unrecognized compensation expense related to non-vested stock option awards was $2,840,000, which is expected to be recognized over a weighted-average term of approximately 2.83 years. Restricted Stock Units The following table summarizes non-vested restricted stock unit activity for the year ended December 31, 2019: Restricted Stock Units (#) Weighted Average Grant Date Fair Value ($) Non-vested restricted stock units at December 31, 2018 10,000 $ 7.11 Granted 33,000 $ 9.68 Vested (14,000 ) $ 6.13 Canceled – Non-vested restricted stock units at December 31, 2019 29,000 $ 10.40 As of December 31, 2019, the total unrecognized compensation expenses related to non-vested restricted stock units was $52,000 which will be recognized over a weighted-average term of approximately 0.12 years. Warrants Issued to Employees and Nonemployees for Services During the year ended December 31, 2018, the Company issued common stock purchase warrants to certain employees in exchange for services performed, subject to certain vesting conditions. The warrants have expiration dates of 10 years from the date of grant and an exercise price of $10.80 per share. A summary of employee and nonemployee warrant activity for the year ended December 31, 2019 is as follows: Weighted-Average Warrants (#) Exercise Price Per Share ($) Remaining Contractual Term (Years) Aggregate Intrinsic Value ($) Outstanding at December 31, 2018 1,098,000 $ 9.33 2.66 Exercised (67,000 ) $ 0.17 $ 137,000 Outstanding at December 31, 2019 1,031,000 $ 9.92 2.83 $ (7,797,000 ) Vested and exercisable as of December 31, 2019 763,000 $ 10.16 3.34 $ (5,952,000 ) Compensation expense related to common stock purchase warrants was $2,182,000 and $1,400,000 for the years ended December 31, 2019 and 2018, respectively. The weighted-average grant date fair value of warrants granted during the year ended December 31, 2018 was $7.80. No warrants were granted to employees or non-employees in exchange for services performed during the year ended December 31, 2019. The aggregate fair value of warrants that vested during the years ended December 31, 2019 and 2018 was $2,092,000 and $1,401,000, respectively. As of December 31, 2019, the total unrecognized compensation expense related to warrants was $275,000, which is expected to be recognized over a weighted-average term of approximately 0.4 years. Noncash Stock Compensation Expense Noncash stock-based compensation expense for the periods presented was comprised of the following: For the Year Ended December 31, 2019 2018 Stock options $ 3,573,000 $ 2,490,000 Warrants 2,182,000 1,400,000 Restricted stock units 370,000 14,000 Earn-out compensation expense (Note 5) 58,000 - Other 34,000 39,000 Total noncash stock compensation expense $ 6,217,000 $ 3,943,000 Noncash stock-based compensation expense for the periods presented was included in the following financial statement line items: Fiscal Year 2019 2018 Sales, marketing and advertising $ 635,000 $ 504,000 Technology platform and infrastructure 129,000 200,000 General and administrative 5,453,000 3,239,000 Total noncash stock compensation expense 6,217,000 $ 3,943,000 Noncash stock-based compensation expense for the year ended December 31, 2019 included compensation expense resulting from the vesting of certain performance-based options and warrants previously granted to certain executives, which vested upon the achievement of certain performance-based milestones, pursuant to vesting conditions in the underlying equity grant agreements. Performance targets included the completion of our IPO in February 2019 and other operational performance-based milestones. During fiscal year 2019, 325,000 of performance-based stock options and warrants vested with grant date fair values ranging from $8.28 to $8.50, resulting in noncash stock compensation expense of $2,766,000 during fiscal year 2019. 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. |
9. INCOME TAXES
9. INCOME TAXES | 12 Months Ended |
Dec. 31, 2019 | |
Income Tax Disclosure [Abstract] | |
