10-K: Signing Day Sports Reports 293% Revenue Increase in 2023, Despite Ongoing Losses

Signing Day Sports, a sports recruitment technology company, saw a significant 293% year-over-year revenue increase in 2023, driven by growth in event revenue and user subscriptions, while still reporting a net loss.

Summary

• Signing Day Sports, Inc. reported a 293% increase in sales year-over-year in 2023 compared to 2022, primarily due to an increase in event revenue and user subscriptions.
• The company's total assets were approximately $4.7 million with total stockholders equity of approximately $1.7 million as of December 31, 2023.
• The company experienced a net loss of approximately $5.5 million in 2023 and $6.7 million in 2022.
• Cash used in operating activities was approximately $4.8 million and $4.9 million for 2023 and 2022, respectively.
• The accumulated deficit was approximately $17.0 million and $11.5 million for 2023 and 2022, respectively.
• The company expects to incur expenses and operating losses over the next several years.
• The company plans to finance its operations primarily using proceeds from its recent initial public offering in November 2023, use of its committed equity financing facility, and other capital raises until its transition to profitable operations.
• The youth sports market was $28.7 billion in the U.S. in 2019 before it declined to $6.7 billion in the wake of the COVID-19 pandemic, and it was projected that it would start to recover in 2021.
• Prior to the COVID-19 pandemic, it was reported that the youth sports market was projected to reach $77.6 billion by 2026.
• In the United States alone, in the 13-17 age-range only, as of 2020, there were 1,845,000 youth baseball players, 1,437,000 youth tackle football players, 1,208,000 outdoor soccer players, and 353,000 youth fastpitch softball players.
• Sports families spent an average of $693 per child, per sport annually.
• In 2020, in the United States alone there were 8 million student-athletes competing in high school sports.
• In most sports, less than 10% of high school athletes compete in college athletics, and the probability of NCAA athletes making it to the professional leagues ranges from about 2% to essentially zero.

Sentiment

Score: 4

Explanation: The document presents a mixed picture. While there is significant revenue growth, the company is still operating at a loss and has substantial doubt about its ability to continue as a going concern. The company is also dependent on additional funding and faces strong competition. The positive aspects are overshadowed by the financial risks and uncertainties.

Positives

• The company's sales increased 293% year-over-year in 2023 compared to 2022.
• The company has expanded its platform to include baseball, softball, and men's and women's soccer, in addition to football.
• The company is investing in technology and infrastructure to improve its product and ability to present best-in-class technology in the recruitment space.
• The company is launching new products and features to meet market demand, including public player profiles and social community features.
• The company is pursuing strategic geographies for product expansion, including international markets.
• The company has formed strategic alliances and sponsorship agreements with key sports organizations, such as the U.S. Army Bowl and Elite Development Program Soccer.

Negatives

• The company has incurred losses for each period from its inception and a significant accumulated deficit.
• The company's independent registered public accounting firm has expressed substantial doubt as to the company's ability to continue as a going concern.
• The company expects to incur expenses and operating losses over the next several years.
• The company is dependent on additional funding to continue operations.
• The company operates in a highly competitive sports recruitment industry.
• The company's software or services may not operate properly, which could damage its reputation.
• The company is subject to complex and growing user data privacy use and other governmental laws and regulations.

Risks

• The company has a limited operating history and there is no assurance that it will be successful in growing its business.
• The company has a history of losses since its inception and may continue to incur losses for the foreseeable future.
• The company's management has concluded that factors raise substantial doubt about its ability to continue as a going concern.
• The company will need to obtain additional funding to continue operations.
• The company operates in the highly competitive sports recruitment industry which is subject to rapid and significant technological changes.
• The company's software or services may not operate properly, which could damage its reputation.
• If the company's security measures are breached or fail, unauthorized access may be obtained to customer data.
• The company is subject to complex and growing user data privacy use and other governmental laws and regulations.
• The market price of the company's common stock has fluctuated significantly and may continue to do so.
• The company may not be able to maintain a listing of its common stock on the NYSE American stock exchange.

Future Outlook

The company plans to finance its operations primarily using proceeds from its recent initial public offering in November 2023, use of its committed equity financing facility, and other capital raises until its transition to profitable operations, at which point it plans to finance operations primarily from profits.

Management Comments

• The company believes that its business can generate more revenues, at little or no additional cost, from more customers as a result of their search for alternatives to in-person recruiting events.
• The company plans to continue to develop its platform with additional features for all supported sports.
• The company expects increased profitability as it launches support for student-athletes in areas such as apparel, supplements, and nutrition.

