Super League Enterprise Inc
For the period ended Sep 30, 2024. Filed Nov 14, 2024.
View on SEC.govAbout this filing
A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Sep 30, 2024 · Filed Nov 14, 2024
SLE$4.32+2.3%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-06-30; filed 2024-08-14.
0001437749-24-026873
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2024-09-30; filed 2024-11-14.
0001437749-24-035353
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 128 previous paragraphs and 154 current paragraphs.
95 unchanged; 26 reworded; 33 added; 6 removed; 1 previous and 0 current paragraphs rearranged.
Tables are not compared: 50 previous and 53 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (33)
Current report
Infinite Reality Transaction
Current report
On September 30, 2024, the Company entered into a binding term sheet (the “iR Term Sheet”) with Infinite Reality, Inc. (“Infinite Reality”), whereby, subject to the satisfaction of certain conditions as more specifically set forth in the iR Term Sheet (including receipt of the approval of the Company’s stockholders), and the entry into definitive documentation, the Company will:
Current report
The Term Sheet contemplates that, subject to the satisfaction of the conditions contained therein (including approval of the iR Transaction by the Company’s stockholders), upon the consummation of the iR Transaction, Infinite Reality will beneficially own 84.9% of the issued and outstanding shares of the Company as of the Closing.
Current report
*Equity Exchange Agreement.*On September 30, 2024, in connection with the Term Sheet and the Share Exchange, the Company entered into an Equity Exchange Agreement with Infinite Reality (the “Exchange Agreement”), pursuant to which the Company agreed, subject to the receipt of the approval of the Company’s stockholders and other customary closing conditions, to issue 2,499,090 shares of Common Stock (the “Exchange Shares”) in exchange for 139,592 shares of Infinite Reality common stock of equal value, based on the Company’s Common Stock being valued at $1.30 per share. The Exchange Agreement contains representations, warranties, and covenants of the Company and Infinite Reality that are customary for a transaction of this nature.
Current report
The Exchange Shares, once exchanged pursuant to the Exchange Agreement, will be exempt from the registration requirements of the Securities Act of 1933, as amended (the “Securities Act”), pursuant to Section 4(a)(2) of the Securities Act and/or Rule 506(b) of Regulation D promulgated.
Current report
On October 29, 2024, the Company entered into an Amended and Restated Equity Exchange Agreement (the “Amended Exchange Agreement”) with Infinite Reality, which amended and restated the Exchange Agreement. Pursuant to the Amended Exchange Agreement, the Company will issue an aggregate total of 2,499,090 shares of common stock, par value $0.001 per share, in exchange for 216,831 shares of Infinite Reality common stock (“Infinite Reality Common Stock” and collectively, the “Exchange”). The Exchange will be consummated across two closings: (i) an initial closing of 1,215,279 shares of Common Stock in exchange for 105,445 shares of Infinite Reality Common Stock (the “Initial Closing”); and (ii) a second closing, subject to the approval of the Company’s stockholders, of 1,283,811 shares of Common Stock for 111,386 shares of Infinite Reality Common Stock. All other terms of the Exchange Agreement were not modified.
Current report
As a percentage of revenue, gross profit for the three months ended September 30, 2024 was 39%, compared to 35% for the prior year comparable quarter. Results for the three months ended September 30, 2023 included the impact of partial delivery under a significant custom integration and platform media revenue contract with a customer that had a higher average direct cost profile, compared to the other programs that generated revenues during the prior year comparable quarter.
Current report
Nine Months Ended September 30, 2024
Current report
Three and Nine Months Ended September 30, 2024 Compared to the Three and Nine Months Ended September 30, 2023
Current report
For the Nine Months Ended September 30, 2024, Compared to the Nine Months Ended September 30, 2023:
Current report
Series AAA Junior -3 and Series AAA Junior–* 4 Warrants*
Current report
The Series AAA Junior-3 and Series AAA Junior-4 subscription agreements entered into in September 2024, included the sale of an aggregate of 1,096 units (the “Units”), each Unit consisting of (i) one share of newly designated Series AAA-3 Junior Convertible Preferred Stock or Series AAA-4 Junior Convertible Preferred Stock, as reflected in the table above, and (ii) a warrant to purchase 1,000 shares of the Company’s common stock (the “September 2024 Series AAA Junior Investor Warrants”), at a purchase price of $1,000 per Unit, for aggregate gross proceeds to the Company of approximately $1,096,000.
Current report
The Investor Warrants are exercisable at $1.00 per share at the option of the holder, subject to adjustment, are exercisable immediately upon issuance and expire three years from the respective issue dates of the Units, subject to certain beneficial ownership limitations. The Investor Warrants contain customary adjustments in the event of stock splits, stock dividends and other corporate events, and contain price-based anti-dilution protections. Any price-based anti-dilution adjustments are conditioned on, and subject to, Stockholder Approval.