INCOME TAXES | Super League’s provision for income taxes consisted of the following for the years ended December 31, 2019 and 2018: 2019 2018 Current: Federal taxes $ – $ – State taxes Total current 2019 2018 Deferred: Federal taxes 4,098,000 4,073,000 State taxes 1,374,000 1,609,000 Subtotal 5,472,000 5,682,000 Change in valuation allowance (5,472,000 ) (5,682,000 ) Total deferred – – Provision for income taxes $ - $ - The tax effects of temporary differences and carryforwards that give rise to significant portions of deferred tax assets and liabilities consist of the following as of December 31, 2019 and 2018. 2019 2018 Deferred tax assets (liabilities): Net operating loss and credits $ 14,456,000 $ 11,129,000 Stock compensation 3,992,000 3,452,000 Accrued interest expense 1,541,000 938,000 Fixed assets and intangibles 118,000 87,000 Total deferred tax assets 20,107,000 15,606,000 Valuation allowance (20,107,000 ) (15,606,000 ) Total deferred tax assets, net of valuation allowance $ - $ - A reconciliation of the federal statutory income tax rate and the effective income tax rate is as follows: 2019 2018 Statutory federal tax rate - (benefit) expense 21 % 35 % Non-deductible permanent items (6 ) (1 ) Change in tax rate - (29 ) Valuation allowance (15 ) (5 ) - % - % For the years ended December 31, 2019 and 2018, the Company recorded full valuation allowances against its net deferred tax assets due to uncertainty regarding future realizability pursuant to guidance set forth in the FASB’s Accounting Standards Codification Topic No. 740, Income Taxes At December 31, 2019, the Company had U.S. federal and state income tax net operating loss carryforwards of approximating $49,795,000 and $52,665,000, respectively, expiring through 2039. Utilization of the net operating loss carryforwards may be subject to a substantial annual limitation due to ownership change limitations that may have occurred or that could occur in the future, as required by Section 382 of the Internal Revenue Code of 1986, as amended, as well as similar state provisions. The Company has not completed a study to assess whether an ownership change has occurred or whether there have been multiple ownership changes since the Company’s formation due to the complexity and cost associated with such a study, and the fact that there may be additional such ownership changes in the future. 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 NOL’s, have been measured using the new rate under and are reflected in the valuation of these assets as of December 31, 2019 and 2018. As a result, as of December 31, 2017, the value of our deferred tax assets was reduced by $4,279,000 and the related valuation allowance was reduced by the same amount. Given the full valuation allowance provided for net deferred tax assets, the change in tax law did not have a material impact on the Company’s financial statements. |
10. COMMITMENTS AND CONTINGENCI
10. COMMITMENTS AND CONTINGENCIES | 12 Months Ended |
Dec. 31, 2019 | |
Commitments and Contingencies Disclosure [Abstract] | |
COMMITMENTS AND CONTINGENCIES | Operating Leases The Company leases office space under an operating lease agreement which expired on May 31, 2017 and was amended to a month-to-month lease. Rent expense for the years ended December 31, 2019 and 2018 was approximately $349,000 and $329,000, respectively, and is included in general and administrative expenses in the accompanying statements of operations. Rental payments are expensed in the statements of operations in the period to which they relate. Scheduled rent increases, if any, are amortized on a straight-line basis over the lease term. Related Party Transactions In May 2018, the Company entered into a consulting agreement with a member of the Company's Board of Directors, pursuant to which the board member provides the Company with strategic advice and planning services for which he receives a cash payment of $7,500 per month from the Company. The Consulting Agreement has an initial term that runs until December 31, 2019, but may be extended upon mutual agreement of the board member and the Company. |
