Super League Enterprise(SLE) - 2022 Q1 - Quarterly Report

PART I. FINANCIAL INFORMATION This section provides the unaudited condensed consolidated financial statements and management's discussion and analysis for the first quarter Condensed Consolidated Financial Statements This section presents Super League Gaming, Inc.'s unaudited condensed consolidated financial statements, including balance sheets, statements of operations, cash flows, and detailed notes on accounting policies and acquisitions Condensed Consolidated Balance Sheets Total assets decreased from $96.8 million to $88.4 million, primarily due to a reduction in cash, while liabilities and equity also declined Condensed Consolidated Balance Sheets (Unaudited, in thousands) | | March 31, 2022 (in thousands) | December 31, 2021 (in thousands) | | :--- | :--- | :--- | | Current Assets | | | | Cash and cash equivalents | $7,784 | $14,533 | | Total current assets | $14,688 | $22,195 | | Total Assets | $88,412 | $96,805 | | Current Liabilities | | | | Accounts payable and accrued expenses | $3,987 | $5,514 | | Total current liabilities | $4,060 | $5,590 | | Total Liabilities | $4,532 | $6,108 | | Total Stockholders' Equity | $83,880 | $90,697 | Condensed Consolidated Statements of Operations Revenues surged 378% to $3.77 million, but net loss widened to $7.92 million due to increased operating expenses, despite a slight improvement in loss per share Condensed Consolidated Statements of Operations (Unaudited, in thousands) | | Three Months Ended March 31, 2022 (in thousands) | Three Months Ended March 31, 2021 (in thousands) | | :--- | :--- | :--- | | Revenues | $3,768 | $788 | | Gross Profit | $1,859 | $446 | | Total Operating Expenses | $9,820 | $5,072 | | Net Operating Loss | ($7,961) | ($4,626) | | Net Loss | ($7,916) | ($4,625) | | Basic and Diluted Loss Per Share | ($0.21) | ($0.23) | | Weighted-Average Shares Outstanding | 36,838,957 | 19,807,775 | Condensed Consolidated Statements of Cash Flows Net cash used in operating activities increased to $6.3 million, with no financing activities in Q1 2022, leading to a $6.7 million decrease in cash and equivalents Condensed Consolidated Statements of Cash Flows (Unaudited, in thousands) | | Three Months Ended March 31, 2022 (in thousands) | Three Months Ended March 31, 2021 (in thousands) | | :--- | :--- | :--- | | Net cash used in operating activities | ($6,287) | ($4,370) | | Net cash used in investing activities | ($462) | ($267) | | Net cash provided by financing activities | $0 | $33,437 | | Increase (Decrease) in Cash | ($6,749) | $28,800 | | Cash and Cash Equivalents - end of period | $7,784 | $36,742 | Notes to Condensed Consolidated Financial Statements These notes detail business operations, 2021 acquisitions, revenue streams, intangible assets, and financing activities, while addressing going concern uncertainty and subsequent convertible note offerings - The company's business model focuses on building and operating networks of games, monetization tools, and content channels across major gaming platforms, including metaverse environments[16] - Financial results include the impact of three key acquisitions made in 2021: Mobcrush (live streaming platform), Bannerfy (creator collaboration platform), and Bloxbiz (metaverse ad platform)[18][19][20] Revenue by Type (in thousands) | Revenue Stream | Q1 2022 (in thousands) | Q1 2021 (in thousands) | | :--- | :--- | :--- | | Advertising and sponsorships | $1,856 | $434 | | Content sales | $1,405 | $290 | | Direct to consumer | $507 | $64 | | Total | $3,768 | $788 | - Management has concluded there is a going concern uncertainty due to recurring net losses ($7.9 million in Q1 2022) and cash used in operations ($6.3 million in Q1 2022)[28][30] However, they believe current cash and financing facilities are sufficient to fund operations through at least May 2023 - Subsequent to the quarter end, on May 16, 2022, the company entered into a Securities Purchase Agreement for the sale of senior convertible notes with an aggregate principal amount of $4.32 million[132] Management's Discussion and Analysis of Financial Condition and Results of Operations This section analyzes Q1 2022 financial performance, noting a 378% revenue increase to $3.8 million driven by acquisitions, but also a wider $7.9 million net loss and a decrease in cash, with liquidity supported by recent financing - The company's strategy focuses on monetizing its three primary revenue streams: advertising, content, and direct-to-consumer offers across gaming and metaverse platforms[139][140][141] - The 2021 acquisitions of Mobcrush, Bannerfy, and Bloxbiz significantly expanded the company's premium advertising inventory, creator network, and presence