Current report
The September 2024 Series AAA Junior Investor Warrant agreements also contain a provision that states that, upon exercise of the warrant by an investor, if for any reason the company fails to deliver the shares by the settlement date, the investor can require the company to make a cash payment (“Buy-In Provision”). The cash payment would be based on the amount (if any) that the investor lost by having to purchase shares in the open market because of the company’s failure to deliver the shares.
Current report
As a result of the Buy-In Provision, the ability to deliver shares upon exercise of the Investor Warrants in every circumstance is generally not within the control of the Company as contemplated by the accounting standards, and thus, a partial cash settlement may be required outside of the Company’s control. As such, the September 2024 Series AAA Junior Investor Warrants do not meet the requirements for equity classification, and therefore, the fair value of the September 2024 Series AAA Junior Investor Warrants are recorded as a liability on the consolidated balance sheet and re-valued at each reporting date, with changes in the fair value reported in the consolidated statements of operations. Refer to the table below.
Current report
Placement Agent Warrants
Current report
The fair value and change in the fair value of the warrant liability, measured using Level 3 inputs, and the related income statement impact was comprised of the following for the applicable periods presented:
Current report
Interest Expense
Current report
Interest expense for the three and nine months ended September 30, 2024 was primarily comprised of interest paid or accrued in connection with the SLR Facility, totaling $19,000 and $52,000, respectively, and accrued interest expense in connection with the Super Biz Note issued in August 2024, as described below, totaling $25,000 and $25,000, respectively.
Current report
Loss on Extinguishment of Liability
Current report
In August 2024, the Company issued an unsecured promissory note to the Founders in connection with the remaining Super Biz Second Earn Out Period accrued contingent consideration outstanding, with a principle amount totaling approximately $1.8 million, whereby the Company is obligated to pay the outstanding contingent consideration on the following repayment terms (“Super Biz Note”).
Current report
Interest accrues on the outstanding principal at the rate of 8.5% per annum, and accrues until the earlier of (i) repayment of the Super Biz Note in full, or (ii) the Maturity Date.
Current report
In addition, in connection with the issuance of the Super Biz Note, during the period commencing January 2, 2025 and concluding on January 6, 2025, the Company will issue 98,438 shares of the Company’s common stock to the Founders, valued at $336,000, based on the closing price of our common stock on the date of issuance of the promissory note.
Current report
The issuance of the Super Biz Note in exchange for the related accrued contingent consideration balance was accounted for as an extinguishment of the original liability due to the fact that the present value of the cash flows under the terms of Super Biz Note was determined to be at least 10 percent different from the present value of the remaining cash flows under the terms of the original obligation. As a result, a gain on extinguishment totaling $336,000 was recorded in the statement of operations, and credited to additional paid in capital (included in “Other” in the consolidated statement of stockholder’s equity), for the three and nine months ended September 30, 2024, primarily comprised of the fair value of the 98,438 shares of restricted stock (based on closing price of our common stock on the date of issuance of the Super Biz Note) to be issued, as described above.
Current report
The default interest provision included in the Super Biz Note represents an embedded derivative with a fair value of $171,000 as of August 1, 2024, the date of issuance of the Super Biz Note. The fair value of the derivative liability is included in the September 30, 2024 balance sheet under the caption “Promissory note – contingent consideration,” and is required to be marked to market at each balance sheet. The change in fair value of the derivative liability was not material for the three and nine months ended September 30, 2024.
Current report
In September 2024, the Company announced the iR Transaction as described above.
Current report
On October 24, 2024, the Company entered into a Securities Purchase Agreement (the "Purchase Agreement") with a certain accredited investor for the registered direct offering of an aggregate of 1,136,364 shares of the Company’s common stock, par value $0.001 per share (the “Shares”), at a purchase price of $0.88 per Share (the “Registered Direct Offering”). The Registered Direct Offering close on or about October 25, 2024, subject to the satisfaction of customary closing conditions in the Purchase Agreement, and resulted in gross proceeds to the Company of approximately $1.0 million.
Current report
On November 8, 2024 (the “Effective Date”), the Company and its subsidiary, InPVP, LLC (“Subsidiary”), entered into a Business Loan and Security Agreement (the “Agile Loan Agreement”), with Agile Capital Funding, LLC as collateral agent (“Collateral Agent”), and Agile Lending, LLC (“Agile”), pursuant to which the Company issued to Agile a Confessed Judgment Secured Promissory Note for an aggregate value of $1.85 million (the “Agile Note”). Pursuant to the Agile Loan Agreement: (i) the Agile Note matures 28 weeks from the Effective Date; (ii) carries an aggregate total interest payment of approximately $0.78 million (the “Applicable Rate”), and (iii) immediately upon the occurrence and during the continuance of an Event of Default (as defined in the Agile Loan Agreement), interest shall accrue at a fixed per annum rate equal to the Applicable Rate plus five percent. The Company is required to repay all the obligations due under the Agile Loan Agreement and the Agile Note in 28 equal payments of $93,821.43, with the first payment being made to Agile on November 14, 2024, and every seven days thereafter until the Maturity Date. The proceeds received from the Agile Note will be used to fund general working capital needs. For more information on the Agile Loan Agreement and the Agile Note, refer to Note 8 of the accompanying financial statements.