11. SUBSEQUENT EVENTS
11. SUBSEQUENT EVENTS | 12 Months Ended |
Dec. 31, 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 annual audited 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) | 12 Months Ended |
Dec. 31, 2019 | |
Accounting Policies [Abstract] | |
Basis of Presentation | The financial statements and accompanying notes have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). |
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 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 financial statements, the Company incurred net losses of $30.7 million and $20.6 million during the years ended December 31, 2019 and 2018, respectively, and had an accumulated deficit of $85.8 million as of December 31, 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 $16.2 million and $8.4 million for the years ended December 31, 2019 and 2018, respectively. Net cash used in operating activities totaled $13.6 million and $10.7 million, for the years ended December 31, 2019 and 2018, respectively. As of December 31, 2019, the Company had cash and cash equivalents of approximately $8.4 million. The Company has used 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. We are focused on expanding our service offerings and revenue growth opportunities through internal development, collaborations, and through one or more strategic acquisitions. Management is currently exploring several alternatives for raising capital to facilitate our growth and execute our business strategy, including strategic partnerships or other forms of equity or debt financings. 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. |
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, (iii) advertising and third-party content Sponsorships and Advertising 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). Payments are typically due from customers during the term of the arrangement. Platform-As-A-Service. Advertising and Third-Party Content Revenue For advertising and third-party content arrangements that include performance obligations satisfied over time, customers typically simultaneously receive and consume the benefits under the arrangement as we satisfy our performance obligations, over the applicable contract term. As such, revenue is recognized over the contract term based upon estimates of progress toward complete satisfaction of the contract performance obligations (typically utilizing a time, effort or delivery-based method of estimation). Payments are typically due from customers during the term of the arrangement for longer-term campaigns, and once delivery is complete for shorter-term campaigns. Direct to Consumer Direct to consumer revenues include tournament fees, digital subscriptions and merchandise. Direct to consumer revenues have primarily consisted of the sale of season passes to gamers for participation in Super League’s in-person and or online multiplayer gaming experiences. For the applicable periods presented herein, season passes for gaming experiences were primarily comprised of multi-week packages and also include one-time, single experience admissions. For the year ended December 31, 2019, digital subscription revenues include revenues related to the Company’s Minehut asset acquisition in June 2018, which provides various Minecraft server hosting services on a subscription basis to the Minecraft gaming community, and Super League Prime subscription offer which was launched in beta in the fourth quarter of 2019. Revenue from single experiences is recognized when the experience occurs. Revenue from multi-week packages is recognized over time as the multi-week experiences occur based on estimates of the progress toward complete satisfaction of the applicable offer and related performance obligations. Subscription revenue is recognized over the applicable subscription term. Payments are typically due from customers at the point of sale. 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. Revenue was comprised of the following for the periods presented: 2019 2018 Brand and Media Sponsorships $ 351,000 $ 549,000 Platform-as-a-service 632,000 291,000 Advertising and content sales 68,000 69,000 Direct to Consumer 33,000 137,000 $ 1,084,000 $ 1,046,000 For the years ended December 31, 2019 and 2018 33% and 39% of revenues were recognized at a single point in time, and 67% and 61% of revenues were recognized over time, respectively. |
