Document and Entity Information
Document and Entity Information - shares | 9 Months Ended | |
Sep. 30, 2020 | Nov. 11, 2020 | |
Cover [Abstract] | ||
Entity Registrant Name | Super League Gaming, Inc. | |
Entity Central Index Key | 0001621672 | |
Document Type | 10-Q | |
Document Period End Date | Sep. 30, 2020 | |
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 Interactive Data Current | Yes | |
Entity Incorporation, State or Country Code | DE | |
Entity File Number | 001-38819 | |
Entity Filer Category | Non-accelerated Filer | |
Entity Small Business | true | |
Entity Shell Company | false | |
Entity Common Stock, Shares Outstanding | 15,483,010 | |
Document Fiscal Period Focus | Q3 | |
Document Fiscal Year Focus | 2020 |
CONDENSED BALANCE SHEETS
CONDENSED BALANCE SHEETS - USD ($) | Sep. 30, 2020 | Dec. 31, 2019 |
Current Assets | ||
Cash and cash equivalents | $ 10,346,000 | $ 8,442,000 |
Accounts receivable | 972,000 | 293,000 |
Prepaid expenses and other current assets | 1,213,000 | 924,000 |
Total current assets | 12,531,000 | 9,659,000 |
Property and equipment, net | 160,000 | 239,000 |
Intangible and other assets, net | 1,953,000 | 1,984,000 |
Goodwill | 2,565,000 | 2,565,000 |
Total assets | 17,209,000 | 14,447,000 |
Current Liabilities | ||
Accounts payable and accrued expenses | 727,000 | 853,000 |
Deferred revenue | 31,000 | 151,000 |
Total current liabilities | 758,000 | 1,004,000 |
Long-term note payable | 1,205,000 | 0 |
Total Liabilities | 1,963,000 | 1,004,000 |
Commitments and contingencies | ||
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; 15,483,010 and 8,573,922 shares issued and outstanding as of September 30, 2020 and December 31, 2019, respectively. | 25,000 | 18,000 |
Additional paid-in capital | 115,025,000 | 99,237,000 |
Accumulated deficit | (99,804,000) | (85,812,000) |
Total stockholders' equity (deficit) | 15,246,000 | 13,443,000 |
Total liabilities and stockholders' equity | $ 17,209,000 | $ 14,447,000 |
CONDENSED BALANCE SHEETS (Paren
CONDENSED BALANCE SHEETS (Parenthetical) - $ / shares | Sep. 30, 2020 | Dec. 31, 2019 |
Statement of Financial Position [Abstract] | ||
Preferred stock, par value | $ 0.001 | $ 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 | $ 0.001 | $ 0.001 |
Common stock, authorized | 100,000,000 | 100,000,000 |
Common stock, issued | 15,483,010 | 8,573,802 |
Common stock, outstanding | 15,483,010 | 8,573,802 |
CONDENSED STATEMENTS OF OPERATI
CONDENSED STATEMENTS OF OPERATIONS - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2020 | Sep. 30, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | |
Income Statement [Abstract] | ||||
Revenues | $ 718,000 | $ 350,000 | $ 1,285,000 | $ 822,000 |
Cost of revenues | 327,000 | 192,000 | 560,000 | 379,000 |
Gross profit | 391,000 | 158,000 | 725,000 | 443,000 |
OPERATING EXPENSES | ||||
Selling, marketing and advertising | 1,476,000 | 1,063,000 | 4,005,000 | 3,202,000 |
Technology platform development | 1,430,000 | 1,319,000 | 5,109,000 | 3,772,000 |
General and administrative | 1,782,000 | 2,201,000 | 5,615,000 | 9,535,000 |
Total operating expenses | 4,688,000 | 4,583,000 | 14,729,000 | 16,509,000 |
Net operating loss | (4,297,000) | (4,425,000) | (14,004,000) | (16,066,000) |
OTHER INCOME (EXPENSE) | ||||
Accrued interest expense | (3,000) | 0 | (5,000) | (187,000) |
Accretion of debt discount | 0 | 0 | 0 | (2,684,000) |
Beneficial conversion feature | 0 | 0 | 0 | (7,067,000) |
Other | 2,000 | 8,000 | 17,000 | 13,000 |
Total other income (expense) | (1,000) | 8,000 | 12,000 | (9,925,000) |
Net loss | $ (4,298,000) | $ (4,417,000) | $ (13,992,000) | $ (25,991,000) |
Net loss attributable to common stockholders - basic and diluted | ||||
Basic and diluted loss per common share | $ (0.36) | $ (0.52) | $ (1.39) | $ (3.39) |
Weighted-average number of shares outstanding, basic and diluted | 12,063,778 | 8,569,922 | 10,084,002 | 7,663,243 |
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, 2018 | 4,610,109 | |||
Beginning balance, amount at Dec. 31, 2018 | $ 14,000 | $ 48,325,000 | $ (55,133,000) | $ (6,794,000) |
Initial public offering of common stock, shares | 2,272,727 | |||
Initial public offering of common stock, amount | $ 2,000 | 22,456,000 | 22,458,000 | |
Automatic conversion of convertible debt to common stock, shares | 1,475,164 | |||
Automatic conversion of convertible debt to common stock, amount | $ 2,000 | 13,791,000 | 17,793,000 | |
Beneficial conversion feature | 7,067,000 | 7,067,000 | ||
Common stock issued for Framerate Acquisition, shares | 134,422 | |||
Common stock issued for Framerate Acquisition, amount | $ 0 | 1,000,000 | 1,000,000 | |
Framerate Earn-Out | 454,000 | 454,000 | ||
Stock-based compensation, shares | 10,833 | |||
Stock-based compensation, amount | $ 0 | 5,199,000 | 5,199,000 | |
Stock option and warrant exercises | 20,000 | 20,000 | ||
Warrant exercises, shares | 66,667 | |||
Warrant exercises, amount | $ 0 | 0 | ||
Net loss | (25,991,000) | (25,991,000) | ||
Ending balance, shares at Sep. 30, 2019 | 8,569,922 | |||
Ending balance, amount at Sep. 30, 2019 | $ 18,000 | 98,312,000 | (81,124,000) | 17,206,000 |
Beginning balance, shares at Jun. 30, 2019 | 8,569,922 | |||
Beginning balance, amount at Jun. 30, 2019 | $ 18,000 | 97,598,000 | (76,707,000) | 20,909,000 |
Stock-based compensation, amount | 714,000 | 714,000 | ||
Net loss | (4,417,000) | (4,417,000) | ||
Ending balance, shares at Sep. 30, 2019 | 8,569,922 | |||
Ending balance, amount at Sep. 30, 2019 | $ 18,000 | 98,312,000 | (81,124,000) | 17,206,000 |
Beginning balance, shares at Dec. 31, 2019 | 8,573,922 | |||
Beginning balance, amount at Dec. 31, 2019 | $ 18,000 | 99,237,000 | (85,812,000) | 13,443,000 |
Initial public offering of common stock, shares | 1,825,000 | |||
Initial public offering of common stock, amount | $ 2,000 | 5,951,000 | 5,953,000 | |
Issuance of common stock at $3.50 per share, net of issuance costs, shares | 4,988,981 | |||
Issuance of common stock at $3.50 per share, net of issuance costs, amount | $ 5,000 | 8,398,000 | 8,403,000 | |