Current report
Equity Financing
Current report
On August 21, 2023, we entered into an underwriting agreement (the “Underwriting Agreement”) with Aegis Capital Corp. (the “Underwriter”), relating to the Company’s public offering (the “Common Stock Offering”) of 778,653 shares of its common stock, par value $0.001 per share, and pre-funded warrants to purchase 67,500 shares of the Company’s common stock, in lieu of the Company’s common stock (the “Pre-Funded Warrants”, and collectively with the Shares, the “Firm Securities”) to certain investors. Pursuant to the Underwriting Agreement, the Company also granted the Underwriters a 45-day option (“Option”) to purchase an additional 126,923 shares of the Company’s common stock and/or Pre-Funded Warrants (the “Option Securities”, and together with the Firm Securities, the “Securities”). On September 12, 2023, the Underwriter partially exercised its Option and purchased an additional 32,616 shares of common stock at a price of $2.60 per share. The issuance by the Company of the Option Securities resulted in total gross proceeds of approximately $84,800, before deducting underwriting discounts, commissions, and other offering expenses payable by the Company.
Current report
On August 23, 2023, the Company issued the Firm Securities and closed the Offering at a public price of $2.60 per share, and $2.58 per share underlying each Pre-Funded Warrant, for net proceeds to the Company of approximately $1.8 million after deducting underwriting discounts and commissions and estimated offering expenses payable by the Company.
Current report
Each Pre-Funded Warrant had an exercise price per share of common stock equal to $0.001 per share. The exercise price and the number of shares of common stock issuable upon exercise of each Pre-Funded Warrant was subject to appropriate adjustments in the event of certain stock dividends and distributions, stock splits, stock combinations, reclassifications or similar events affecting the common stock. Under the Pre-Funded Warrants, a holder would not be entitled to exercise any portion of any Pre-Funded Warrant that, upon giving effect to such exercise, would cause: (i) the aggregate number of shares of common stock beneficially owned by such holder (together with its affiliates) to exceed 4.99% of the number of shares of common stock outstanding immediately after giving effect to the exercise; or (ii) the combined voting power of the Company’s securities beneficially owned by such holder (together with its affiliates) to exceed 4.99% of the combined voting power of all of the Company’s securities outstanding immediately after giving effect to the exercise, as such percentage ownership is determined in accordance with the terms of the Pre-Funded Warrant, which percentage may be changed at the holder’s election to a higher or lower percentage not in excess of 9.99% upon 61 days’ notice to the Company. In addition, in certain circumstances, upon a fundamental transaction, a holder of Pre-Funded Warrants would be entitled to receive, upon exercise of the Pre-Funded Warrants, the kind and amount of securities, cash or other property that such holder would have received had they exercised the Pre-Funded Warrants immediately prior to the fundamental transaction. The Pre-Funded Warrants were fully exercised as of August 29, 2023.
Current report
The Firm Securities were offered, issued, and sold pursuant to a prospectus supplement and accompanying prospectus filed with the Securities and Exchange Commission (the “SEC”) pursuant to an effective shelf registration statement filed with the SEC on Form S-3 (File No. 333-259347) (the “Registration Statement”) under the Securities Act of 1933, as amended (the “Securities Act”), as supplemented by a prospectus supplement, dated August 23, 2023, relating to the Securities (together with the accompanying base prospectus, dated September 7, 2021, the “Prospectus Supplement”), filed with the SEC pursuant to Rule 424(b) of the Securities Act on August 23, 2023.
Removed paragraphs (6)
Previous report
Additionally, pursuant to the Purchase Agreement, the Company entered into employment agreements with two former key Melon employees (“Key Melon Employees”), pursuant to which the Key Melon Employees were granted inducement awards consisting of restricted stock unit awards (“RSUs”) to acquire an aggregate of 2,075,550 shares of its common stock. Refer to Note 4 to the condensed consolidated financial statements elsewhere herein for additional information.
Previous report
Six Months Ended June 30, 2024
Previous report
As a percentage of revenue, gross profit for the six months ended June 30, 2024 was 41%, compared to 42% for the prior year comparable period.
Previous report
Three and Six Months Ended June 30, 2024 Compared to the Three and Six Months Ended June 30, 2023
Previous report
For the Six Months Ended June 30, 2024, Compared to the Six Months Ended June 30, 2023:
Previous report
The change in warrant liability, which is reflected in other income (expense) in the condensed consolidated statement of operations for the applicable period, was comprised of the following (dollars in thousands) (Unaudited):
Reworded paragraphs (26)
Previous wording
During the three and six months ended June 30, 2024 we continued to demonstrate the effectiveness of our overall strategy, providing us with increasing opportunities to earn a greater share of advertisers’ wallet, as demonstrated by larger average deal sizes and continued high repeat customer percentages, and our focus on cost reductions and optimization has positively impacted operating leverage.
