Good afternoon, everyone and thank you for participating in today's conference call to discuss Super League Gaming's Financial Results for the First Quarter Ended March 31 2020. Joining us today are Super League's President and CEO, Ann Hand; and CFO, Clayton Haynes. Following their remarks, we’ll open the call for your questions. Before we go further, please take note of the company’s Safe Harbor statement within the meaning of the Private Securities Litigation Reform Act of 1995. The statement provides important cautions regarding forward-looking statements. The company’s remarks during today’s conference call will include forward-looking statements. These statements, along with other information presented does not reflect historical fact, are subject to a number of risks and uncertainties. Actual results may differ materially from those implied by these forward-looking statements. Please refer to the company’s recent earnings release and to the company’s reports filed within the Securities and Exchange Commission for more information about the risk and uncertainties that could cause actual results to differ. I would like to remind everyone that this call will be available for replay through May 21, 2020 starting at 8:00 p.m. Eastern Time tonight. A webcast replay will also be available via the link provided in today's press release, as well as on the company's website at www.superleague.com. Now I would like to turn the call over to President and CEO of Super League Gaming, Ann Hand. Ann?

Good afternoon and thank you for joining us. I think I can speak for everyone when I say that I can't believe how much the whole world has changed or how many times I have personally used the phrase crazy times since our last earnings call on March 12th. As you may recall, we addressed COVID-19 head on in that call and predicted frankly we were hoping that gaming would prove as it has historically to be fairly recession resilient. As the world has turned upside down for nearly every industry and every human on the planet we have fortunate silver lining in the gaming space, which Super League is beginning to capitalize on. What else did we know on March 12th? Well, we knew and you knew that we would need to bring in some more capital to fund our growth. And we assure you we would do that in a shareholder-friendly manner as possible. Like all companies, just one week after our earnings call, we heard this message blaring. Cash was king regardless of COVID degree of impact on your respective industry. I'm pleased to report that we secured over $6 million in new equity capital yesterday. You can imagine that there were a variety of financing options being presented to the company over the last two months. And many of those came when our share price was depressed as we rode the waves of the greater market pullback. We believe this financing gives us what we were looking for; straight equity invested by a few high-quality shareholders with no warrant overhang, maintaining our clean balance sheet with no debt and priced above the average trading price for the five prior closing days, let alone the last 30 closing days. As I said, we are pleased to have…

Thank you, Ann, and good afternoon everyone. By way of summary, our revenues were relatively flat quarter-to-quarter and down modestly compared to a year ago, as we undoubtedly felt the initial impact of the deferral of activities by brands and advertisers as the COVID-19 pandemic unfolded during the first quarter of 2020. Our cost of revenue was higher relative to the prior year quarter, while our average margin remained consistent with Q4 2019 trends, and our operating expenses were lower on a GAAP basis leading to a lower GAAP operating loss when compared to the prior year quarter. As summarized in our earnings release filed earlier today, first quarter 2020 revenues were $243,000 compared to $249,000 for the first quarter of 2019. The slight decrease reflects the impact of the general deferral in advertising spending by brands and sponsors during the early stages of the COVID-19 pandemic, the impact of which has badly been felt by all companies that have advertising and sponsorships as a key revenue stream. As Ann mentioned, we categorize our revenues into two main buckets: sponsorship and advertising revenues and direct-to-consumer revenues. Sponsorship and advertising revenues, which includes brand sponsorships for our owned and operated properties, along with our more customized brand partner programs, and traditional advertising and third-party content licensing, comprised approximately 94% of revenues for the first quarter of 2020, as compared to 96% of revenues in the first quarter of 2019. Direct-to-consumer revenues were primarily comprised of subscription and digital goods revenues with Minehut digital property. We continue to emphasize, free-to-play events and experiences consistent with our strategic focus on increasing the volume of new gamers and spectators introduced into our customer funnel to increase the number of registered users on our platform and drive consumer conversion. Going forward, we intend to continue…