Common stock issued for Framerate Acquisition, shares | 32,396 | |||
Common stock issued for Framerate Acquisition, amount | $ 0 | 0 | 0 | |
Stock-based compensation, shares | 62,171 | |||
Stock-based compensation, amount | $ 0 | 1,429,000 | 1,429,000 | |
Stock option and warrant exercises | 10,000 | 10,000 | ||
Net loss | (13,992,000) | (13,992,000) | ||
Ending balance, shares at Sep. 30, 2020 | 15,483,010 | |||
Ending balance, amount at Sep. 30, 2020 | $ 25,000 | 115,025,000 | (99,804,000) | 15,246,000 |
Beginning balance, shares at Jun. 30, 2020 | 10,460,696 | |||
Beginning balance, amount at Jun. 30, 2020 | $ 20,000 | 106,237,000 | (95,506,000) | 10,751,000 |
Issuance of common stock at $1.85 per share, net of issuance costs, shares | 4,988,981 | |||
Issuance of common stock at $1.85 per share, net of issuance costs, amount | $ 5,000 | 8,398,000 | 8,403,000 | |
Stock-based compensation, shares | 33,333 | |||
Stock-based compensation, amount | $ 0 | 380,000 | 380,000 | |
Stock option and warrant exercises | 10,000 | 10,000 | ||
Net loss | (4,298,000) | (4,298,000) | ||
Ending balance, shares at Sep. 30, 2020 | 15,483,010 | |||
Ending balance, amount at Sep. 30, 2020 | $ 25,000 | $ 115,025,000 | $ (99,804,000) | $ 15,246,000 |
CONDENSED STATEMENTS OF CASH FL
CONDENSED STATEMENTS OF CASH FLOWS - USD ($) | 9 Months Ended | |
Sep. 30, 2020 | Sep. 30, 2019 | |
CASH FLOWS FROM OPERATING ACTIVITIES | ||
Net loss | $ (13,992,000) | $ (25,991,000) |
Adjustments to reconcile net loss to net cash used in operating activities: | ||
Depreciation and amortization | 1,098,000 | 657,000 |
Stock-based compensation | 1,570,000 | 5,266,000 |
Amortization of discount on convertible notes | 0 | 2,684,000 |
Beneficial conversion feature | 0 | 7,067,000 |
Changes in assets and liabilities: | ||
Accounts receivable | (679,000) | 171,000 |
Prepaid expenses and other current assets | (430,000) | (852,000) |
Accounts payable and accrued expenses | (125,000) | 601,000 |
Deferred revenue | (121,000) | 68,000 |
Accrued interest on convertible notes | 5,000 | 187,000 |
Net cash used in operating activities | (12,674,000) | (10,142,000) |
CASH FLOWS FROM INVESTING ACTIVITIES | ||
Cash paid for acquisition of Framerate (Note 4) | 0 | (1,491,000) |
Purchase of property and equipment | (7,000) | (56,000) |
Capitalization of software development costs | (877,000) | (839,000) |
Acquisition of other intangible assets | (104,000) | (138,000) |
Net cash used in investing activities | (988,000) | (2,524,000) |
CASH FLOWS FROM FINANCING ACTIVITIES | ||
Proceeds from issuance of common stock, net of issuance costs (Note 6) | 14,356,000 | 22,458,000 |
Proceeds from note payable (Note 5) | 1,200,000 | 0 |
Proceeds from common stock purchase warrant exercises | 10,000 | 20,000 |
Net cash provided by financing activities | 15,566,000 | 22,478,000 |
INCREASE IN CASH | 1,904,000 | 9,812,000 |
Cash - beginning of period | 8,442,000 | 2,774,000 |
Cash - end of period | 10,346,000 | 12,586,000 |
SUPPLEMENTAL NONCASH INVESTING AND FINANCING ACTIVITIES | ||
Automatic conversion of convertible debt to common stock | 0 | 13,793,000 |
Issuance of common stock for Framerate Acquisition (Note 4) | $ 0 | $ 1,000,000 |
1. DESCRIPTION OF BUSINESS
1. DESCRIPTION OF BUSINESS | 9 Months Ended |
Sep. 30, 2020 | |
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. 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. 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 a wide range of gamers across game titles, ages and skill levels, and also a wide range of content-capture beyond 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. We are an “emerging growth company” as defined by the Jumpstart Our Business Startups Act of 2012, as amended. |
2. SUMMARY OF SIGNIFICANT ACCOU
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 9 Months Ended |
Sep. 30, 2020 | |
Accounting Policies [Abstract] | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | Basis of Presentation The accompanying condensed financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information and with the instructions to Form 10-Q and Rule 8-03 of Regulation S-X. Accordingly, certain information and footnotes required by U.S. GAAP in annual financial statements have been omitted or condensed in accordance with quarterly reporting requirements of the Securities and Exchange Commission (“SEC”). These interim financial statements should be read in conjunction with our audited financial statements for the year ended December 31, 2019 included in our Annual Report on Form 10-K for the year ended December 31, 2019, filed with the SEC on March 23, 2020. The condensed interim financial statements of Super League include all adjustments of a normal recurring nature which, in the opinion of management, are necessary for a fair statement of Super League’s financial position as of September 30, 2020, and results of its operations and its cash flows for the interim periods presented. The results of operations for the three and nine months ended September 30, 2020 are not necessarily indicative of the results to be expected for the entire fiscal year. Reclassifications Certain reclassifications to operating expense line items have been made to prior year amounts for consistency and comparability with the current year’s financial statements presentation. These reclassifications had no effect on the reported total operating expenses for the periods presented. 