Cost of Revenue | Cost of sales includes direct costs incurred in connection with the production of Super League’s in-person and online gaming events, including venue rental, venue entertainment, licenses, direct marketing, prizing, talent and contract services. |
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 years ended December 31, 2019 and 2018 were $409,000 and $614,000, respectively, and are included in selling, marketing and advertising expenses in the accompanying statements of operations. |
Technology Platform and Infrastructure Costs | Technology platform and infrastructure costs include (i) allocated personnel costs, including salaries, noncash stock compensation, 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, (ii) third-party contract software development and engineering resources engaged in developing and enhancing our proprietary gaming and content technology platform (iii) the amortization of capitalized internal use software costs, and (iv) technology platform related cloud services and broadband costs. |
Cash and Cash Equivalents | Super League considers all highly liquid, short-term investments with original maturities of three months or less when purchased to be cash equivalents. As of December 31, 2019, the Company’s cash equivalents consisted of investments in AAA rated money market funds. As of December 31, 2018, the Company did not have any cash equivalents. |
Accounts Receivable | Accounts receivable are recorded at the original invoice amount, less an estimate made for doubtful accounts, if any. The Company provides an allowance for doubtful accounts for potential credit losses based on its evaluation of the collectability and the customers’ creditworthiness. Accounts receivable are written off when they are determined to be uncollectible. As of December 31, 2019 and 2018, no allowance for doubtful accounts was considered necessary. |
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 Company does not have any instruments that are measured at fair value on a recurring basis. However, the Company measured certain acquired intangible assets and the Earn-Out using Level 3 inputs on a nonrecurring basis. |
Concentration of Credit Risks | The Company maintains its cash on deposit with a bank that is insured by the Federal Deposit Insurance Corporation. At various times, the Company maintained balances in excess of insured amounts. The Company has not experienced any significant losses on its cash held in banks. |
Deferred Equity 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 December 31, 2019 and 2018, respectively. Deferred financing costs, if any, are included in other current assets in the accompanying balance sheet. Total 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 (December 31) and between annual tests if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying value. 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 utilizes the simplified method for estimating the expected term for options granted to employees due to the lack of available or sufficient historical exercise data for the Company for the applicable options terms. 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. |
Risks and Uncertainties | Concentrations For the years ended December 31, 2019 and 2018, 5 customers accounted for 69% and four customers accounted for 82% of revenue, respectively. At December 31, 2019, one customer accounted for 70% of accounts receivable. At December 31, 2018, three customers accounted for 96% of accounts receivable. At December 31, 2019, one vendor accounted for 21% of accounts payable. At December 31, 2018, three vendors accounted for 43% of accounts payable. |
