Revenue Performance - Revenue for Q3 2024 totaled $4.4 million, a decrease of $2.8 million or 38% compared to $7.2 million in Q3 2023[253]. - Revenue for the nine months ended September 30, 2024 totaled $12.8 million, down from $15.6 million in the prior year period[257]. - Total revenue for the three months ended September 30, 2024 decreased by $2.8 million, or 38%, to $4.4 million compared to $7.2 million in the prior year quarter[270]. - Total revenue for the nine months ended September 30, 2024 decreased by $2.8 million, or 18%, to $12.8 million compared to $15.6 million in the prior year period[274]. - Media and advertising revenue decreased by $1.3 million, or 47%, to $1.5 million compared to $2.9 million in the prior year quarter[271]. - Publishing and content studio revenue decreased by $1.3 million, or 33%, to $2.6 million compared to $4.0 million in the prior year quarter[272]. - Direct to consumer revenue decreased by $102,000, or 29%, to $247,000 compared to $349,000 in the prior year quarter[273]. - Media and advertising revenue decreased by $2.3 million, or 33%, to $4.6 million compared to $6.9 million in the prior year period[275]. - Direct to consumer revenue decreased by $387,000, or 35%, to $731,000 compared to $1.1 million in the prior year period[277]. - Publishing and content studio revenue was relatively flat at $7.4 million for the nine months ended September 30, 2024, compared to $7.5 million in the prior year[276]. - Minehut related media sales for the nine months ended September 30, 2023 totaled $716,000[275]. Cost and Expenses - Cost of revenue for Q3 2024 decreased by $1.9 million or 42% to $2.7 million, driven by the 38% decrease in quarterly revenues[254]. - Cost of revenue for the nine months ended September 30, 2024 decreased by $1.9 million or 20% to $7.7 million compared to $9.5 million in the prior year[258]. - Total operating expenses for Q3 2024 decreased by $1.9 million or 26% to $5.2 million compared to $7.0 million in Q3 2023[256]. - Total operating expense for the nine months ended September 30, 2024 decreased by $8.7 million, or 34%, to $17.3 million compared to $26.0 million in the prior year period[259]. - Total operating expense for the three months ended September 30, 2024 was $5.2 million, a decrease of $1.9 million, or 26%, compared to $7.0 million in the prior year quarter[266]. - Noncash stock compensation expense for the three months ended September 30, 2024 decreased by $287,000, or 44%, compared to the same period in 2023[281]. - Selling, marketing and advertising expense decreased by $764,000, or 24%, primarily due to a $335,000 reduction in amortization expense related to the write-down of partner relationship intangible assets[291]. - Total amortization expense decreased by $618,000, or 50%, for the three months ended September 30, 2024 compared to the same period in 2023[289]. - Engineering, technology and development costs decreased by $1.2 million, or 56%, primarily due to a $243,000 (60%) reduction in cloud services and a $662,000 (61%) decrease in product and engineering personnel expenses[294]. - For the nine months ended September 30, 2024, engineering, technology and development costs decreased by $3.9 million, or 53%, driven by a $1.2 million (64%) reduction in cloud services and a $1.5 million (48%) decrease in product and engineering personnel expenses[295]. - General and administrative expenses for the three months ended September 30, 2024, totaled $1.935 million, a decrease of $336,000 (15%) compared to $2.271 million in the same period of 2023[297]. - Personnel costs in general and administrative expenses decreased by $164,000 (30%) for the three months ended September 30, 2024, due to headcount reductions[298]. - Professional fees increased by $45,000 (25%) for the three months ended September 30, 2024, due to additional audit and third-party valuation fees related to complex transactions[298]. - Noncash stock compensation expense in general and administrative expenses decreased by $171,000 (43%) for the three months ended September 30, 2024[299]. Net Loss - Net loss for Q3 2024 was $3.6 million or $(0.54) per share, compared to a net loss of $3.0 million or $(3.19) per share in Q3 2023[256]. - Net loss for the nine months ended September 30, 2024 was $11.3 million, or $(2.00) per share, compared to a net loss of $17.1 million, or $(10.25) per share, in the prior year period[259]. Acquisitions and Investments - The company entered into a binding term sheet with Infinite Reality for an asset acquisition, including a cash component of up to $20 million[241]. - The company acquired Melon, Inc. for a total consideration of $900,000, with potential contingent consideration of up to $2.35 