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, stock-based compensation expense, accounting for business combinations, and valuation allowances against net deferred tax assets, require its most difficult, subjective or complex judgments. Going Concern The accompanying interim condensed financial statements have been prepared assuming the Company will continue as a going concern, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. As presented in the financial statements, the Company incurred net losses of $14.0 million and $26.0 million during the nine months ended September 30, 2020 and 2019, respectively, and had an accumulated deficit of $99.8 million as of September 30, 2020. Total noncash charges included in accumulated deficit since inception, primarily related to noncash stock compensation, restricted stock units issued in connection with a license agreement, amortization of the discount on convertible debt and in-kind advertising expense, totaled approximately $36.5 million. For the nine months ended September 30, 2020 and 2019, noncash expenses (excluding depreciation and amortization of fixed and intangible assets, respectively) included in net loss, primarily comprised of stock-based compensation and noncash interest charges (2019 period only), totaled $1.5 million and $15.2 million, respectively. For the nine months ended September 30, 2020 and 2019, net cash used in operating activities totaled $12.7 million and $10.1 million, respectively. As of September 30, 2020, the Company had cash and cash equivalents of approximately $10.3 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. Recent Financing Activities As described at Note 5, on May 4, 2020, the Company entered into a potentially forgivable loan from the U.S. Small Business Administration (“SBA”) resulting in net proceeds of approximately $1.2 million pursuant to the Paycheck Protection Program enacted by Congress under the CARES Act administered by the SBA. As described at Note 6, in May 2020, the Company issued 1,825,000 shares of common stock at a price of $3.50 per share, raising aggregate net proceeds of approximately $6.0 million, after deducting placement agent fees of $319,000 and other offering expenses totaling $116,000, pursuant to a registered direct offering. As described at Note 6, in August and September 2020, the Company issued a total of 4,988,981 shares of common stock at a price of $1.85 per share, raising aggregate net proceeds of approximately $8.4 million, after deducting placement agent fees of $646,000 and other offering expenses totaling $180,000. The net proceeds are for working capital and other general corporate purposes, including sales and marketing activities, product development and capital expenditures. We may also use a portion of the net proceeds for the acquisition of, or investment in, technologies, solutions or businesses. 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) sponsorships and advertising, including third-party content sales and (ii) direct to consumer offers including tournament fees for participation in our physical and online multiplayer gaming experiences, digital subscriptions and merchandise sales. Sponsorships and Advertising The Company generates sponsorship revenues primarily from sales of various forms of sponsorships and promotional campaigns for its online gameplay and content platforms and from sponsorship at its in-person esports experiences. These revenue arrangements may include: exclusive or non-exclusive title sponsorships, marketing benefits, official product status exclusivity, product visibly and additional infrastructure placement, social media rights (including rights to create and post social content and clips), rights to on-screen activations and promotions, display material rights, media rights, hospitality and tickets and merchandising rights. Sponsorship revenues also include revenues pursuant to arrangements with brand and media partners, retail venues, game publishers and broadcasters that allow our partners to run amateur esports experiences, and or capture specifically curated gameplay content that is customized for our partners’ distribution channels, leveraging the flexibility of, and powered by the Super League gaming and content technology platform. Sponsorship arrangements typically include contract terms for time periods ranging from several weeks or months to multi-year arrangements. We also generate content through digital and physical experiences that offer opportunities for generating advertising revenue on our proprietary digital channels. In addition, we license our content to third parties seeking esports content for their own distribution channels. For 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. Revenue for sponsorship 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. 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 online and physical tournament fees, digital subscriptions, digital goods and merchandise. 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: Three Months Ended September 30, Nine Months Ended September 30, 2020 2019 2020 2019 Sponsorships and advertising $ 677,000 $ 342,000 $ 1,190,000 $ 798,000 Direct to Consumer 41,000 8,000 95,000 24,000 $ 718,000 $ 350,000 $ 1,285,000 $ 822,000 For the three and nine months ended September 30, 2020, 65% and 55% of revenues were recognized at a single point in time, and 35% and 45% of revenues were recognized over time, respectively. For the three and nine months ended September 30, 2019, 45% and 43% of revenues were recognized at a point in time, and 55% and 57% of revenues were recognized over time, respectively. Advertising Gaming experience and Super League brand related advertising costs include the cost of ad production, social media, print media, marketing, promotions, and merchandising. The Company expenses advertising costs as incurred. Advertising costs are included in selling, marketing and advertising expenses in the accompanying statements of operations. Advertising expenses for the three and nine months ended September 30, 2020 were $22,000 and $73,000, respectively. Advertising expenses for the three and nine months ended September 30, 2019 were $81,000 and $270,000, respectively. 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, broadband and other technology platform costs. 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. 