Thank you, Clayton. I think one of the best examples I can offer about how Super League is using our technology to create compelling community and content for the 2.6 billion-strong everyday recreational gamers. But it has a real opportunity to extend to mainstream gaming, content consumption as well. So what do I mean by that? While I often have said, that my dad will likely never watch an Overwatch or League of Legends, professional tournament being broadcast on ESPN. But he is also searching for content. He's missing The Masters and the PGA. What if we turned on the TV this Sunday and saw live golf, virtual golf? So similar to our Topgolf tournaments, but in this instance we dropped in Jordan Spieth. And he doesn't win, a kid from Des Moines wins. I think my dad just might watch that. I think many of us would. We believe Super League has an opportunity to show how virtual sports can be natural and complementary extensions of live physical sports. And to us it has a far more wide-reaching audience than just esports fans and competitive gamers, around traditional titles. That is the promise of being an esports star, not just aspirational, but also accessible and mainstream. With that, we remain focused on driving revenue growth. We are well positioned to be at the epicenter of esports growth. And we continue to form new partnerships and alliances, with a widening array of strategic partners that are coming to realize the growing power of our platform. And we continue to believe if we execute our plan and optimize our opportunities, we will build significant shareholder value. And with that, Clayton and I are happy to take your questions, Operator?

Thank you. [Operator Instructions] Our first question comes from Brian Kinstlinger with Alliance Global Partners. You may proceed with your question.

How's going?

Great, thanks Ann. Thanks for taking my questions and solid KPIs. We didn't hear -- you touched on, so many different subjects. But we didn't hear anything about China and China no longer under, stay-at-home rules. The economy they're opening. What's the latest progress you're making on the Wanda Cinema Games partnership? Has the transformation of theaters begun? Has it not begun? And how long might it take?

Yes. That's a great question. Thank you for bringing that up. Actually I was just having a board call the other day. And I said, it's kind of fascinating to see how we continue to have weekly meetings with our partners in China, namely Wanda. And things are continuing to move at a clip. We never expected to be running events or launching really in the first half of the year. We knew that we needed to do the market planning work to look at, what would be the ideal games to launch with and the right kind of formats. We have a lot of flexibility in our platform. And we really haven't missed a beat. In fact if anything it feels like maybe much like what I see inside, Super League that added level of urgency and excitement and focus, we're feeling it in China with our partners. And the beautiful thing is China is the biggest market of gamers on the planet. And Wanda has a very large-reaching loyalty program. So basis of customers there are loyal to Wanda's cinemas and malls, and right now can't go to them. And we have ways to really engage with them, while they're at home as well. And so, we're pretty excited that even if we stay in the early days more folks digitally, that we haven't slowed down those efforts at all. But I do want to caution and say, just like we have on other calls when asked that, again, we never intended to see big revenues coming out of China for 2020. It was about locking in the big partnerships, picking the game portfolio and doing that real proper market testing, so that we were really kind of in more of a rollout phase in 2021.

Great. A follow-up it was great to hear about micro transactions. Are you able to provide any industry metrics? And if not, maybe some reasonable long-term targets for micro transaction value per subscribers?

You know, what, it's a really good question. We have -- we see different stats, right? We've seen stats ranging from the fact that the average gamer in North America spends anywhere from $50 a month, up to $130 a month, in purchasing gaming content. Now you need to break that down a little bit. What does that mean? The primary dollars that they're spending on gaming content are when they're buying things in-game. So maybe you're in Fortnite and you're buying a new skin or a dance. And those are micro transactions. The other interesting thing is that, they're spending close to $30 a month, basically giving donations to their favorite streamers. So that's when they're actually watching, someone else's gameplay content. And they're being either entertained, or they're learning from watching that streamer. And so they make donations to keep that streamer's content site alive. So I can't pinpoint for you exactly, but I do think that when you look at the fact that we've got a 1.6 million base of registered users, we're just starting to attempt to monetize through micro transactions over 50% of them that are in minehut.com right now and fairly active. Even if we're able to get just $1 a month at some kind of percent of conversion, it starts to become a pretty exciting business on its own. But it is just four weeks in. So -- but it's certainly something I'll give some thought to about some ways we can start to peg some benchmarks and think a little bit more about what that shape of growth could look like.