in the metaverse (specifically Roblox), contributing to revenue growth[144] Key Performance Indicators (KPIs) | KPI | Q1 2022 | Q1 2021 | | :--- | :--- | :--- | | Views and Impressions | ~3.0 billion | 600.0 million | | Monthly Active Users | >70.0 million | 1.0 million | | Gameplay Hours | ~222.0 million | ~34.0 million | Results of Operations Q1 2022 revenues grew 378% to $3.8 million, but a 94% increase in operating expenses, driven by acquisitions and cloud costs, widened the net operating loss to $8.0 million Comparison of Operations (in thousands) | | Q1 2022 (in thousands) | Q1 2021 (in thousands) | Change % | | :--- | :--- | :--- | :--- | | Revenues | $3,768 | $788 | 378% | | Gross Profit | $1,859 | $446 | 317% | | Total Operating Expenses | $9,820 | $5,072 | 94% | | Net Loss | ($7,916) | ($4,625) | 71% | - The increase in operating expenses was primarily due to higher personnel costs following the Mobcrush acquisition, a $1.0 million increase in cloud services and platform costs, and amortization of intangible assets from the FY 2021 acquisitions[161][163][164] Liquidity and Capital Resources Cash and equivalents decreased to $7.8 million by Q1 2022, with $6.3 million used in operations, but management expects sufficient liquidity through May 2023 via a $10 million stock purchase agreement and a $4.32 million convertible note offering - Cash and cash equivalents decreased by $6.7 million during the quarter, ending at $7.8 million on March 31, 2022[165] - On March 25, 2022, the company entered into a common stock purchase agreement with Tumim Stone Capital, providing the right to sell up to $10 million of its common stock[118][168] - On May 16, 2022, the company secured a $4.32 million convertible note offering with three institutional investors to provide additional capital[172] Critical Accounting Estimates Critical accounting estimates involve significant judgment in revenue recognition, business combinations, and goodwill impairment testing, with management concluding no goodwill impairment as of March 31, 2022 - Significant judgment is required for revenue recognition, including identifying performance obligations and determining if revenue should be recognized over time or at a point in time[196][214] - Accounting for business combinations requires significant estimates in determining the fair value of assets acquired and liabilities assumed, which affects the amount of goodwill recorded[215] - Goodwill of $50.3 million was tested for impairment[221] Management performed a qualitative assessment and concluded it was not "more likely than not" impaired as of March 31, 2022, despite a downturn in macroeconomic conditions and the company's stock price[222] Quantitative and Qualitative Disclosures About Market Risk The company reports no current material exposure to market risks from interest rates, foreign currency exchange rates, or derivatives in its ordinary course of business - The company reports no current material exposure to market risks from interest rates, foreign currency exchange rates, or derivatives[227] Controls and Procedures The CEO and CFO affirmed effective disclosure controls and procedures, with no material changes to internal controls, while integration of acquired businesses' controls is ongoing - The CEO and CFO concluded that disclosure controls and procedures were effective as of the end of the period[228] - No material changes were identified in the company's internal control over financial reporting during the quarter[229] - The company is still in the process of integrating and evaluating the internal controls for the acquisitions of Mobcrush and Bannerfy, completed in June and August 2021, respectively[230][231] PART II. OTHER INFORMATION This section covers legal proceedings, risk factors, unregistered sales of equity securities, and exhibits Legal Proceedings The company reported no legal proceedings during the period - There are no legal proceedings to report[236] Risk Factors The company refers to risk factors detailed in its Annual Report on Form 10-K, with no new material changes reported in this period - The company refers to the risk factors discussed in its Annual Report on Form 10-K for the year ended December 31, 2021[237] Unregistered Sales of Equity Securities and Use of Proceeds No previously unreported unregistered equity securities were sold during the three months ended March 31, 2022 - No previously unreported sales of unregistered securities occurred during the quarter[238] Exhibits This section lists exhibits filed with the Form 10-Q, including CEO and CFO certifications and Inline XBRL documents - Exhibits filed include CEO and CFO certifications (31.1, 31.2, 32.1) and various Inline XBRL data files[241]