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. Noncash stock-based compensation expense for the periods presented was comprised of the following: Three Months Ended September 30, Nine Months Ended September 30, 2020 2019 2020 2019 Stock options $ 145,000 $ 374,000 $ 579,000 $ 3,004,000 Warrants - 263,000 282,000 1,918,000 Restricted stock units 235,000 75,000 568,000 311,000 Earn-out compensation expense (Note 4) 90,000 25,000 141,000 33,000 Total noncash stock compensation expense $ 470,000 $ 737,000 $ 1,570,000 $ 5,266,000 Noncash stock-based compensation expense for the periods presented was included in the following financial statement line items: Three Months Ended September 30, Nine Months Ended September 30, 2020 2019 2020 2019 Sales, marketing and advertising $ 272,000 $ 120,000 $ 668,000 $ 448,000 Technology platform and infrastructure 51,000 47,000 199,000 71,000 General and administrative 147,000 570,000 703,000 4,747,000 Total noncash stock compensation expense $ 470,000 $ 737,000 $ 1,570,000 $ 5,266,000 Noncash stock-based compensation expense for the nine months ended September 30, 2019 included compensation expense resulting from the vesting of certain performance-based options and warrants previously granted to two of the Company’s executives which vested upon completion of the IPO and the satisfaction of certain other operational performance metrics, pursuant to October 2018 amended employee agreements and related vesting provisions of the underlying equity grant agreements. During the nine months ended September 30, 2019, 300,000 of performance-based stock options and warrants vested, with a weighted-average grant date fair value of $8.50, resulting in noncash stock compensation expense of $2,549,000. The fair value of these equity awards was estimated on October 31, 2018, their original grant date, using the Black Scholes-Merton option pricing model and the following weighted-average assumptions: (i) volatility of 93%, (ii) risk-free interest rate of 3.0%, and (iii) expected term of 6.5 years. Risks and Uncertainties Concentrations For the three and nine months ended September 30, 2020, two customers accounted for 43% and four customers accounted for 54% of revenues, respectively. At September 30, 2020, four customers accounted for 74% of accounts receivable. At December 31, 2019, one customer accounted for 70% of accounts receivable. At September 30, 2020, two vendors accounted for 34% of accounts payable. At December 31, 2019, one vendor accounted for 21% of accounts payable. 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 4,595,000 and 4,108,000 at September 30, 2020 and 2019, respectively, have been excluded from the computation of diluted loss per share because the effect of inclusion would have been anti-dilutive. Recent Accounting Guidance Recent Accounting Pronouncements - Recently 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 Company adopted this new standard effective January 1, 2020. The adoption of the new standard did not have a material impact on the Company’s financial position or results of operations for 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, 2021 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. INTANGIBLE AND OTHER ASSETS
3. INTANGIBLE AND OTHER ASSETS | 9 Months Ended |
Sep. 30, 2020 | |
Finite-Lived Intangible Assets, Net [Abstract] | |
INTANGIBLE AND OTHER ASSETS | Intangible and other assets consisted of the following for the periods presented: September 30, 2020 December 31, 2019 (Unaudited) Capitalized software development costs $ 3,133,000 $ 2,363,000 Licenses - 340,000 Trade name 189,000 189,000 Domain 68,000 68,000 Copyrights and other 392,000 289,000 3,782,000 3,249,000 Less: accumulated amortization (1,829,000 ) (1,265,000 ) Intangible and other assets, net $ 1,953,000 $ 1,984,000 Amortization expense for the three and nine months ended September 30, 2020 totaled $217,000 and $1,013,000, respectively. Amortization expense for the three and nine months ended September 30, 2019 totaled $134,000 and $326,000, respectively. In April 2020, we amended our arrangement with a third party terminating certain rights and licenses from a prior agreement, as amended, focused on in-person play in gaming centers, and securing other rights and licenses from the third party, focused on online play at home. As a result of the termination of the rights and licenses related to the prior arrangement, the Company accelerated the amortization of the remaining balance related to the prior rights and licenses included in “Licenses” above, totaling $306,000, and certain capitalized internal use software development costs totaling $107,000, which are included in technology platform and infrastructure expense in the accompanying statement of operations for the nine months ended September 30, 2020. |
4. BUSINESS COMBINATIONS
4. BUSINESS COMBINATIONS | 9 Months Ended |
Sep. 30, 2020 | |
Business Combinations [Abstract] | |
BUSINESS COMBINATIONS | 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”). 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. In June 2020, we issued an additional 32,936 shares of our common stock to the former shareholders of Framerate in connection with the achievement of certain components of the year-one earn-out related performance milestones. The Company 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 was 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. The remaining deferred compensation balance, totaling $90,000, was expensed in July 2020 due to the cessation of services. The Earn-Out arrangement does not meet the liability classification criteria outlined in ASC 480, “Distinguishing Liabilities from Equity,” and is both (i) indexed to the Company’s own shares and (ii) classified in shareholders’ equity in the accompanying condensed balance sheet. Equity-classified contingent consideration is measured initially at fair value on the acquisition date and is not remeasured subsequent to initial recognition. As such, the initial value recognized for the Earn-Out on the acquisition date is not adjusted for changes in the fair value of the Earn-Out as of any future settlement date. Subsequent differences between the estimated fair value of the Earn-Out recorded at the acquisition date and the actual amount of Earn-Out paid based on actual performance will be reflected as a charge or credit, as applicable, in the statement of operations. The following table summarizes the fair value of purchase price consideration paid to acquire Framerate: Amount Cash consideration at closing $ 1,515,000 Equity consideration at closing 1,000,000 Fair value of Earn-Out shares 254,000 Total $ 2,769,000 The purchase price allocation is based upon an estimate of the fair value of the assets acquired and the liabilities assumed by the Company in connection with the acquisition of Framerate, as follows: Amount Accounts receivable $ 15,000 Intangible Assets - Trade name 189,000 Goodwill 2,565,000 Total purchase price $ 2,769,000 The 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. |