Great. Last thing and I'll get back in the queue. You highlighted the pressure on advertising in general, but also the desire to be beginning to take advantage of the increased gameplay and the increased pipeline that is 4 times to 5 times the size of last year. How should and what do you want to communicate to investors about how that -- and what that means to the revenue ramp from where we are in 1Q?

Yes. I mean it's kind of inevitable that you're going to have a little lag between the inventory and then lining up the sales pipeline and converting those deals into paid deals. So, one thing that we did say to investors in 4Q as we said, hey this kind of surge, we're seeing in ad inventory is kind of a new opportunity. And so what we did in December and January is, we hired up a direct sales team underneath our global head of brand partner and sponsorships. So we now have -- when we talk about the fact that we have a 50% increase in sales opportunities in our pipeline that's pretty extensive. That is the hard work of this new direct sales team pounding the pavement and really getting a much kind of wider diverse mix of advertisers. Usually we would have a longer lead time to convert some of our more strategic partner deals because those are kind of big top-down, meaty deals that often had one, two years of length on them. So they just are a longer sales cycle. So what you're going to start to see is that, as these new leads come into the pipeline we should also see our conversion funnel decreasing, so the length of time. But I would say you should expect a few months' lag. So if we were able to pivot so fast and to really get in March as a response to COVID, reset the pipeline and now see a 50% increase in it then I think within another couple of months you're going to start to see the fruits of that labor and start to monetize more of that ever-expanding inventory.

Great. Thanks, good luck.

Thanks.

Thank you. Our next question comes from Mike Latimore with Northland Capital Markets. Please proceed.

Hi, thanks for taking my question. There's noise for my line. My first question is regarding advertising business. What are the key ad milestones for this year? And when should they occur?

I'm sorry there's a little echo with your question. Could you ask it again? It might be your speakerphone.

What are the key ad milestones for this year? And when should they occur?

I'm still having a hard time listening to it. I am so sorry.

What are the key ad milestones for this year? And when should they occur?

So I think I heard you saying what are the key milestones for the year? Are you talking about for 2020?

Yes.

Yes. No, good question. So yes. So really I mean look last year we pointed to 5 KPIs. And this year what we're focused on is saying, hey it's really -- we've refined it even tighter. We've got a good portfolio of game titles. So we're really focused on top of the funnel, viewership impressions. How do we convert those gamers into registered players or users? Now keep in mind, we don't need hundreds of millions of players, right? We want hundreds of millions of viewers. So one player can generate how much viewership around them? But we still think it's important to measure that registered user. And then the third thing is ultimately is engagement hours because that tells you how much time they're engaging and giving us a larger share of their -- not just their wallet, but their time. Now of course we would be remiss not to say there's a fourth important metric is top line growth. It's revenue. We said from the beginning, this is early stage and it's -- we really need to be focused on growth. And you can see that it's working, right? Our 2019 significant outperformance on our KPIs, we laid out at the start of the year, happening right now with this unique window we're in, we're delivering against those. But we listen to our investors at conferences and they do let us know that nothing's going to beat top line growth. And so I would say those are really the four milestones or metrics that are most critical.

And I have been on -- what was your platform as a service revenue and brand sponsor contribution in the quarter?

Yes. You know what one thing that you'll note and then I'll let Clayton jump in and talk about brand sponsorship platform as a service revenue for the quarter. But the key thing that we've done is that, we recognized when we went out in early 2019, we were breaking out the difference between brand partners that we're sponsoring our own owned and operated offers, versus brand sponsors or partners that we're paying us to run something customized for them, which we call platform-as-a-service. And we realized that in doing that we were actually just making it more cloudy or confusing for investors and it was being done unnecessarily, when really they're are just two different types of a similar type of activate. And so when we talk about running for Tencent, a PUBG mobile tournament and bringing in a sponsor like OnePlus, to us both those things really are at their heart brand sponsorship activations. So we've now started to just make it simpler for investors to understand. We've just started for 2020 going forward to just lump those two line items together, because they're really kind of one and the same. So with that, Clayton, do you want to answer our brand sponsor platform-as-a-service revenues for 1Q?