million based on revenue milestones[250]. - The Super Biz Acquisition included a contingent consideration liability of $1.765 million as of September 30, 2024, reflecting the cash portion payable[305]. - The Melon Acquisition has a contingent consideration of up to $2.35 million, with $1 million payable for revenue milestones achieved by December 31, 2023, and $1.35 million for the year ending December 31, 2024[309]. - The fair value of the Melon Contingent Consideration was determined using a Monte Carlo simulation model with a closing stock price of $2.15 and a volatility rate of 70%[310]. - The company completed the Melon Acquisition on May 4, 2023, for a total of $900,000, which included $150,000 in working capital advances and $750,000 in common stock[343]. Cash Flow and Financing - As of September 30, 2024, the company reported an accumulated deficit of $263.7 million and net cash used in operating activities of $8.2 million for the nine months ended September 30, 2024[331]. - Cash and cash equivalents decreased from $7.6 million at December 31, 2023, to $0.3 million at September 30, 2024[330]. - The company anticipates seeking additional capital through future issuances of common stock, preferred stock, or debt financings to fund operations[332]. - The Company entered into a Business Loan and Security Agreement, issuing a secured promissory note for an aggregate value of $1.85 million, with total interest payments of approximately $0.78 million[335]. - Net cash used in operating activities for the nine months ended September 30, 2024, was $(8,160) thousand, compared to $(14,090) thousand for the same period in 2023, indicating a 42.5% improvement[339][341]. - Net cash provided by financing activities was $1,297 thousand for the nine months ended September 30, 2024, a significant decrease of 90.3% compared to $13,406 thousand in the same period of 2023[339][345]. - The Company reported a net cash decrease of $(7,320) thousand for the nine months ended September 30, 2024, compared to a decrease of $(1,342) thousand in the same period of 2023[339]. - The company raised approximately $41.98 million in gross proceeds from various preferred stock offerings, with net proceeds totaling $37.56 million after fees[353]. - The company completed a public offering of 778,653 shares of common stock at a price of $2.60 per share, resulting in net proceeds of approximately $1.8 million after deducting underwriting discounts and commissions[357]. Market and Operational Risks - The Company may face challenges in obtaining additional funding due to market volatility, which could adversely impact its financial condition and business strategies[336][338]. - The company is exploring alternatives for raising capital, including strategic partnerships and potential acquisitions, which may require additional equity or debt financing[336][337]. - The company is not currently exposed to market risks from changes in interest rates or foreign currency exchange rates[375]. Other Financial Information - The company has not entered into any off-balance sheet financial guarantees or derivative contracts that are not reflected in its financial statements[363]. - The triggering of the Down Round Feature for the Series AA Preferred Stock resulted in a deemed dividend totaling $6.45 million, impacting retained earnings[353]. - The company issued 5,334 shares of Series AAA-2 Preferred Stock, with a conversion price adjusted to $1.71 as of December 22, 2023[353]. - The company has approximately 3,200 square feet of office space, with 1,650 square feet on a month-to-month basis[362]. - The company granted underwriters a 45-day option to purchase additional shares as part of its common stock offering[355]. - The company has assessed contingent liabilities related to legal proceedings, with potential losses evaluated based on the merits of claims[364]. - The company generates revenue from innovative advertising, content and technology, and direct to consumer offers, including in-game items and digital collectibles[367]. - Revenue is recognized when the company transfers promised goods or services to customers, reflecting the expected consideration[368]. - Management's estimates regarding collectability impact the actual revenue recognized each period, which could materially affect financial results[369]. - The company elected to report as an "emerging growth company," allowing it to take advantage of certain exemptions from rigorous reporting requirements[371]. - The company will remain an "emerging growth company" for up to five years unless the market value of its common stock held by non-affiliates exceeds $700 million[373].
Super League Enterprise(SLE) - 2024 Q3 - Quarterly Report