5. NOTES PAYABLE
5. NOTES PAYABLE | 9 Months Ended |
Sep. 30, 2020 | |
Debt Disclosure [Abstract] | |
NOTES PAYABLE | Long-Term Note Payable On May 4, 2020, the Company entered into a potentially forgivable loan from the SBA resulting in net proceeds of $1,200,047 pursuant to the Paycheck Protection Program (“PPP”) enacted by Congress under the CARES Act administered by the SBA (the “PPP Loan”). To facilitate the PPP Loan, the Company entered into a Note Payable Agreement with South Porte Bank as the lender (the “Lender”) (the “PPP Loan Agreement”). The PPP Loan will mature on May 4, 2022. However, under the CARES Act and the PPP Loan Agreement, all payments of both principal and interest will be deferred until at least December 4, 2020. The PPP Loan accrues interest at a rate of 1.00% per annum, and interest will continue to accrue throughout the period the PPP Loan is outstanding, or until it is forgiven. The Company will be eligible to apply for forgiveness of all loan proceeds used to pay payroll costs and other qualifying expenses during the 24-week period following receipt of the loan, provided that the Company maintained its employment and compensation within certain parameters during such period. Any amounts forgiven will not be included in the Company’s taxable income. As specifically intended under the program, the PPP Loan, together with our cost savings initiatives, helped us to continue operations without salary reductions, layoffs or furloughs, during this challenging and uncertain economic environment created by the COVID-19 pandemic. The PPP Loan is accounted for as a financial liability in accordance with FASB ASC 470, “ Debt The proceeds from the PPP Loan are recorded as a long-term liability on the balance sheet until either (1) the loan is, in part or wholly, forgiven and the company has been “legally released” or (2) the Company pays off the loan to the creditor. Once the loan is, in part or wholly, forgiven, and legal release is received, the Company will reduce the liability by the amount forgiven and record a gain on extinguishment in the statement of operations in the period of extinguishment. |
6. STOCKHOLDERS' EQUITY
6. STOCKHOLDERS' EQUITY | 9 Months Ended |
Sep. 30, 2020 | |
Stockholders' Equity (Deficit) | |
STOCKHOLDERS' EQUITY | Financing Activities Equity Financings In August 2020, the Company issued 4,540,541 shares of common stock at a price of $1.85 per share, raising aggregate net proceeds of approximately $7.6 million, after deducting placement agent fees of $588,000 and other offering expenses totaling $180,000. The offering was conducted pursuant to the Company’s effective Registration Statements on Form S-1 (File No. 333-248248), and a related registration statement filed pursuant to Rule 462(b) under the Securities Act. In addition, pursuant to the terms of the related underwriting agreement, the Company granted to the underwriter a 30-day over-allotment option to purchase up to an additional 681,081 Shares at the same public offering price per share, less discounts and commissions, which was partially exercised in September 2020, resulting in the issuance of 448,440 shares of common stock and net proceeds of $771,000, after deducting placement agent fees of $58,000. In May 2020, the Company issued 1,825,000 shares of common stock at a price of $3.50 per share, raising aggregate net proceeds of approximately $6.0 million, after deducting placement agent fees of $319,000 and other offering expenses totaling $116,000. The offering was made pursuant to an effective shelf registration statement on Form S-3 previously filed with the U.S. Securities and Exchange Commission. We intend to use the net proceeds from these offerings for working capital and other general corporate purposes, including sales and marketing activities, product development and capital expenditures. We may also use a portion of the net proceeds for the acquisition of, or investment in, technologies, solutions or businesses. 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. |
7. SUBSEQUENT EVENTS
7. SUBSEQUENT EVENTS | 9 Months Ended |
Sep. 30, 2020 | |
Subsequent Events [Abstract] | |
SUBSEQUENT EVENTS | The Company evaluated subsequent events for their potential impact on the financial statements and disclosures through the date the financial statements were available to be issued and determined that no subsequent events occurred that were reasonably expected to impact the financial statements presented herein. |
2. SUMMARY OF SIGNIFICANT ACC_2
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) | 9 Months Ended |
Sep. 30, 2020 | |
Accounting Policies [Abstract] | |
Basis of Presentation | The accompanying condensed financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information and with the instructions to Form 10-Q and Rule 8-03 of Regulation S-X. Accordingly, certain information and footnotes required by U.S. GAAP in annual financial statements have been omitted or condensed in accordance with quarterly reporting requirements of the Securities and Exchange Commission (“SEC”). These interim financial statements should be read in conjunction with our audited financial statements for the year ended December 31, 2019 included in our Annual Report on Form 10-K for the year ended December 31, 2019, filed with the SEC on March 23, 2020. The condensed interim financial statements of Super League include all adjustments of a normal recurring nature which, in the opinion of management, are necessary for a fair statement of Super League’s financial position as of September 30, 2020, and results of its operations and its cash flows for the interim periods presented. The results of operations for the three and nine months ended September 30, 2020 are not necessarily indicative of the results to be expected for the entire fiscal year. |