Current wording
During the three and nine months ended September 30, 2024 we continued to demonstrate the effectiveness of our overall strategy, providing us with increasing opportunities to earn a greater share of advertisers’ wallet, as demonstrated by larger average deal sizes and continued high repeat customer percentages, and our focus on cost reductions and optimization has positively impacted operating leverage.
Previous wording
Revenue for the three months ended June 30, 2024 totaled $4.1 million, a decrease of $936,000 or 19%, compared to $5.1 million for the comparable prior year quarter. The decrease in revenue for the three months ended June 30, 2024 reflected a mix of industry softness in ad sales, stemming from macro environmental factors including consumer spending softness, and the shift of certain revenues and program start delays to the third quarter of 2023, and a reduction in Minehut related media sales revenues in connection with the sale of our Minehut digital property in the first quarter of 2024.
Current wording
Revenue for the three months ended September 30, 2024 totaled $4.4 million, a decrease of $2.8 million or 38%, compared to $7.2 million for the comparable prior year quarter. The decrease in revenue for the three months ended September 30, 2024 reflected a mix of industry softness in ad sales, stemming from macro environmental factors including consumer spending softness, continued market education and adoption of immersive platforms as a marketing channel, the shift of certain revenues and program start delays to future periods by advertisers, and a reduction in Minehut related media sales revenues in connection with the sale of our Minehut digital property in the first quarter of 2024.
Previous wording
Cost of revenue for the three months ended June 30, 2024 decreased $441,000 or 15% to $2.5 million, compared to $2.9 million in the comparable prior year quarter, driven primarily by the 19% decrease in quarterly revenues for the same periods.
Current wording
Cost of revenue for the three months ended September 30, 2024 decreased $1.9 million, or 42% to $2.7 million, compared to $4.7 million in the comparable prior year quarter, driven primarily by the 38% decrease in quarterly revenues for the same periods.
Previous wording
Total operating expense for the three months ended June 30, 2024 decreased $4.6 million, or 44% to $5.7 million, compared to $10.3 million in the comparable prior year quarter. Excluding noncash stock compensation expense, intangible asset amortization expense, loss on intangible asset disposals, mark to market related fair value adjustments, and other noncash charges (collectively, “noncash charges and credits”), totaling $1.3 million, operating expense for the three months ended June 30, 2024 and 2023 was $4.4 million and $5.9 million, reflecting a $1.5 million, or 25% decrease compared to the prior year quarter, reflecting the impact of ongoing cost reduction activities. Net loss for the three months ended June 30, 2024, which includes the impact of noncash charges and credits totaling $1.3 million, was $2.5 million or $(0.60) per share, compared to a net loss of $6.8 million, or $(3.38) per share, in the comparable prior year quarter. The numerator utilized in the calculation of net loss per share included common stock dividends paid and / or due, in connection with outstanding preferred stock, with a total fair value of $1.6 million, which is also included as a charge to accumulated deficit for the three months ended June 30, 2024.
Current wording
Total operating expense for the three months ended September 30, 2024 decreased $1.9 million, or 26% to $5.2 million, compared to $7.0 million in the comparable prior year quarter. Excluding noncash stock compensation expense, intangible asset amortization expense, mark to market related fair value adjustments, and other noncash charges (collectively, “noncash charges and credits”), totaling $968,000, operating expense for the three months ended September 30, 2024 and 2023 was $4.2 million and $6.0 million, respectively, reflecting a $1.8 million, or 30% decrease compared to the prior year quarter, reflecting the impact of our ongoing focus on cost reductions and operating efficiencies. Net loss for the three months ended September 30, 2024, which includes the impact of noncash charges and credits totaling $968,000, was $3.6 million or $(0.54) per share, compared to a net loss of $3.0 million, or $(3.19) per share, in the comparable prior year quarter. The numerator utilized in the calculation of net loss per share for the three months ended September 30, 2024 included noncash common stock dividends paid in connection with outstanding preferred stock, with a total fair value of $1.7 million, which is also included as a charge to accumulated deficit for the three months ended September 30, 2024. The numerator utilized in the calculation of net loss per share for the three months ended September 30, 2023 included a noncash deemed dividend in connection with outstanding preferred stock, with a total fair value of $6.4 million, which is also included as a charge to accumulated deficit for the three months ended September 30, 2023.
