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Note 4 - Intangible and Other Assets | 12 Months Ended
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Dec. 31, 2024
Notes to Financial Statements |
Intangible Assets Disclosure [Text Block] |
4. | INTANGIBLE AND OTHER ASSETS
Intangible and other assets consisted of the following as of December 31:
|  | 2024 |  |  | 2023 |  |  | Weighted Average Amortization Period (Years) |
Partner and customer relationships |  | $ | 7,645,000 |  |  | $ | 7,645,000 |  |  |  | 6.5 |
Capitalized software development costs |  |  | 4,774,000 |  |  |  | 5,912,000 |  |  |  | 3.0 |
Capitalized third-party game property costs |  |  | 500,000 |  |  |  | 500,000 |  |  |  | 5.0 |
Developed technology |  |  | 3,931,000 |  |  |  | 3,931,000 |  |  |  | 5.0 |
Influencers/content creators |  |  | 2,559,000 |  |  |  | 2,559,000 |  |  |  | 4.5 |
Trade name |  |  | 209,000 |  |  |  | 209,000 |  |  |  | 5.0 |
Domain |  |  | 68,000 |  |  |  | 68,000 |  |  |  | 10.0 |
Copyrights and other |  |  | 745,000 |  |  |  | 825,000 |  |  |  | 5.5 |
|  |  | 20,431,000 |  |  |  | 21,649,000 |  |  |  | 5.0 |
Less: accumulated amortization |  |  | (16,361,000 | ) |  |  | (15,013,000 | ) |  |  |  |
Intangible and other assets, net |  | $ | 4,070,000 |  |  | $ | 6,636,000 |  |  |  |  |
Total amortization expense included in operating expense for the fiscal years ended December 31, 2024 and 2023 totaled $2,544,000 and $5,238,000, respectively. Amortization expense included in cost of revenues for the fiscal years ended December 31, 2024 and 2023 totaled $0 and $53,000, respectively. Sale of Minehut On February 29, 2024, the Company sold its Minehut Assets to GamerSafer in a transaction approved by the Board. Pursuant to the GS Agreement entered into by and between Super League and GamerSafer, the Company will receive $1.0 million of purchase consideration for the Minehut Assets, which amount will be paid by GamerSafer in revenue and royalty sharing over a multiple-year period, as described in the GS Agreement. Other than with respect to the GS Agreement, there is no relationship between the Company or its affiliates with GamerSafer or its affiliates. The transaction allows Super League to streamline its position in partnering with major brands to build, market, and operate 3D experiences across multiple immersive platforms, including open gaming powerhouses like Minecraft, and aligns with the Company’s cost improvement initiatives. Super League and GamerSafer will maintain a commercial relationship which ensures that Minehut can remain an ongoing destination available to Super League’s partners. The carrying value of Minehut related assets totaled $475,000 as of February 26, 2024, comprised of total carrying costs of $1,671,000, net of accumulated amortization of $1,196,000, and historically were included in intangible assets, net in the consolidated balance sheets. The Company recorded a receivable for the total estimated Minehut Purchase Consideration totaling $619,000 and recognized an initial gain on sale of the Minehut Assets totaling $144,000, which is included in other income in the consolidated statements of operations. The Minehut Purchase Consideration in the GS Agreement is variable pursuant to the guidance set forth in ASC 606. Under ASC 606, purchase consideration is variable if the amount the Company will receive is contingent on future events occurring or not occurring, even though the amount itself is fixed. As such, the Company estimated the amount of consideration to which the Company will be entitled, in exchange for transferring the Minehut Assets to GamerSafer, utilizing the expected value method which is the sum of probability-weighted amounts in a range of possible consideration outcomes over the applicable contractual payment period, resulting in an estimated receivable of $619,000. Amounts collected in excess of the estimated purchase consideration recorded at contract inception, up to the $1.0 million stated contractual amount of purchase consideration, are recognized as additional gains on the sale of Minehut Assets when realized. Additional gains on the sale of the Minehut Assets subsequent to the initial accounting for the transaction through December 31, 2024, totaled $39,000. For the year ended December 31, 2024, the Company calculated royalties due from GamerSafer, applied against the Minehut Purchase Consideration receivable pursuant to the GS Agreement, totaling $658,000. In the event GamerSafer does not make royalty or shortfall payments in the amount of $1.0 million by December 31, 2028 (“Payment Deadline”), GamerSafer shall assign and transfer all of the purchased assets back to the Company. In the event that GamerSafer determines in good faith that the acquisition of the assets and the operation of GamerSafer’s related Minehut business becomes operationally unsustainable for any reason, GamerSafer reserves the right, at its sole discretion, to terminate operations (the “Termination”). In the event a Termination occurs prior to the Minehut Purchase Consideration being paid in full, then in such event GamerSafer shall promptly assign all Minehut Assets back to the Company. Impairment Charges In the fourth quarter of 2023 we recorded a non-cash impairment charge related to our partner relationship related intangible assets, 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 Company assesses the recoverability of long-lived assets whenever events or changes in circumstances indicate that their carrying value may not be recoverable. Factors we consider important, which could trigger an impairment review, include significant underperformance relative to expected historical or projected future operating results, and significant changes in the manner of our use of the acquired assets or the strategy in the context of our overall business. Due to underperformance relative to historical and projected future operating results and a decision to deploy resources in other areas of the business, we performed an impairment analysis and determined that the sum of the expected undiscounted future cash flows resulting from the use of the intangible assets was less than the carrying amount of the assets, resulting in an impairment loss totaling $7,052,000, which is recorded in the consolidated statements of operations for the year ended December 31, 2023. The fair value was determined using a discounted cash flow approach (using Level 3 inputs), with cash flow projections over the remaining life of the intangible assets of 5 years and a discount rate of 16% based on the Company’s estimated cost of capital. The impairment charge was based on the difference between the calculated fair value of the intangible assets totaling $860,000 and the carrying value of the applicable intangible assets which totaled $7,912,000 as of December 31, 2023. Other 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, the Company recorded a disposal of net developed technology related intangible assets acquired in connection with the acquisition of Bannerfy totaling $2,284,000, which is included in “Loss on intangible asset disposal” in the accompanying consolidated statements of operations for the year ended December 31, 2023. Developed technology related intangibles asset acquisition costs were reduced $3,069,000, and related accumulated depreciation was reduced $785,000, in connection with the disposal of the intangible asset. The Company expects to record aggregate amortization expense for each of the five succeeding fiscal years as follows:
For the years ending December 31, |  |  |  |
2025 |  | $ | 2,092,000 |
2026 |  |  | 1,208,000 |
2027 |  |  | 520,000 |
2028 |  |  | 237,000 |
2029 |  |  | 13,000 |
Thereafter |  |  | - |
|  | $ | 4,070,000 |
Intangible asset amortization expense for the periods presented was included in the following operating expense line items:
|  | Fiscal Year Ended December 31, |
|  | 2024 |  |  | 2023 |
Sales, marketing and advertising |  | $ | 773,000 |  |  | $ | 2,125,000 |
Engineering, technology and development |  |  | 1,070,000 |  |  |  | 2,331,000 |
General and administrative |  |  | 701,000 |  |  |  | 782,000 |
Total amortization expense |  | $ | 2,544,000 |  |  | $ | 5,238,000 |

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