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, restricted stock units and warrants, totaling 4,096,000 and 4,117,000 at December 31, 2019 and 2018, respectively, 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. Under U.S. GAAP, a tax position is a position in a previously filed tax return, or a position expected to be taken in a future tax filing that is reflected in measuring current or deferred income tax assets and liabilities. Tax positions are recognized only when it is more likely than not, based on technical merits, that the position will be sustained upon examination. Tax positions that meet the more likely than not thresholds are measured using a probability weighted approach as the largest amount of tax benefit being realized upon settlement. The Company considers many factors when evaluating and estimating its tax positions and tax benefits, which may require periodic adjustments, and which may not accurately forecast actual outcomes. Management believes the Company has no uncertain tax positions for the years ended December 31, 2019 and 2018. The Company has elected to include interest and penalties related to its tax contingences as a component of income tax expense. There were no accruals for interest and penalties related to uncertain tax positions for the periods presented. Income tax returns remain open for examination by applicable authorities, generally three years from filing for federal and four years for state. The Company is not currently under examination by any taxing authority nor has it been notified of an impending examination. |
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 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, 2020 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) | 12 Months Ended |
Dec. 31, 2019 | |
Accounting Policies [Abstract] | |
Schedule of Revenue | 2019 2018 Brand and Media Sponsorships $ 451,000 $ 549,000 Platform-as-a-service 532,000 291,000 Advertising and content sales 68,000 69,000 Direct to Consumer 33,000 137,000 $ 1,084,000 $ 1,046,000 |
3. PROPERTY AND EQUIPMENT (Tabl
3. PROPERTY AND EQUIPMENT (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
Property, Plant and Equipment [Abstract] | |
Property and equipment | 2019 2018 Furniture and fixtures $ 334,000 $ 207,000 Computer hardware 3,141,000 3,195,000 3,475,000 3,402,000 Less: accumulated depreciation and amortization (3,236,000 ) (2,871,000 ) $ 239,000 $ 531,000 |
4. INTANGIBLE AND OTHER ASSETS
4. INTANGIBLE AND OTHER ASSETS (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
Finite-Lived Intangible Assets, Net [Abstract] | |
Intangible and other assets | 2019 2018 Capitalized software development costs $ 2,363,000 $ 1,281,000 Licenses 340,000 - Tradename 189,000 - Domain 68,000 67,000 Copyrights and other 289,000 127,000 3,249,000 1,475,000 Less: accumulated amortization (1,265,000 ) (768,000 ) $ 1,984,000 $ 707,000 |
Future amortization expense of intangible and other assets | For the years ending December 31: 2020 $ 711,000 2021 643,000 2022 328,000 2023 149,000 2024 105,000 Thereafter 48,000 $ 1,984,000 |
5. AQUISITION OF FRAMERATE, I_2
5. AQUISITION OF FRAMERATE, INC. (Tables) | 12 Months Ended |
Dec. 31, 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 |
6. CONVERTIBLE NOTES PAYABLE (T
6. CONVERTIBLE NOTES PAYABLE (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
Convertible Notes Payable | |
Debt weighted-average assumptions | Volatility 96 % Risk–free interest rate 2.75 Dividend yield 0 % Expected life of options (in years) 5 Weighted-average fair value of common stock $ 9.41 |
8. STOCK-BASED INCENTIVE PLANS
8. STOCK-BASED INCENTIVE PLANS (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
Retirement Benefits [Abstract] | |
Schedule of Share-based Payment Award, Stock Options, Valuation Assumption | 2019 2018 Volatility 95 % 96 % Risk–free interest rate 1.99 % 2.82 % Dividend yield - % - % Expected life of options (in years) 6.08 5.78 Weighted-average fair value of common stock $ 7.45 $ 10.80 |