Previous wording
Revenue for the six months ended June 30, 2024 totaled $8.3 million compared to $8.4 million for the comparable prior year period. The relatively flat revenues for the six months ended June 30, 2024 compared to the prior year period, reflected a second quarter of 2024 mix of industry softness in ad sales, stemming from macro environmental factors including consumer spending softness, and the shift of certain revenues and program start delays to the third quarter of 2023, and a reduction in Minehut related media sales revenues in connection with the sale of our Minehut digital property in the first quarter of 2024.
Current wording
Revenue for the nine months ended September 30, 2024 totaled $12.8 million compared to $15.6 million for the comparable prior year period. The decrease in revenue for the nine months ended September 30, 2024 reflected a mix of industry softness in ad sales, stemming from macro environmental factors including consumer spending softness, continued market education and adoption of immersive platforms as a marketing channel, the shift of certain revenues and program start delays to future periods by advertisers, and a reduction in Minehut related media sales revenues in connection with the sale of our Minehut digital property in the first quarter of 2024.
Previous wording
Cost of revenue for the six months ended June 30, 2024 totaled $4.9 million compared to $4.9 million in the comparable prior year period. As a percentage of revenue, gross profit for the six months ended June 30, 2024 was 41%, compared to 42% for the prior year comparable period.
Current wording
Cost of revenue for the nine months ended September 30, 2024 decreased $1.9 million, or 20% to $7.7 million, compared to $9.5 million in the comparable prior year period, driven primarily by the 18% decrease in revenues for the same year to date periods. As a percentage of revenue, gross profit for the nine months ended September 30, 2024 was 40%, compared to 39% for the prior year comparable period.
Previous wording
Total operating expense for the six months ended June 30, 2024 decreased $6.8 million, or 36% to $12.1 million, compared to $18.9 million in the comparable prior year period. Excluding noncash charges and credits totaling $2.6 million, operating expense for the six months ended June 30, 2024 and 2023 was $9.5 million and $12.1 million, respectively, reflecting a $2.6 million, or 21% decrease compared to the prior year period, reflecting the impact of ongoing cost reduction activities. Net loss for the six months ended June 30, 2024, which includes the impact of noncash charges and credits totaling $2.6 million, was $7.7 million or $(1.55) per share, compared to a net loss of $14.1 million, or $(7.20) per share, in the comparable prior year period. The numerator utilized in the calculation of net loss per share included common stock dividends paid and / or due, in connection with outstanding preferred stock, with a total fair value of $1.6 million, which is also included as a charge to accumulated deficit for the six months ended June 30, 2024. Net loss for the six months ended June 30, 2024 included a gain on the sale of Minehut related assets totaling $144,000.
Current wording
Total operating expense for the nine months ended September 30, 2024 decreased $8.7 million, or 34% to $17.3 million, compared to $26.0 million in the comparable prior year period. Excluding noncash charges and credits totaling $3.6 million and $7.8 million, respectively, operating expense for the nine months ended September 30, 2024 and 2023 was $13.7 million and $18.2 million, respectively, reflecting a $4.5 million, or 25% decrease compared to the prior year period, reflecting the impact of our ongoing focus on cost reductions and operating efficiencies. Net loss for the nine months ended September 30, 2024, which includes the impact of noncash charges and credits totaling $3.6 million, 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 comparable prior year period. The numerator utilized in the calculation of net loss per share included common stock dividends paid in connection with outstanding preferred stock, with a total fair value of $3.3 million, which is also included as a charge to accumulated deficit for the nine months ended September 30, 2024. The numerator utilized in the calculation of net loss per share for the nine months ended September 30, 2023 included a noncash deemed dividend in connection with outstanding preferred stock, with a total fair value of $6.4 million, which is also included as a charge to accumulated deficit for the nine months ended September 30, 2023.
Previous wording
The following table sets forth a summary of our results of operations for the three and six months ended June 30, 2024 and 2023 (dollars in thousands) (Unaudited):
Current wording
The following table sets forth a summary of our results of operations for the three and nine months ended September 30, 2024 and 2023 (dollars in thousands) (Unaudited):
Previous wording
Comparison of the Results of Operations for the Three and Six Months Ended June 30, 2024 and 2023
Current wording
Comparison of the Results of Operations for the Three and Nine Months Ended September 30, 2024 and 2023
Previous wording
Refer to the table summarizing our results of operations for the three and six months ended June 30, 2024 and 2023 above.
Current wording
Refer to the table summarizing our results of operations for the three and nine months ended September 30, 2024 and 2023 above.
