Financial Performance - In Q3 2022, Super League Gaming reported revenue of $4.5 million, a 25% increase from $3.6 million in Q3 2021, driven by strong growth in advertising and sponsorship revenue [173]. - Gross profit for Q3 2022 was $1.8 million, representing a gross margin of 40%, up from 38% in the prior year quarter [173]. - The net loss for Q3 2022 was $52.6 million, or $(1.41) per share, compared to a net loss of $7.0 million, or $(0.20) per share, in Q3 2021 [176]. - Advertising and sponsorship revenue increased by $1,178,000, or 50%, for the three months ended September 30, 2022, compared to the same period in 2021, and by $5,634,000, or 172%, for the nine months ended September 30, 2022 [188]. - Content sales revenue decreased by $65,000, or 11%, for the three months ended September 30, 2022, but increased by $972,000, or 76%, for the nine months ended September 30, 2022 [190]. - Direct to consumer revenue decreased by $210,000, or 33%, for the three months ended September 30, 2022, but increased by $471,000, or 51%, for the nine months ended September 30, 2022 [190]. - The company reported a net GAAP loss of $(69,238,000) for the nine months ended September 30, 2022, compared to a net GAAP loss of $(13,615,000) in 2021 [223]. Operating Expenses - Total operating expenses in Q3 2022 were $53.9 million, a 547% increase compared to $8.3 million in Q3 2021, primarily due to a $42 million goodwill impairment charge [174][176]. - Cost of revenue increased by $469,000, or 21%, for the three months ended September 30, 2022, and by $3,961,000, or 127%, for the nine months ended September 30, 2022, consistent with revenue growth [192]. - Total general and administrative expense increased by $2,688,000, or 112%, for the three months ended September 30, 2022, and by $4,140,000, or 61%, for the nine months ended September 30, 2022 [198]. - Noncash stock-based compensation expense increased by $550,000, or 86%, for the three months ended September 30, 2022, and by $1,675,000, or 104%, for the nine months ended September 30, 2022 [193]. - Engineering, technology, and development expenses increased significantly, with a 180% rise for the three months ended September 30, 2022, compared to the same period in 2021 [193]. Acquisitions and Market Presence - The company completed several acquisitions in FY 2021, including Mobcrush, Bannerfy, and Bloxbiz, to enhance its advertising capabilities and expand its market presence [180]. - The company completed the acquisition of Mobcrush on June 1, 2021, issuing a total of 12,582,204 shares of common stock as consideration [229]. - The acquisition of Bannerfy, Ltd. involved an initial payment of $2.45 million, including $525,000 in cash and $1.925 million in stock [230]. Cash Flow and Liquidity - Cash and cash equivalents decreased from $14.5 million at December 31, 2021, to approximately $1.1 million at September 30, 2022, highlighting liquidity challenges [203]. - Net cash used in operating activities for the nine months ended September 30, 2022, was $(16,036,000), a slight improvement from $(16,273,000) in 2021 [222]. - Cash flows from investing activities totaled $(1,514,000) for the nine months ended September 30, 2022, compared to $(658,000) in 2021 [224]. - Cash flows from financing activities provided $4,160,000 in the nine months ended September 30, 2022, a significant decrease from $33,501,000 in 2021 [232]. - The company issued 331,000 shares of common stock at an average price of $0.97, raising net proceeds of approximately $320,000 during the nine months ended September 30, 2022 [234]. Goodwill and Impairment - The goodwill impairment charge of $42 million was primarily due to a decline in market capitalization as of September 30, 2022 [175]. - A goodwill impairment charge of $42.0 million was recorded, reflecting a fair value of $25.2 million against a carrying value of $67.3 million as of September 30, 2022, indicating a significant decline in market capitalization [202]. - As of September 30, 2022, the company's goodwill balance totaled $50.3 million [268]. - The estimated fair value of the company's reporting unit was $25.2 million, compared to a carrying value of $67.3 million, resulting in a goodwill impairment charge of $42.0 million [272]. Future Outlook and Strategies - Super League Gaming's advertising revenue is expected to grow as it captures the shift towards in-game advertising in the digital advertising market [172]. - The company anticipates higher revenue in the second half of the fiscal year due to seasonal trends in advertising spending [182]. - The company is exploring capital raising alternatives, including strategic partnerships and equity or debt financings, to support growth and business strategy execution [208]. - The company may need to raise additional equity capital or incur debt to finance potential strategic acquisitions, facing risks from market volatility and disruptions [221]. - The company has the right to sell up to $10,000,000 of newly issued shares under a common stock purchase agreement with Tumim Stone Capital, LLC [212]. - The company may offer and sell up to $75 million of shares through an equity distribution agreement with two investment banks, with a commission rate of 3.0% on gross sales [214]. Customer and Revenue Insights - The number of customers contributing over 10% of revenue was two, representing 26% of total revenue for the three months ended September 30, 2022, down from two customers contributing 34% in the prior year [188]. - The average revenue per customer for advertising and sponsorships increased by approximately 54% for the nine months ended September 30, 2022, compared to the prior year [190]. - The company reported a 95% increase in direct sales advertising revenue generating customers for the three months ended September 30, 2022, compared to the prior year [190]. Revenue Recognition Policies - Revenue from digital subscription fees, in-game digital goods, and gameplay access fees is recognized in the period services are rendered [256]. - Revenue for 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 [258]. - The company generates revenue from advertising primarily through direct sales and programmatic display and video advertising units [249]. - Sponsorship revenue includes arrangements with brand and media partners, allowing for amateur esports experiences and curated gameplay content [251]. - Revenue from content sales is recognized over the contract term based on estimates of progress toward satisfaction of performance obligations [255]. - The company assesses collectability of receivables based on past transaction history and customer creditworthiness, impacting actual revenue recognized [259]. Compliance and Regulatory Status - Super League Gaming is monitoring its stock price to regain compliance with Nasdaq's minimum bid price requirement of $1.00 per share [178][179]. - The company expects to remain an "emerging growth company" for up to five years, benefiting from reduced reporting requirements [275].
Super League Enterprise(SLE) - 2022 Q3 - Quarterly Report