Sure, sure. So for the first quarter of 2020, taking a look back sort of the way we were categorizing things in the prior year, about 80% of the revenues for fiscal 2020 were what we traditionally were categorizing as platform-as-a-service. And that compares to 81% in the prior year quarter. And 15% in the prior year quarter was related to what we typically would categorize as brand sponsor.

So really the headline is, this brand sponsorship platform-as-a-service continues to be our primary revenue stream, just much as we had in 2019 and described. I think the difference is really two dimensions. One is, inside brand sponsorship, you're going to start to see more short-term smaller but activations that are more like traditional advertising revenues. So that's a company who's launching a new game, who comes in and quickly buys up a week of inventory on one of our digital channels for game launch. So instead of these larger long-term top-down strategic partner deals like with Tencent, these are us selling out that inventory still at what's a pretty decent premium CPM. So that's a new kind of line in type of advertising revenue. And then the second bucket of revenue is, as we move into direct-to-consumer and those micro transactions we were just speaking about earlier. So one is monetizing advertisers and then the other is monetizing the actual player themselves.

Thank you.

[Operator Instructions] Our next question comes from Jeff Cohen with Stephens. You may proceed with your question.

Hey, guys. Thanks for taking the question. I just wanted to dig in or give a quick follow-up on the micro transactions in Minehut. How does that work? Like what are players actually buying? Can you just give like an example of that? And then I have a follow-up.

Yes, absolutely. So we now have about three different features active in our marketplace, but we've identified a long list of additional types of micro transactions, so just a couple examples. One parent has decided to create a private virtual room inside Minehut for their kids to still be engaging with their friends from maybe their school, at class or maybe the kids across the street that they can't play with, because you want to know who your kids are playing with. You don't want them playing with a bunch of strangers online. Right now, you can invite a certain number of friends for free. But if your son or daughter wants to expand and invite 10, 15, 20 friends into that virtual room or realm, then you need to upgrade your server. So you need to start paying a monthly fee to upgrade it. Another example is, once you're in your private realm, you might want to decorate it, put up a banner in your arena. Or maybe you want to run a specific tournament and you want leaderboards to appear. Those are the types of micro transactions that you can purchase.

Got it. And then, can you talk a little bit about the patent that you guys won? And maybe how quickly should we start to see monetization from that? Do you have any like specific customer wins so far that you can highlight maybe? Thanks.

Yes. Thank you for asking that, because it's good to put it in context. So when I talked about flashing back to 2015 and the movie theaters, that was the first of several patents we filed. And it's the first one that has gotten through the queue and is in that allowed state, which is a tremendous milestone for us. And in that one, what's happening is really a couple of different things. The first thing it's doing is, if you think about a game like Minecraft, which is what we ran a lot of our youth sports leagues around, there is no spectator view. There's no drone that can fly up high above the field and give you that like Super Bowl view that a drone does when you're watching the Super Bowl game. And yet if you're parents or friends in the audience or watching live stream matches or VOD on our channels, if you're watching your Sunday darts match, you don't really know what you're watching then if you don't have that spectating view. So that case early on we were dropping in cameraman. We were dropping in players. And instead of them playing, we had them teleport and create a camera like view of the game. So those are those kind of earliest most crude forms of how we were using it. Then we started to run tournaments where we had thousands of matches happening consecutively. And we asked the question, well, when so many are happening at once, which one do you feature on the big screen, if they're happening across the country simultaneously? And so we started to use the same intelligent kind of viewer to start picking the best matches. So kind of like when NFL, Red Zone you see kind of six…

Got it. Thank you.

Now to that end just to kind of finish a little bit of your question. Yes in COVID, we've seen a different type of deals start to come into our partner and sales pipelines. We've got professional sports teams who are struggling with how are they going to connect to their fans if their season doesn't play. We have usually across the country that are asking questions like gosh, if the kids aren't going to get on field this year, are there other ways for them to stay connected to learn about teamwork and collaboration. You've got media companies that have upfronts coming in late summer. And you probably already saw some of the news reports coming out yesterday that if there isn't live sports or fresh content to put those ad dollars against then these advertisers are going to pull back. And so we're pretty excited because the – so much of the heft of the conversations that have started to come our way inbound have really been about a whole different way we can capitalize and use this technology for others.