Previous wording
Amortization expense for the three and six months ended June 30, 2024 decreased primarily due to a $7.1 million write-down of our partner relationship related intangible assets in the fourth quarter of the year ended December 31, 2023, comprised of our Microsoft Minecraft server and InPvP developed technology intangible assets originally acquired in connection with the acquisition of Mobcrush, Inc. in June 2021. The write-down resulted in a $7.1 million decrease in the carrying value of the related intangible assets as of December 31, 2023, and a corresponding decrease in scheduled future quarterly and annual amortization expense for the remaining carrying value of the applicable intangible assets, commencing in the first quarter of 2024 (remaining carrying value totaled $860,000 as of December 31, 2023). Amortization expense related to our partner relationship related intangible assets, comprised of our Microsoft Minecraft server and InPvP developed technology intangible assets, for the three and six months ended June 30, 2024 totaled $50,000 and $100,000, respectively. Amortization expense related to our partner relationship related intangible assets, comprised of our Microsoft Minecraft server and InPvP developed technology intangible assets, for the three and six months ended June 30, 2023 totaled $502,000 and $1,004,000, respectively.
Current wording
Amortization expense for the three and nine months ended September 30, 2024 decreased primarily due to a $7.1 million write-down of our partner relationship related intangible assets in the fourth quarter of the year ended December 31, 2023, comprised of our Microsoft Minecraft server and InPvP developed technology intangible assets originally acquired in connection with the acquisition of Mobcrush, Inc. in June 2021. The write-down resulted in a $7.1 million decrease in the carrying value of the related intangible assets as of December 31, 2023, and a corresponding decrease in scheduled future quarterly and annual amortization expense for the remaining carrying value of the applicable intangible assets, commencing in the first quarter of 2024 (remaining carrying value totaled $860,000 as of December 31, 2023). Amortization expense related to our partner relationship related intangible assets, comprised of our Microsoft Minecraft server and InPvP developed technology intangible assets, for the three and nine months ended September 30, 2024 totaled $50,000 and $150,000, respectively. Amortization expense related to our partner relationship related intangible assets, comprised of our Microsoft Minecraft server and InPvP developed technology intangible assets, for the three and nine months ended September 30, 2023 totaled $502,000 and $1,506,000, respectively.
Previous wording
In June 2023*,* the Company assigned the intangible assets originally acquired in connection with the Company’s acquisition of Bannerfy in fiscal year 2021, to the original sellers. The assets were disposed of in connection with management’s review of operations and decision to allocate resources elsewhere. As a result, in the second quarter of 2023, the Company recorded a write-off of net developed technology related intangible assets acquired in connection with the acquisition of Bannerfy totaling $2,284,000. Amortization expense for the disposed Bannerfy related intangible assets for the three and six months ended June 30, 2023 totaled $91,000 and $201,000, respectively.
Current wording
In June 2023*,* the Company assigned the intangible assets originally acquired in connection with the Company’s acquisition of Bannerfy in fiscal year 2021, to the original sellers. The assets were disposed of in connection with management’s review of operations and decision to allocate resources elsewhere. As a result, in the second quarter of 2023, the Company recorded a write-off of net developed technology related intangible assets acquired in connection with the acquisition of Bannerfy totaling $2,284,000. Amortization expense for the disposed Bannerfy related intangible assets for the three and nine months ended September 30, 2023 totaled $0 and $201,000, respectively.
Previous wording
Selling, marketing and advertising expense decreased $323,000, or 11% due primarily to a $332,000 reduction in amortization expense related to the write-down of our partner relationship related intangible assets as described above, and a $104,000 decrease in selling and marketing personnel related noncash stock compensation expense, as described above.
Current wording
Selling, marketing and advertising expense decreased $764,000, or 24% due primarily to a $335,000, or 63% reduction in amortization expense related to the write-down of our partner relationship related intangible assets as described above, and a $107,000 decrease in selling and marketing personnel related noncash stock compensation expense, as described above.
Previous wording
Selling, marketing and advertising expense decreased $697,000, or 12% due primarily to a $660,000 reduction in amortization expense related to the write-down of our partner relationship related intangible assets as described above, and a $146,000 decrease in selling and marketing personnel related noncash stock compensation expense, as described above.
Current wording
Selling, marketing and advertising expense decreased $1.5 million, or 17% due primarily to a $1.0 million, or 63% reduction in amortization expense related to the write-down of our partner relationship related intangible assets as described above, and a $253,000 decrease in selling and marketing personnel related noncash stock compensation expense, as described above.
Previous wording
Engineering, technology and development costs decreased $1.5 million, or 65%, driven primarily by the following:
Current wording
Engineering, technology and development costs decreased $1.2 million, or 56%, driven primarily by the following:
Previous wording
Engineering, technology and development costs decreased $2.7 million, or 52%, driven primarily by the following:
Current wording
Engineering, technology and development costs decreased $3.9 million, or 53%, driven primarily by the following:
Previous wording
The Placement Agent Warrants issued in connection with the Series A Preferred, Series AA Preferred and Series AAA Preferred (including the Exchange) described at Note 6, include provisions that are triggered in the event of the occurrence of a Fundamental Transaction, as defined in the underlying warrant agreement, which contemplates the potential for certain transactions that result in a third-party acquiring more than 50% of the outstanding shares of common stock of the Company for cash or other assets. Given the existence of multiple classes of voting stock for the Company, as described herein, the Fundamental transaction provisions in the warrant agreements could result in a 50% or more change in ownership of outstanding common stock, without a 50% change in voting interests. As such, the Placement Agent Warrants are not eligible for the scope exception under ASC 480, and therefore, the fair value of the Placement Agent Warrants are recorded as a liability at fair value on the condensed consolidated balance sheet and re-valued at each reporting date, with changes in the fair value reported in the condensed consolidated statements of operations.