Summary of stock option activity | Weighted-Average Options (#) Exercise Price Per Share ($) Remaining Contractual Term (Years) Aggregate Intrinsic Value ($) Outstanding at December 31, 2018 1,524,000 $ 9.18 7.34 $ (10,327,000 ) Granted 165,000 $ 7.45 Exercised - - Canceled / forfeited (138,000 ) $ 10.60 Outstanding at December 31, 2019 1,551,000 $ 8.86 7.51 $ (10,088,000 ) Vested and exercisable at December 31, 2019 1,153,000 $ 8.66 7.04 $ (7,259,000 ) |
Non-vested restricted stock unit activity | Restricted Stock Units (#) Weighted Average Grant Date Fair Value ($) Non-vested restricted stock units at December 31, 2018 10,000 $ 7.11 Granted 33,000 $ 9.68 Vested (14,000 ) $ 6.13 Canceled – Non-vested restricted stock units at December 31, 2019 29,000 $ 10.40 |
Summary of warrant activity | Weighted-Average Warrants (#) Exercise Price Per Share ($) Remaining Contractual Term (Years) Aggregate Intrinsic Value ($) Outstanding at December 31, 2018 1,098,000 $ 9.33 2.66 Exercised (67,000 ) $ 0.17 $ 137,000 Outstanding at December 31, 2019 1,031,000 $ 9.92 2.83 $ (7,797,000 ) Vested and exercisable as of December 31, 2019 763,000 $ 10.16 3.34 $ (5,952,000 ) |
Summary of stock-based compensation expense | For the Year Ended December 31, 2019 2018 Stock options $ 3,573,000 $ 2,490,000 Warrants 2,182,000 1,400,000 Restricted stock units 370,000 14,000 Earn-out compensation expense (Note 5) 58,000 - Other 34,000 39,000 Total noncash stock compensation expense $ 6,217,000 $ 3,943,000 Fiscal Year 2019 2018 Sales, marketing and advertising $ 635,000 $ 504,000 Technology platform and infrastructure 129,000 200,000 General and administrative 5,453,000 3,239,000 Total noncash stock compensation expense 6,217,000 $ 3,943,000 |
9. INCOME TAXES (Tables)
9. INCOME TAXES (Tables) | 12 Months Ended |
Dec. 31, 2019 | |
Income Tax Disclosure [Abstract] | |
Provision for income taxes | 2019 2018 Current: Federal taxes $ – $ – State taxes Total current 2019 2018 Deferred: Federal taxes 4,098,000 4,073,000 State taxes 1,374,000 1,609,000 Subtotal 5,472,000 5,682,000 Change in valuation allowance (5,472,000 ) (5,682,000 ) Total deferred – – Provision for income taxes $ - $ - |
Summary of deferred tax assets and liabilities | 2019 2018 Deferred tax assets (liabilities): Net operating loss and credits $ 14,456,000 $ 11,129,000 Stock compensation 3,992,000 3,452,000 Accrued interest expense 1,541,000 938,000 Fixed assets and intangibles 118,000 87,000 Total deferred tax assets 20,107,000 15,606,000 Valuation allowance (20,107,000 ) (15,606,000 ) Total deferred tax assets, net of valuation allowance $ - $ - |
Schedule of Effective Income Tax Rate Reconciliation | 2019 2018 Statutory federal tax rate - (benefit) expense 21 % 35 % Non-deductible permanent items (6 ) (1 ) Change in tax rate - (29 ) Valuation allowance (15 ) (5 ) - % - % |
2. SUMMARY OF SIGNIFICANT ACC_4
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2019 | Dec. 31, 2018 | |
Revenues | $ 1,084,000 | $ 1,046,000 |
Brand and Media Sponsorships [Member] | ||
Revenues | 451,000 | 549,000 |
Platform-as-a-service [Member] | ||
Revenues | 532,000 | 291,000 |
Advertising [Member] | ||
Revenues | 68,000 | 69,000 |
Sales Channel, Directly to Consumer [Member] | ||
Revenues | $ 33,000 | $ 137,000 |
2. SUMMARY OF SIGNIFICANT ACC_5
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details Narrative) | 12 Months Ended | |
Dec. 31, 2019USD ($)Segmentsshares | Dec. 31, 2018USD ($)shares | |
Advertising expense | $ 409,000 | $ 614,000 |
Deferred costs related to proposed offerings of securities | $ 0 | $ 154,354 |
Operating segments | Segments | 1 | |
Antidilutive shares | shares | 4,096,000 | 4,117,000 |
Five Customers | Revenue | ||
Concentration risk | 69.00% | |
Four Customers | Revenue | ||
Concentration risk | 82.00% | |
Three Customers | Accounts Receivable | ||
Concentration risk | 70.00% | 96.00% |
One vendor | Accounts Payable | ||
Concentration risk | 21.00% | |
Three vendors | Accounts Payable | ||
Concentration risk | 43.00% |
3. PROPERTY AND EQUIPMENT (Deta
3. PROPERTY AND EQUIPMENT (Details) - USD ($) | Dec. 31, 2019 | Dec. 31, 2018 |