Thank you. And our next question comes from Rick Davidson with National Securities. You may proceed with your question.

Hi, Ann. How are you? In terms of the tournaments, it seems to me that there should be an easier way to monetize some of these thousands and thousands of people playing tournaments even if it's in smaller amounts $1, $2 just to join the tournament and so forth. To me that seems like a very easy point of revenue in terms of growth as well as for example, you were just talking about monetization of some of this new media. Even like sleepaway camps, which is believe it or not is almost a $250 million a year business. There isn't any this year. But these kids are so ingrained in each other's lives that they want to say in contact and so forth. There's so much now because of COVID that there's this new technology so much easily adoptable to. And one of the other questions I have is in terms of your in-house sales force, are they on commission? Or are they on salary? The reason why I'm asking is because there are so many professional television reps out there and so forth and so on. I'm just curious how you guys have run tried to that’s the better salespeople to raise for advertising and so forth?

Yes. Yes. I'll start with your last one first. So we – I mentioned on other calls that we were fortunate to – we have a wonderful Board member, Mark Jung, who was the founder and CEO of IGN and then sold IGN after he took it public to Fox for hundreds of millions of dollars and became the COO of Fox Digital. And he was the one as we were really seeing that surge on of engagement in kind of 3Q who said "It's time. It's time you get ahead of this. You need this direct sales force to start getting ready for this volume." And so with his help we brought an adviser, a woman who had run sales at IGN for him and then had run the West Coast Twitch sales team. And we asked her to do a few things: first to have an objective lens on our ad inventory to quantify it, to independently price it, just to get that kind of expertise on how we were thinking about the opportunity. And then she also helped us recruit that team. And part of that was thinking about comp structures. And I've run a lot of sales teams in my career and pretty typically those are variable comp structures. You'd like to think that everyone is doing their good for the country, keeping the company first. But certainly that is the predominant way that in this kind of space, especially that sales leaders and managers are compensated. So we do have a variable costs structure that is associated with kind of eating what you kill, right? And then, your other question is a good one because, you’re right. We've got all this engagement. And so -- when the surge gets in, we're I think only one…

And you have no ambition of charging like a yearly fee, monthly fee, even if it's nominal and so forth?

That's the subscription offer. That is exactly what that is. It's a monthly subscription. Yes.

And then my other -- I have another question. So in terms of all your engagements, how much of your games are international versus domestic and in advertising, is that venue as well as in terms of international investing and so forth advertising?

Okay yes. Right now, we are -- this is rough, but I'm going to say that we're about 60:40 North America International. And much of that 40% is U.K. Europe-based. And I would say that the general belief is that, the more that you have global reach, the more value you are to advertisers. So certainly, as we've started to have a more meaningful international reach, you think about a big brand, for instance a Coca Cola, they want global reach. They've got their bottlers in every major country. And typically, they're looking for opportunities to really leverage their dollars globally. And that's also where you see the ad budgets and the allocations get bigger and richer. We also know that generally speaking, when you look at traditional professional sports broadcast rights are exponential when something becomes international and global, no different than like the NBA blowing up in China. So global generally speaking a good thing for our business model.

How much -- of that 40% or so, how much you think that is in terms of people? And it's 60:40. And now with your -- also with the other question is with your engagement with the movie theater chain in China, would that be just a natural addition to this international team?

Yes. So, Wanda and China definitely gives us that big global accelerator, right? And so it's usually helpful. And when I say 60:40 and again, I'm just giving you kind of rough numbers, but that's kind of the split of that 1.6 million registered player base.