Current wording
The Placement Agent Warrants issued in connection with the Series A Preferred Stock, Series AA Preferred Stock and Series AAA Preferred Stock (including the Exchange), described above, include provisions that are triggered in the event of the occurrence of a Fundamental Transaction, as defined in the underlying warrant agreement, which contemplates the potential for certain transactions that result in a third-party acquiring more than 50% of the outstanding shares of common stock of the Company for cash or other assets. Given the existence of multiple classes of voting stock for the Company, as described above, the Fundamental Transaction provisions in the warrant agreements could result in a 50% or more change in ownership of outstanding common stock, without a 50% change in voting interests. As such, the Placement Agent Warrants are not eligible for the scope exception under ASC 815, and therefore, the fair value of the Placement Agent Warrants are recorded as a liability on the consolidated balance sheet and re-valued at each reporting date, with changes in the fair value reported in the consolidated statements of operations.
Previous wording
Cash and cash equivalents totaled $1.7 million and $7.6 million at June 30, 2024 and December 31, 2023, respectively. The change in cash and cash equivalents for the periods presented reflects the impact of operating, investing and financing cash flow related activities as described below.
Current wording
Cash and cash equivalents totaled $0.3 million and $7.6 million at September 30, 2024 and December 31, 2023, respectively. The change in cash and cash equivalents for the periods presented reflects the impact of operating, investing and financing cash flow related activities as described below.
Previous wording
The accompanying condensed consolidated financial statements have been prepared assuming the Company will continue as a going concern, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. The Company incurred net losses, including significant noncash charges, as reflected in the summary condensed consolidated results of operation above, and had an accumulated deficit of $258.3 million as of June 30, 2024. Net cash used in operating activities for the six months ended June 30, 2024 totaled $6.1 million.
Current wording
The accompanying condensed consolidated financial statements have been prepared assuming the Company will continue as a going concern, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. The Company incurred net losses, including significant noncash charges, as reflected in the summary condensed consolidated results of operation above, and had an accumulated deficit of $263.7 million as of September 30, 2024. Net cash used in operating activities for the nine months ended September 30, 2024 totaled $8.2 million.
Previous wording
Cash Flows for the Six Months Ended June 30, 2024 and 2023
Current wording
Cash Flows for the Nine Months Ended September 30, 2024 and 2023
Previous wording
Net cash used in operating activities during the six months ended June 30, 2024, primarily reflected our GAAP net loss, net of adjustments to reconcile net GAAP loss to net cash used in operating activities, which included noncash stock compensation charges of $630,000, depreciation and amortization charges of $1,320,000, gain on disposal of intangible assets of $(144,000), net changes in fair value of certain liabilities of ($996,000), noncash legal settlement charges of $724,000 and net changes in working capital of $129,000. Changes in working capital primarily reflected the impact of the management and settlement of receivables and payables in the ordinary course.
Current wording
Net cash used in operating activities during the nine months ended September 30, 2024, primarily reflected our GAAP net loss, net of adjustments to reconcile net GAAP loss to net cash used in operating activities, which included noncash stock compensation charges of $986,000, depreciation and amortization charges of $2.0 million, gain on disposal of intangible assets of $(144,000), net changes in fair value of certain liabilities of ($1.3 million), noncash legal settlement charges of $724,000, noncash loss on extinguishment of debt of $336,000 and net changes in working capital of $525,000. Changes in working capital primarily reflected the impact of the management and settlement of receivables and payables in the ordinary course.
Previous wording
Net cash used in operating activities during the six months ended June 30, 2023, primarily reflected our net GAAP net loss, net of adjustments to reconcile net GAAP loss to net cash used in operating activities, which included noncash stock compensation charges of $1,532,000, depreciation and amortization charges of $2,679,000, disposal of intangible asset charges of $2,284,000, net changes in fair value of certain liabilities of ($754,000) and net changes in working capital of ($2,501,000). Changes in working capital primarily reflected the impact of the management and settlement of receivables and payables in the ordinary course and the payment of the cash portion of the Super Biz Contingent Consideration, as described above.
Current wording
Net cash used in operating activities during the nine months ended September 30, 2023, primarily reflected our GAAP net loss, net of adjustments to reconcile net GAAP loss to net cash used in operating activities, which included noncash stock compensation charges of $2.2 million, depreciation and amortization charges of $3.9 million, disposal of intangible asset charges of $2.3 million, net changes in fair value of certain liabilities of ($3.1 million) and net changes in working capital of ($2.4 million). Changes in working capital primarily reflected the impact of the settlement of receivables and payables in the ordinary course and the payment of the cash portion of the Super Biz Contingent Consideration, as described above.