Property and equipment, gross | $ 3,475,000 | $ 3,402,000 |
Less: accumulated depreciation and amortization | (3,236,000) | (2,871,000) |
Property and equipment, net | 239,000 | 531,000 |
Furniture and Fixtures | ||
Property and equipment, gross | 334,000 | 207,000 |
Computer Hardware | ||
Property and equipment, gross | $ 3,141,000 | $ 3,195,000 |
3. PROPERTY AND EQUIPMENT (De_2
3. PROPERTY AND EQUIPMENT (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2019 | Dec. 31, 2018 | |
Property, Plant and Equipment [Abstract] | ||
Depreciation and amortization expense | $ 365,000 | $ 861,214 |
4. INTANGIBLE AND OTHER ASSET_2
4. INTANGIBLE AND OTHER ASSETS (Details) - USD ($) | Dec. 31, 2019 | Dec. 31, 2018 |
Intangible assets, gross | $ 3,249,000 | $ 1,475,000 |
Less: accumulated amortization | (1,265,000) | (768,000) |
Intangible assets, net | 1,984,000 | 707,000 |
Capitalized Software Development Costs | ||
Intangible assets, gross | 2,363,000 | 1,281,000 |
Licenses | ||
Intangible assets, gross | 340,000 | 0 |
Tradename | ||
Intangible assets, gross | 189,000 | 0 |
Domain | ||
Intangible assets, gross | 68,000 | 67,000 |
Copyrights and Other | ||
Intangible assets, gross | $ 289,000 | $ 127,000 |
4. INTANGIBLE AND OTHER ASSET_3
4. INTANGIBLE AND OTHER ASSETS (Details 1) - USD ($) | Dec. 31, 2019 | Dec. 31, 2018 |
Finite-Lived Intangible Assets, Net [Abstract] | ||
2020 | $ 711,000 | |
2021 | 643,000 | |
2022 | 328,000 | |
2023 | 149,000 | |
2024 | 105,000 | |
Thereafter | 48,000 | |
Total | $ 1,984,000 | $ 707,000 |
4. INTANGIBLE AND OTHER ASSET_4
4. INTANGIBLE AND OTHER ASSETS (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 2019 | Dec. 31, 2018 | |
Finite-Lived Intangible Assets, Net [Abstract] | ||
Amortization expense | $ 497,000 | $ 245,000 |
5. AQUISITION OF FRAMERATE, I_3
5. AQUISITION OF FRAMERATE, INC. (Details) | 12 Months Ended |
Dec. 31, 2019USD ($) | |
Business Combinations [Abstract] | |
Cash consideration at closing | $ 1,515,000 |
Equity consideration at closing | 1,000,000 |
Contingent earnout | 254,000 |
Total | $ 2,769,000 |
5. AQUISITION OF FRAMERATE, I_4
5. AQUISITION OF FRAMERATE, INC. (Details 1) - USD ($) | 12 Months Ended | |
Dec. 31, 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 |
6. CONVERTIBLE NOTES PAYABLE (D
6. CONVERTIBLE NOTES PAYABLE (Details) - Debt Warrants | 12 Months Ended |
Dec. 31, 2019$ / shares | |
Volatility | 96.00% |
Riskfree interest rate | 275.00% |
Dividend yield | 0.00% |
Expected life of options (in years) | 5 years |
Weighted-average fair value of common stock | $ 9.41 |
6. CONVERTIBLE NOTES PAYABLE _2
6. CONVERTIBLE NOTES PAYABLE (Details Narrative) - USD ($) | 12 Months Ended | |
Dec. 31, 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 ($) | 12 Months Ended | |
Dec. 31, 2019 | Dec. 31, 2018 | |
Stockholders' Equity (Deficit) | ||
In-kind contribution of services | $ 0 | $ 667,000 |
8. STOCK-BASED INCENTIVE PLAN_2
8. STOCK-BASED INCENTIVE PLANS (Details) - Stock Options - $ / shares | 12 Months Ended | |
Dec. 31, 2019 | Dec. 31, 2018 | |
Volatility | 95.00% | 96.00% |
Risk–free interest rate | 1.99% | 2.82% |
Dividend yield | 0.00% | 0.00% |
Expected life of options (in years) | 6 years 29 days | 5 years 9 months 11 days |
Weighted-average fair value of common stock | $ 7.45 | $ 10.80 |
8. STOCK-BASED INCENTIVE PLAN_3
8. STOCK-BASED INCENTIVE PLANS (Details 1) - Stock Options - USD ($) | 12 Months Ended | |
Dec. 31, 2019 | Dec. 31, 2018 | |
Number Of options | ||
Outstanding at beginning of year | 1,524,000 | |
Granted | 165,000 | |
Exercised | 0 | |
Canceled / forfeited | (138,000) | |
Outstanding at end of year | 1,551,000 | 1,524,000 |
Vested and exercisable at December 31, 2019 | 1,153,000 | |
Weighted-Average Exercise Price | ||
Outstanding at beginning of year | $ 9.18 | |
Granted | 7.45 | |
Exercised | 0 | |
Canceled / forfeited | 10.60 | |
Outstanding at end of year | 8.86 | $ 9.18 |
Vested and exercisable at December 31, 2019 | $ 8.66 | |
Weighted-Average Remaining Contractual Life in Years | ||
