Super League Gaming, Inc. — Q3 2019 Form 10-Q
Reporting period: Three and nine months ended September 30, 2019; comparative periods ended September 30, 2018. The filing describes an esports business spanning amateur gaming experiences, content, sponsorships and platform services.
Financial results and liquidity
| Metric | Q3 2019 | Q3 2018 | Nine months 2019 | Nine months 2018 |
|---|---|---|---|---|
| Revenue | $350,000 | $153,000 | $822,000 | $640,000 |
| Gross profit | $158,000 | $83,000 | $443,000 | $265,000 |
| Gross margin | 45.1% | 54.2% | 53.9% | 41.4% |
| Operating loss | $4.425 million | $3.558 million | $16.066 million | $11.297 million |
| Net loss | $4.417 million | $5.009 million | $25.991 million | $13.143 million |
| Loss per share, basic and diluted | $0.52 | $1.09 | $3.39 | $2.85 |
- For the nine months, operating cash use was $10.142 million, versus $7.880 million in 2018; investing cash use was $2.524 million, versus $449,000. Financing provided $22.478 million, chiefly from the IPO.
- At September 30, cash was $12.586 million, current assets $14.064 million and current liabilities $1.567 million; working capital was approximately $12.5 million. The company reported no debt outstanding after its convertible notes converted at the February 2019 IPO closing.
- Cash increased from $2.774 million at December 31, 2018. The February IPO raised net proceeds of $22.458 million. Shares outstanding were 8,569,922 at September 30, compared with 4,610,109 at year-end.
Changes and operating developments
- Q3 revenue grew 129% year over year, led by platform-as-a-service revenue of $176,000 versus $20,000. Nine-month revenue rose 28%; PaaS revenue was $434,000 versus $55,000. Direct-to-consumer revenue fell in both periods as the company offered fewer paid experiences and emphasized free experiences to build its audience.
- Q3 operating expenses increased 26% to $4.583 million; nine-month operating expenses rose 43% to $16.509 million. Higher general and administrative costs included public-company and directors’ and officers’ insurance expenses, increased personnel costs, and stock compensation. Nine-month stock-based compensation was $5.266 million, including $2.549 million related to executive awards vesting on IPO and performance milestones.
- Nine-month net loss increased substantially, partly reflecting $7.067 million of noncash expense for a beneficial conversion feature and other convertible-note discount and interest charges. The notes converted into 1,475,164 common shares at the IPO; there was no debt outstanding at quarter-end.
- The June acquisition of Framerate was valued at approximately $2.769 million, including cash, shares and earn-out consideration; it added $2.565 million of goodwill. A September expanded ggCircuit partnership made Super League the planned consumer-facing brand for ggLeap. The agreement includes a $340,000 upfront fee, revenue sharing and potential quarterly fees.
- Management reported six game titles, 96 active venues, 817,000 registered users, 10.73 million gameplay hours and 58.0 million views through September 30. These are company-reported operating indicators, not revenue or profitability measures.
Outlook, risks and other disclosures
- Management expected operating losses to continue and stated that, without additional capital from operations or future financing, the company’s cash was insufficient to fund planned operations for the 12 months following the report. The filing says this raises substantial doubt about the company’s ability to continue as a going concern; no assurance was given that financing would be available on acceptable terms.
- No quantitative revenue or earnings guidance was provided. Management described plans to invest in platform development, sales and marketing, audience growth, content monetization and strategic partnerships or acquisitions.
- Key risks include recurring losses and cash burn, financing needs, reliance on a small number of customers and vendors, competition and dependence on popular game titles and publisher relationships. The filing notes that some publisher relationships did not yet have definitive license agreements. Cybersecurity, privacy, platform reliability, and regulatory risks are also highlighted.
- Legal proceedings: none reported. Management concluded disclosure controls were effective and reported no material change in internal control over financial reporting during the quarter.
Investor verification priorities
- Assess cash burn, financing availability and the stated going-concern uncertainty against subsequent filings and cash needs.
- Verify customer concentration: the notes state five customers represented 90% of Q3 revenue, while the risk-factor discussion gives a different nine-month concentration figure. The filing’s concentration disclosures should be reconciled.
- Track whether PaaS and content growth converts into recurring, higher-margin revenue, and whether audience growth supports monetization.
- Review ggCircuit agreement fees, revenue-sharing economics and rollout, alongside Framerate earn-out milestones and acquisition performance.
- Separate recurring operating costs from IPO-related, stock-based and convertible-note accounting charges when evaluating the reported losses.