And then the last question is this and it's kind of a tougher question. So you've just raised some money and so forth. So in terms of your burn rate and you had some money on the books, you're talking about 9, 10 months of operating expenses as it stands now without any revenue coming in. Is that about a fair estimate the way -- because of your growth rate you're actually probably going to burn more than you would only because it's a good thing. But it's still kind of a finite. Is that fair to say right now? Is that revenue covered?

Well we certainly don't feel like six million plus our PPP money that it's finite. I mean, we take a lot of comfort in being able to bring that -- those monies in and above the market based on our five-day average look back.

No, no, that part is clear. That part is awesome. That part is awesome.

No, no, no. I'm with you. So then the question is, is you're right. We've always talked about this larger strategic raise, right that we believe that the power of a strategic like many that are already on our cap table can really bring with it some kind of commercial acceleration. That was always the goal. And I did talk about it even like in the 3Q and 4Q calls, so that was ultimate fund-raising or capital raise to really accelerate our growth. And so nothing has changed with that. That is we have never taken our foot off the gas on that. But very candidly, I did feel already going into March, as -- that if there was an opportunity to take interim capital that was shareholder-friendly, that it would be the right thing to do. That would give our shareholders a little bit of comfort that we could execute our strategy correctly and bring in the right kind of investors strategically. And I certainly think in COVID time, I would feel negligent, if I didn't examine all of the opportunities to bring some cash in. And so I have to tell you, as I mentioned in the call, we saw all kinds of deals put in front of us and many of which I don't think anybody on this call would have thought were attractive for the company. And so we've worked really hard the last couple of months really to ferret through all of those. And when we landed on something that we thought was attractive with quality investors, it felt like the right, absolutely right thing to do. Now that said to your point, we have done some belt-tightening with COVID. But you kind of nailed it. But we've also had the surge of engagement. And so it's kind of -- we're a little bit between a rock and a hard place because our engagement's up 50%, 60%. And yet we're still doing it with the same headcount or a little bit less. So we've done the belt-tightening where we can and we're going to continue to do so. We don't need a big office anymore. There's a lot of things that we're in motion. We're renegotiating our server contract. Now on one hand, we have a lot more volume on our servers, but equally, we've got to try to keep those infrastructure costs in check as well. And so, we're looking at every one of those items, and trying to see if there are opportunities to instead of holding our burn with the surge in engagement that we could have opportunities to bring it down and maybe extend runway a little bit more. But we are in good shape through the end of the year.

I have to tell you something. I've never seen a company that has such potential growth rate in literally as I count maybe a lot different -- separate average on revenue leverage as the graphic in values. I mean it's incredible. The growth that you have in front of you is just spectacular. I would assume your burn rate would go up because of this early potential growth rate.

Yes. And then, yes, it doesn't feel right to do that either. So that's -- I mean, that's where I know I said it earlier, and I've just -- I've been working for, I hit -- I know, I hate to even admit it, but I hit 30 years in June. And I've run a lot of big organizations. I've dealt with staff --

30 plus years in this June?

Yes. I've done a lot of -- dealt with a lot of remote working staff. I just -- the maturity that this young team has shown, the kind of conviction to fight for their job, fight for Super League, fight for profitability. I've never had -- our staff talks so much about revenue, which usually in young companies. It's everybody wants to talk about the growth, and like the bottom line isn't always this exciting conversation. I think that the crisis has -- as I said, we'll be a better company on the other side will be leaner. But we'll also I think be more mature.

Thank you very much. I just want to say that during this horrible crisis, this is where -- I've been in a lot of conference calls. This is the one exciting growth opportunities that I've seen in a long time in terms of risk/reward for a company. Good luck.

Thank you. I appreciate that.

Thank you. At this time, this concludes our question-and-answer session. I would now like to turn the call back over to Ms. Hand for closing remarks.

All right. Thank you so much. And gosh, I'd just like to thank everyone for listening to today's call. We really appreciate you standing behind the stock and continuing to give us support. Hopefully, we'll keep bumping into each other, if not in real life at conferences. We'll continue to have virtual conferences, and look forward to reporting our second quarter results in August. So, thanks again. I hope you have a great day, and I hope your family and friends are safe and well.

Thank you, ladies and gentlemen. This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.