Outstanding at end of year | 7 years 6 months 4 days | 7 years 4 months 2 days |
Exercisable at end of year | 7 years 14 days | |
Aggregate Intrinsic Value | ||
Outstanding at beginning of year | $ (10,327,000) | |
Outstanding at end of year | (10,088,000) | $ (10,327,000) |
Vested and exercisable at December 31, 2019 | $ (7,259,000) |
8. STOCK-BASED INCENTIVE PLAN_4
8. STOCK-BASED INCENTIVE PLANS (Details 2) - Restricted Stock Units | 12 Months Ended |
Dec. 31, 2019$ / sharesshares | |
Number Of Awards | |
Non-vested restricted stock units at December 31, 2018 | shares | 10,000 |
Granted | shares | 33,000 |
Vested | shares | (14,000) |
Canceled | shares | 0 |
Non-vested restricted stock units at December 31, 2019 | shares | 29,000 |
Weighted-Average Grant Date Fair Value | |
Non-vested restricted stock units at December 31, 2018 | $ / shares | $ 7.11 |
Granted | $ / shares | 9.68 |
Vested | $ / shares | 0 |
Canceled | $ / shares | 0 |
Non-vested restricted stock units at December 31, 2019 | $ / shares | $ 10.40 |
8. STOCK-BASED INCENTIVE PLAN_5
8. STOCK-BASED INCENTIVE PLANS (Details 3) - Warrants | 12 Months Ended |
Dec. 31, 2019USD ($)$ / sharesshares | |
Warrants | |
Outstanding at beginning of year | shares | 1,098,000 |
Exercised | shares | (67,000) |
Outstanding at end of year | shares | 1,031,000 |
Vested and exercisable at December 31, 2019 | shares | 763,000 |
Weighted-Average Exercise Price | |
Outstanding at beginning of year | $ / shares | $ 9.33 |
Exercised | $ / shares | 0.17 |
Outstanding at end of year | $ / shares | 9.92 |
Vested and exercisable at December 31, 2019 | $ / shares | $ 10.16 |
Weighted-Average Remaining Contractual Life in Years | |
Outstanding at beginning of year | 2 years 7 months 28 days |
Outstanding at end of year | 2 years 9 months 29 days |
Vested and exercisable at December 31, 2019 | 3 years 4 months 2 days |
Aggregate Intrinsic Value | |
Exercised | $ | $ 137,000 |
Outstanding at end of year | $ | (7,797,000) |
Vested and exercisable at December 31, 2019 | $ | $ (5,952,000) |
8. STOCK-BASED INCENTIVE PLAN_6
8. STOCK-BASED INCENTIVE PLANS (Details 4) - USD ($) | 12 Months Ended | |
Dec. 31, 2019 | Dec. 31, 2018 | |
Stock options | $ 3,573,000 | $ 2,490,000 |
Warrants | 2,182,000 | 1,400,000 |
Restricted stock units | 370,000 | 14,000 |
Earn-out compensation expense (Note 5) | 58,000 | 0 |
Other | 34,000 | 39,000 |
Total noncash stock compensation expense | 6,217,000 | 3,943,000 |
Sales Marketing Advertising [Member] | ||
Total noncash stock compensation expense | 35,000 | 504,000 |
Technology Equipment [Member] | ||
Total noncash stock compensation expense | 129,000 | 200,000 |
General and Administrative Expense [Member] | ||
Total noncash stock compensation expense | $ 5,453,000 | $ 3,239,000 |
9. INCOME TAXES (Details)
9. INCOME TAXES (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2019 | Dec. 31, 2018 | |
Current: | ||
Federal taxes | $ 0 | $ 0 |
Deferred: | ||
Federal taxes | 4,098,000 | 4,073,000 |
State taxes | 1,374,000 | 1,609,000 |
Subtotal | 5,472,000 | 5,682,000 |
Change in valuation allowance | (5,472,000) | (5,682,000) |
Total deferred | 0 | 0 |
Provision for income taxes | $ 0 | $ 0 |
9. INCOME TAXES (Details 1)
9. INCOME TAXES (Details 1) - USD ($) | Dec. 31, 2019 | Dec. 31, 2018 |
Deferred tax assets (liabilities): | ||
Net operating loss and credits | $ 14,456,000 | $ 11,129,000 |
Stock compensation | 3,992,000 | 3,452,000 |
Accrued interest expense | 1,541,000 | 938,000 |
Fixed assets and intangibles | 118,000 | 87,000 |
Total deferred tax assets | 20,107,000 | 15,606,000 |
Valuation allowance | (20,107,000) | 15,606,000 |
Total deferred tax assets, net of valuation allowance | $ 0 | $ 0 |
9. INCOME TAXES (Details 2)
9. INCOME TAXES (Details 2) | 12 Months Ended | |
Dec. 31, 2019 | Dec. 31, 2018 | |
Income Tax Disclosure [Abstract] | ||
Statutory federal tax rate - (benefit) expense | 21.00% | 35.00% |
Non-deductible permanent items | (6.00%) | (1.00%) |
Change in tax rate | 0.00% | (29.00%) |
Valuation allowance | (15.00%) | (5.00%) |
Effective tax rate | 0.00% | 0.00% |