Reclassifications | Certain reclassifications to operating expense line items have been made to prior year amounts for consistency and comparability with the current year’s financial statements presentation. These reclassifications had no effect on the reported total operating expenses for the periods presented. |
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, stock-based compensation expense, accounting for business combinations, and valuation allowances against net deferred tax assets, require its most difficult, subjective or complex judgments. |
Going Concern | The accompanying interim condensed financial statements have been prepared assuming the Company will continue as a going concern, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. As presented in the financial statements, the Company incurred net losses of $14.0 million and $26.0 million during the nine months ended September 30, 2020 and 2019, respectively, and had an accumulated deficit of $99.8 million as of September 30, 2020. Total noncash charges included in accumulated deficit since inception, primarily related to noncash stock compensation, restricted stock units issued in connection with a license agreement, amortization of the discount on convertible debt and in-kind advertising expense, totaled approximately $36.5 million. For the nine months ended September 30, 2020 and 2019, noncash expenses (excluding depreciation and amortization of fixed and intangible assets, respectively) included in net loss, primarily comprised of stock-based compensation and noncash interest charges (2019 period only), totaled $1.5 million and $15.2 million, respectively. For the nine months ended September 30, 2020 and 2019, net cash used in operating activities totaled $12.7 million and $10.1 million, respectively. As of September 30, 2020, the Company had cash and cash equivalents of approximately $10.3 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. |
Recent Financing Activities | As described at Note 5, on May 4, 2020, the Company entered into a potentially forgivable loan from the U.S. Small Business Administration (“SBA”) resulting in net proceeds of approximately $1.2 million pursuant to the Paycheck Protection Program enacted by Congress under the CARES Act administered by the SBA. As described at Note 6, in May 2020, the Company issued 1,825,000 shares of common stock at a price of $3.50 per share, raising aggregate net proceeds of approximately $6.0 million, after deducting placement agent fees of $319,000 and other offering expenses totaling $116,000, pursuant to a registered direct offering. As described at Note 6, in August and September 2020, the Company issued a total of 4,988,981 shares of common stock at a price of $1.85 per share, raising aggregate net proceeds of approximately $8.4 million, after deducting placement agent fees of $646,000 and other offering expenses totaling $180,000. The net proceeds are for working capital and other general corporate purposes, including sales and marketing activities, product development and capital expenditures. We may also use a portion of the net proceeds for the acquisition of, or investment in, technologies, solutions or businesses. |
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) sponsorships and advertising, including third-party content sales and (ii) direct to consumer offers including tournament fees for participation in our physical and online multiplayer gaming experiences, digital subscriptions and merchandise sales. Sponsorships and Advertising The Company generates sponsorship revenues primarily from sales of various forms of sponsorships and promotional campaigns for its online gameplay and content platforms and from sponsorship at its in-person esports experiences. These revenue arrangements may include: exclusive or non-exclusive title sponsorships, marketing benefits, official product status exclusivity, product visibly and additional infrastructure placement, social media rights (including rights to create and post social content and clips), rights to on-screen activations and promotions, display material rights, media rights, hospitality and tickets and merchandising rights. Sponsorship revenues also include revenues pursuant to arrangements with brand and media partners, retail venues, game publishers and broadcasters that allow our partners to run amateur esports experiences, and or capture specifically curated gameplay content that is customized for our partners’ distribution channels, leveraging the flexibility of, and powered by the Super League gaming and content technology platform. Sponsorship arrangements typically include contract terms for time periods ranging from several weeks or months to multi-year arrangements. We also generate content through digital and physical experiences that offer opportunities for generating advertising revenue on our proprietary digital channels. In addition, we license our content to third parties seeking esports content for their own distribution channels. For 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. Revenue for sponsorship 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. 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 online and physical tournament fees, digital subscriptions, digital goods and merchandise. 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: Three Months Ended September 30, Nine Months Ended September 30, 2020 2019 2020 2019 Sponsorships and advertising $ 677,000 $ 342,000 $ 1,190,000 $ 798,000 Direct to Consumer 41,000 8,000 95,000 24,000 $ 718,000 $ 350,000 $ 1,285,000 $ 822,000 For the three and nine months ended September 30, 2020, 65% and 55% of revenues were recognized at a single point in time, and 35% and 45% of revenues were recognized over time, respectively. For the three and nine months ended September 30, 2019, 45% and 43% of revenues were recognized at a point in time, and 55% and 57% of revenues were recognized over time, respectively. |
