Financial Performance - Revenue for the three months ended March 31, 2023, totaled $3.3 million, a decrease of 12% compared to $3.8 million for the same period in 2022[133]. - Gross profit for the three months ended March 31, 2023, was $1.4 million, representing a gross margin of 41%, down from 49% in the prior year quarter[133]. - Total operating expenses for the three months ended March 31, 2023, were $8.6 million, a decrease of 12% from $9.8 million in the comparable prior year quarter[134]. - Net loss for the three months ended March 31, 2023, was $7.2 million, or $(0.19) per share, compared to a net loss of $7.9 million, or $(0.21) per share, in the same period last year[135]. - Total revenue decreased by $446,000 or 12% to $3.3 million compared to $3.8 million in the prior year quarter, but excluding certain revenues, total revenue increased by $473,000 or 17%[150]. - Media and advertising revenue decreased by 10% to $1.7 million, while direct-to-consumer revenue fell by 25% to $382,000[148]. - The company incurred net losses of $7.2 million for the three months ended March 31, 2023, compared to $7.9 million in the prior year, with an accumulated deficit of $218.0 million[164]. Customer and Revenue Sources - The number of customers contributing more than 10% of revenue decreased from three (45% of revenue) in the prior year to three (37% of revenue) in the current year[148]. - Media and advertising revenue decreased by 10%, primarily due to a 36% decrease in average revenue per customer, although reseller media and advertising revenues increased by $467,000 or 212%[150]. - Publishing and content studio revenue increased by $786,000 or 162%, driven by a 278% increase in average sales revenue per customer[150]. - Direct to consumer revenue decreased by $125,000 or 25%, mainly from the Minehut digital property and related services[150]. - The company generates revenue from three primary sources: advertising, content, and direct-to-consumer offers, including digital subscriptions and in-game digital goods[190]. - Media and advertising revenue includes direct and reseller sales of in-game media and analytics products, influencer marketing, and programmatic advertising, with contract terms typically ranging from several days to weeks[192]. - Direct-to-consumer revenue primarily consists of digital subscription fees, in-game digital goods, and gameplay access fees, recognized in the period services are rendered[197]. - Revenue from digital goods sold on the platform is recognized when Microsoft collects the revenue, with payments made to the company monthly based on reconciled sales revenue[199]. - The company assesses collectability of receivables based on past transaction history and customer creditworthiness, impacting actual revenue recognized each period[200]. Expenses and Cost Management - Cost of revenue for the three months ended March 31, 2023, was relatively flat compared to the prior year, while total revenues and cost of revenues increased by 17% and 21%, respectively, when excluding certain revenues[152]. - General and administrative expenses decreased by $356,000 or 12%, with professional fees down by $125,000 or 30%[159]. - Engineering, technology, and development costs decreased by $1,254,000 or 30%, primarily due to a 47% reduction in cloud services and other technology platform costs[158]. - Noncash stock compensation charges for the three months ended March 31, 2023, were $783,000, compared to $1,099,000 in the same period of 2022[173]. Cash Flow and Financing - Cash and cash equivalents totaled approximately $0.6 million as of March 31, 2023, down from $2.5 million at December 31, 2022[163]. - The company raised net proceeds of $2,000,000 from the sale of Series A-5 Convertible Preferred Stock on January 31, 2023[167]. - The company raised a total of $11,231,000 from the sale of 11,231 shares of Series AA Preferred Stock, with net proceeds of $9,869,000 after fees[168]. - Net cash used in operating activities for the three months ended March 31, 2023, was $2,978,000, a decrease from $6,287,000 in the same period of 2022[172]. - Cash and cash equivalents at the end of the period were $590,000, down from $7,784,000 at the end of March 2022[172]. - The company reported net cash provided by financing activities of $1,380,000 for the three months ended March 31, 2023, compared to no financing activities in the same period of 2022[177]. - The company may need to raise additional equity capital or incur debt to finance potential strategic acquisitions, which may not be available on favorable terms[171]. - The company has the right to sell up to $10,000,000 of newly issued shares of common stock to an institutional investor, subject to certain conditions[168]. - Cash flows from investing activities for the three months ended March 31, 2023, were $294,000, a decrease from $462,000 in the same period of 2022[175]. Compliance and Market Position - The company received a 180-day extension from Nasdaq to regain compliance with the minimum bid price requirement of $1.00 per share[142]. - The company has no significant commitments for capital expenditures or long-term debt as of March 31, 2023[181]. - The company has not entered into any off-balance sheet financial guarantees or derivative contracts that are not reflected in its consolidated financial statements[182]. - The company has elected to report as an "emerging growth company," allowing it to take advantage of certain exemptions from rigorous reporting requirements[203]. - 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[205]. - The company is not currently exposed to market risks from changes in interest rates or foreign currency exchange rates[207]. Acquisition Activity - The company acquired Melon, Inc. for a total consideration of $900,000, which included $750,000 in common stock and $150,000 in working capital advances[138]. - Up to $2.35 million in contingent consideration will be payable to Melon based on achieving certain revenue milestones through December 31, 2024[139].
SUPER LEAGUE GAM(SLGG) - 2023 Q1 - Quarterly Report