Previous wording
The Company and its subsidiaries (collectively with the Company, the “Borrowers”), entered into a Financing and Security Agreement (the “SLR Agreement”) with SLR Digital Finance, LLC (“Lender”), effective December 17, 2023 (the “Effective Date”). Pursuant to the SLR Agreement, Lender may, from time to time and in its sole discretion, make certain cash advances to the Company (each an “Advance”, and collectively, “Advances”), against the face amounts of certain uncollected accounts receivable of the Borrowers on an account-by-account basis (each, a “Financed Account”, and collectively, the “Accounts”), at a rate of 85% multiplied by the face value of such Account (the “Advance Rate”), less any reserved funds and any other amounts due to Lender from Borrowers, up to a maximum aggregate Advance amount of $4,000,000 (the “Maximum Amount”)(the Advances on the Accounts is hereinafter, the “Facility”). Upon receipt of any Advance, Borrowers will have assigned all of its rights in such receivables and all proceeds thereof. The proceeds received from the Facility are, and will be, used to fund general working capital needs.
Current wording
The Company and its subsidiaries (collectively with the Company, the “Borrowers”), entered into a Financing and Security Agreement (the “SLR Agreement”) with SLR Digital Finance, LLC (“Lender”), effective December 17, 2023 (the “Facility Effective Date”). Pursuant to the SLR Agreement, Lender may, from time to time and in its sole discretion, make certain cash advances to the Company (each an “Advance”, and collectively, “Advances”), against the face amounts of certain uncollected accounts receivable of the Borrowers on an account-by-account basis (each, a “Financed Account”, and collectively, the “Accounts”), at a rate of 85% multiplied by the face value of such Account (the “Advance Rate”), less any reserved funds and any other amounts due to Lender from Borrowers, up to a maximum aggregate Advance amount of $4,000,000 (the “Maximum Amount”)(the Advances on the Accounts is hereinafter, the “Facility”). Upon receipt of any Advance, Borrowers will have assigned all of its rights in such receivables and all proceeds thereof. The proceeds received from the Facility are, and will be, used to fund general working capital needs.
Previous wording
The SLR Agreement is effective for 24 months from the Effective Date (the “Term”), automatically extends for successive Terms (each, a “Renewal Term”), and the Borrowers’ are obligated to pay the Lender an early termination fee in the event the SLR Agreement is terminated under certain circumstances prior to the end of any Term or Renewal Term, as more specifically set forth in the SLR Agreement.
Current wording
The SLR Agreement is effective for 24 months from the Facility Effective Date (the “Term”), automatically extends for successive Terms (each, a “Renewal Term”), and the Borrowers’ are obligated to pay the Lender an early termination fee in the event the SLR Agreement is terminated under certain circumstances prior to the end of any Term or Renewal Term, as more specifically set forth in the SLR Agreement.
Previous wording
Transfers of financial assets that do not qualify for sale accounting are reported as collateralized borrowings. Financing and servicing fees calculated with reference to amounts advanced under the AR Facility are included in interest expense. The commitment fee, based on the maximum facility amount and payable irrespective of drawdowns, is expensed on a straight line basis over the term of the AR Facility. Total amounts advanced under the AR Facility for the six months ended June 30, 2024 totaled $672,000. Total repayments of advances under the AR Facility for the six months ended June 30, 2024 totaled $1,273,000. Interest expense for the three and six months ended June 30, 2024 totaled $14,000 and $33,000, respectively. Commitment fee expense for the three and six months ended June 30, 2024 totaled $10,000 and $20,000, respectively.
Current wording
Transfers of financial assets that do not qualify for sale accounting are reported as collateralized borrowings. Financing and servicing fees calculated with reference to amounts advanced under the AR Facility are included in interest expense. The commitment fee, based on the maximum facility amount and payable irrespective of drawdowns, is expensed on a straight line basis over the term of the AR Facility.
Previous wording
On the dates set forth in the table below, we entered into subscription agreements with accredited investors in connection with the sale of newly designated series of Convertible Preferred Stock, each series having a $0.001 par value and a $1,000 purchase price, as follows (in thousands, except share and per share data) (Unaudited):
Current wording
On the dates set forth in the table below, we entered into subscription agreements with accredited investors in connection with the sale of newly designated series of Convertible Preferred Stock, each series having a $0.001 par value and a $1,000 purchase price, as follows (rounded to the nearest thousand, except share and per share data) (Unaudited):
Rearranged previous paragraphs (1)
Previous report — wording carried elsewhere
As a percentage of revenue, gross profit for the three months ended June 30, 2024 was 40%, compared to 42% for the prior year comparable quarter.