Advertising | Gaming experience and Super League brand related advertising costs include the cost of ad production, social media, print media, marketing, promotions, and merchandising. The Company expenses advertising costs as incurred. Advertising costs are included in selling, marketing and advertising expenses in the accompanying statements of operations. Advertising expenses for the three and nine months ended September 30, 2020 were $22,000 and $73,000, respectively. Advertising expenses for the three and nine months ended September 30, 2019 were $81,000 and $270,000, respectively. |
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, broadband and other technology platform costs. |
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. |
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. Noncash stock-based compensation expense for the periods presented was comprised of the following: Three Months Ended September 30, Nine Months Ended September 30, 2020 2019 2020 2019 Stock options $ 145,000 $ 374,000 $ 579,000 $ 3,004,000 Warrants - 263,000 282,000 1,918,000 Restricted stock units 235,000 75,000 568,000 311,000 Earn-out compensation expense 90,000 25,000 141,000 33,000 Total noncash stock compensation expense $ 470,000 $ 737,000 $ 1,570,000 $ 5,266,000 Noncash stock-based compensation expense for the periods presented was included in the following financial statement line items: Three Months Ended September 30, Nine Months Ended September 30, 2020 2019 2020 2019 Sales, marketing and advertising $ 272,000 $ 120,000 $ 668,000 $ 448,000 Technology platform and infrastructure 51,000 47,000 199,000 71,000 General and administrative 147,000 570,000 703,000 4,747,000 Total noncash stock compensation expense $ 470,000 $ 737,000 $ 1,570,000 $ 5,266,000 Noncash stock-based compensation expense for the nine months ended September 30, 2019 included compensation expense resulting from the vesting of certain performance-based options and warrants previously granted to two of the Company’s executives which vested upon completion of the IPO and the satisfaction of certain other operational performance metrics, pursuant to October 2018 amended employee agreements and related vesting provisions of the underlying equity grant agreements. During the nine months ended September 30, 2019, 300,000 of performance-based stock options and warrants vested, with a weighted-average grant date fair value of $8.50, resulting in noncash stock compensation expense of $2,549,000. The fair value of these equity awards was estimated on October 31, 2018, their original grant date, using the Black Scholes-Merton option pricing model and the following weighted-average assumptions: (i) volatility of 93%, (ii) risk-free interest rate of 3.0%, and (iii) expected term of 6.5 years. |
Risks and Uncertainties | Concentrations For the three and nine months ended September 30, 2020, two customers accounted for 43% and four customers accounted for 54% of revenues, respectively. At September 30, 2020, four customers accounted for 74% of accounts receivable. At December 31, 2019, one customer accounted for 70% of accounts receivable. At September 30, 2020, two vendors accounted for 34% of accounts payable. At December 31, 2019, one vendor accounted for 21% of accounts payable. |
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 4,595,000 and 4,108,000 at September 30, 2020 and 2019, respectively, have been excluded from the computation of diluted loss per share because the effect of inclusion would have been anti-dilutive. |
Recent Accounting Guidance | Recent Accounting Pronouncements - Recently 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 Company adopted this new standard effective January 1, 2020. The adoption of the new standard did not have a material impact on the Company’s financial position or results of operations for 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, 2021 and early adoption is permitted. The Company is evaluating the impact that this guidance will have on its financial position, results of operations and financial statement disclosures. In June 2016, the FASB issued guidance on the measurement and recognition of credit losses on most financial assets. For trade receivables, loans, and held-to-maturity debt securities, the current probable loss recognition methodology is being replaced by an expected credit loss model. For available-for-sale debt securities, the recognition model on credit losses is generally unchanged, except the losses will be presented as an adjustable allowance. The guidance will be applied retrospectively with the cumulative effect recognized as of the date of adoption. The guidance will become effective at the beginning of the Company’s first quarter of the fiscal year ending December 31, 2021 but can be adopted as early as the beginning of the first quarter of fiscal year ending December 31, 2020. The Company is currently assessing the impact that adopting this new accounting guidance will have on its financial statements and footnote disclosures. |
2. SUMMARY OF SIGNIFICANT ACC_3
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables) | 9 Months Ended |
Sep. 30, 2020 | |
Accounting Policies [Abstract] | |
Disaggregation of revenue | Three Months Ended September 30, Nine Months Ended September 30, 2020 2019 2020 2019 Sponsorships and advertising $ 677,000 $ 342,000 $ 1,190,000 $ 798,000 Direct to Consumer 41,000 8,000 95,000 24,000 $ 718,000 $ 350,000 $ 1,285,000 $ 822,000 |