Industry Context

The sports recruitment industry is highly competitive and subject to rapid technological changes. The company is attempting to leverage modern technologies to bring coaches and student-athletes together in a mutually beneficial ecosystem. The ongoing COVID-19 global pandemic has increased both the need for, and familiarity with, remote interactions, which the company believes presents a significant business opportunity.

Comparison to Industry Standards

• The document mentions competitors such as Next College Student Athlete, Gridiron Elite and Perfect Game, which host in-person recruiting events, while Signing Day Sports offers a digital platform.
• The document states that other digital sports recruitment apps do not allow coaches to evaluate prospects drill performances frame-by-frame, side-by-side, or have verified statistics within individual recruiting profiles, which Signing Day Sports does.
• The document highlights that Signing Day Sports is the first comprehensive sports recruitment platform, suggesting a unique position in the market.

Management Changes

Corporate Governance

Legal Proceedings

• The company entered into a Settlement Agreement with Robert Smith to resolve a dispute regarding the number of shares of restricted common stock to be awarded to him.
• The company entered into a Settlement Agreement and Release with Midwestern to resolve a dispute involving allegations of unpaid work.
• The company resolved a dispute with John Dorsey, a former Chief Executive Officer and director, regarding a $50,000 loan.

Related Party Transactions

• The company entered into a lease agreement for office space with a related party, John Dorsey, a former chief executive officer and director of the Company, which was terminated in August 2022.
• The company issued a promissory note in the amount of $130,000 to Daniel Nelson, the Chief Executive Officer, Chairman and director of the Company, which was repaid in November 2023.
• The company issued a promissory note in the amount of $10,000 to Daniel Nelson, the Chief Executive Officer, Chairman and director of the Company, which was repaid in November 2023.
• The company issued a promissory note in the amount of $95,000 to Nelson Financial Services Inc., whose sole owner is Daniel Nelson, the Chief Executive Officer, Chairman and director of the Company, which was repaid in October 2023.
• The company issued a promissory note in the amount of $75,000 to Nelson Financial Services Inc., whose sole owner is Daniel Nelson, the Chief Executive Officer, Chairman and director of the Company, which was repaid in May 2023.
• The company issued a promissory note in the amount of $35,000 to Dennis Gile, the largest stockholder and a former Chief Executive Officer, President, Secretary, Chairman, and director of the Company, which was repaid in April 2023.
• The company issued a promissory note in the amount of $35,000 to Daniel Nelson, the Chief Executive Officer, Chairman and director of the Company, which was repaid in October 2023.
• The company repurchased 600,000 shares of common stock from Dennis Gile, the largest stockholder and a former Chief Executive Officer, President, Secretary, Chairman, and director of the Company, for $800,000.
• The company issued a promissory note in the amount of $250,000 to Richard Symington, the Companys former President, Chief Technology Officer, Chief Marketing Officer, and director, and a warrant to purchase 100,000 shares of common stock at an exercise price of $2.50 per share in a private placement. The promissory note was repaid in November 2023 upon the automatic exercise of the warrant.
• The company has a group benefits plan with Nelson Financial Services Inc., whose sole owner is Daniel Nelson, the Chief Executive Officer, Chairman and director of the Company.

Stakeholder Impact

• Shareholders may experience dilution due to the issuance of new shares under the committed equity financing facility and equity incentive plan.
• Employees may benefit from the equity incentive plan, which provides opportunities for stock options and restricted stock awards.
• Customers (student-athletes and coaches) may benefit from the company's expanded platform and new features, including AI-powered tools.
• Suppliers and creditors may be impacted by the company's financial performance and ability to meet its obligations.
• The company's strategic alliances and sponsorships may benefit other stakeholders in the sports industry.

Next Steps

• The company plans to continue to develop its platform with additional features for all supported sports.
• The company expects increased profitability as it launches support for student-athletes in areas such as apparel, supplements, and nutrition.
• The company plans to introduce social features on the platform to help student-athletes share and exchange videos, information, and bragging rights.
• The company has implemented and plans to implement artificial intelligence (AI) features in 2024 and 2025, including lead scraping, AI matchmaking, video capturing, visual biometrics, standards assessment, and AI chatbots.
• The company will continue to invest in its technology and infrastructure to improve its product and ability to present best-in-class technology in the recruitment space.

Key Dates

Keywords

sports recruitment, student-athletes, college coaches, digital platform, AI, subscriptions, youth sports, NCAA, NAIA, recruiting events