Noncash stock-based compensation expense | Noncash stock-based compensation expense for the periods presented was comprised of the following: Three Months Ended September 30, Nine Months Ended September 30, 2020 2019 2020 2019 Stock options $ 143,000 $ 374,000 $ 578,000 $ 3,004,000 Warrants - 263,000 282,000 1,918,000 Restricted stock units 235,000 75,000 568,000 311,000 Earn-out compensation expense 92,000 25,000 142,000 33,000 Total noncash stock compensation expense $ 470,000 $ 737,000 $ 1,570,000 $ 5,266,000 Noncash stock-based compensation expense for the periods presented was included in the following financial statement line items: Three Months Ended September 30, Nine Months Ended September 30, 2020 2019 2020 2019 Sales, marketing and advertising $ 272,000 $ 120,000 $ 668,000 $ 448,000 Technology platform and infrastructure 51,000 47,000 199,000 71,000 General and administrative 147,000 570,000 703,000 4,747,000 Total noncash stock compensation expense $ 470,000 $ 737,000 $ 1,570,000 $ 5,266,000 |
3. INTANGIBLE AND OTHER ASSETS
3. INTANGIBLE AND OTHER ASSETS (Tables) | 9 Months Ended |
Sep. 30, 2020 | |
Finite-Lived Intangible Assets, Net [Abstract] | |
Intangible and other assets | September 30, 2020 December 31, 2019 (Unaudited) Capitalized software development costs $ 3,133,000 $ 2,363,000 Licenses - 340,000 Trade name 189,000 189,000 Domain 68,000 68,000 Copyrights and other 392,000 289,000 3,782,000 3,249,000 Less: accumulated amortization (1,829,000 ) (1,265,000 ) Intangible and other assets, net $ 1,953,000 $ 1,984,000 |
4. BUSINESS COMBINATIONS (Table
4. BUSINESS COMBINATIONS (Tables) | 9 Months Ended |
Sep. 30, 2020 | |
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 |
1. DESCRIPTION OF BUSINESS (Det
1. DESCRIPTION OF BUSINESS (Details Narrative) | 9 Months Ended |
Sep. 30, 2020 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Date of incorporation | Oct. 1, 2014 |
State of incorporation | DE |
2. SUMMARY OF SIGNIFICANT ACC_4
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2020 | Sep. 30, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | |
Revenues | $ 718,000 | $ 350,000 | $ 1,285,000 | $ 822,000 |
Sponsorships and Advertising | ||||
Revenues | 677,000 | 3,342,000 | 1,190,000 | 798,000 |
Direct to Consumer | ||||
Revenues | $ 41,000 | $ 8,000 | $ 95,000 | $ 24,000 |
2. SUMMARY OF SIGNIFICANT ACC_5
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details 1) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2020 | Sep. 30, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | |
Stock options | $ 145,000 | $ 374,000 | $ 579,000 | $ 3,004,000 |
Warrants | 0 | 263,000 | 282,000 | 1,918,000 |
Restricted stock units | 235,000 | 75,000 | 568,000 | 311,000 |
Earn-out compensation expense | 90,000 | 25,000 | 41,000 | 33,000 |
Total noncash stock compensation expense | 470,000 | 737,000 | 1,570,000 | 5,266,000 |
Sales, Marketing and Advertising | ||||
Total noncash stock compensation expense | 272,000 | 120,000 | 668,000 | 448,000 |
Technology Platform and Infrastructure | ||||
Total noncash stock compensation expense | 51,000 | 47,000 | 199,000 | 71,000 |
General and Administrative | ||||
Total noncash stock compensation expense | $ 147,000 | $ 570,000 | $ 703,000 | $ 4,747,000 |
2. SUMMARY OF SIGNIFICANT ACC_6
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details Narrative) - USD ($) | 3 Months Ended | 9 Months Ended | 12 Months Ended | ||
Sep. 30, 2020 | Sep. 30, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | Dec. 31, 2019 | |
Accumulated deficit | $ (99,804,000) | $ (99,804,000) | $ (85,812,000) | ||
Net Loss | (4,298,000) | $ (4,417,000) | (13,992,000) | $ (25,991,000) | |
Advertising expense | 22,000 | $ 73,000 | 81,000 | 270,000 | |
Noncash stock compensation expense | 1,500,000 | 15,200,000 | |||
Net cash used in operating activities | (12,674,000) | $ (10,142,000) | |||
Cash | $ 10,346,000 | $ 10,346,000 | $ 8,442,000 | ||
Revenue | Single point in time | |||||
Concentration risk | 65.00% | 45.00% | 55.00% | 43.00% | |
Revenue | Over time | |||||
Concentration risk | 35.00% | 55.00% | 45.00% | 57.00% | |
Revenue | Two Customers | |||||
Concentration risk | 43.00% | ||||
Revenue | Four Customers | |||||
Concentration risk | 54.00% | ||||
Revenue | Five Customers | |||||
Concentration risk | 90.00% | ||||
Revenue | Three Customers | |||||
Concentration risk | 49.00% | ||||
Accounts Receivable | Four Customers | |||||
Concentration risk | 74.00% | ||||
Accounts Receivable | One Customers | |||||
Concentration risk | 70.00% | ||||
Accounts Payable | Two vendors | |||||
Concentration risk | 34.00% | ||||
Accounts Payable | One vendors | |||||
Concentration risk | 21.00% |
3. INTANGIBLE AND OTHER ASSET_2
3. INTANGIBLE AND OTHER ASSETS (Details) - USD ($) | Sep. 30, 2020 | Dec. 31, 2019 |
Intangible assets, gross | $ 3,782,000 | $ 3,249,000 |
Less: accumulated amortization | (1,829,000) | (1,265,000) |
Intangible assets, net | 1,953,000 | 1,984,000 |
Capitalized Software Development Costs | ||
Intangible assets, gross | 3,133,000 | 2,363,000 |
Licenses | ||
Intangible assets, gross | 0 | 340,000 |
Trade Name | ||
Intangible assets, gross | 189,000 | 189,000 |
Domain | ||
Intangible assets, gross | 68,000 | 68,000 |
Copyrights and Other | ||
Intangible assets, gross | $ 392,000 | $ 289,000 |
3. INTANGIBLE AND OTHER ASSET_3
3. INTANGIBLE AND OTHER ASSETS (Details Narrative) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2020 | Sep. 30, 2019 | Sep. 30, 2020 | Sep. 30, 2019 | |
Finite-Lived Intangible Assets, Net [Abstract] | ||||
Amortization expense | $ 217,000 | $ 134,000 | $ 1,013,000 | $ 326,000 |
4. BUSINESS COMBINATIONS (Detai
4. BUSINESS COMBINATIONS (Details) | 9 Months Ended |
Sep. 30, 2020USD ($) | |
Business Combinations [Abstract] | |
Cash consideration at closing | $ 1,515,000 |
Equity consideration at closing | 1,000,000 |
Fair value of Earn-Out shares | 254,000 |
Total | $ 2,769,000 |
4. BUSINESS COMBINATIONS. (Deta
4. BUSINESS COMBINATIONS. (Details 1) - USD ($) | 9 Months Ended | |
Sep. 30, 2020 | Dec. 31, 2019 | |
Business Combinations [Abstract] | ||
Accounts receivable | $ 15,000 | |
Intangible assets - Trade Name | 189,000 | |
Goodwill | 2,565,000 | $ 2,565,000 |
Total purchase price | $ 2,769,000 |