XML 35 R14.htm IDEA: XBRL DOCUMENT
v3.25.1

Note 5 - Acquisitions | 12 Months Ended
--- | ---
Dec. 31, 2024
Notes to Financial Statements |
Business Combination Disclosure [Text Block] |
5. | ACQUISITIONS
Acquisition of Melon, Inc. On May 4, 2023 (“Melon Acquisition Date”), Super League entered into an Asset Purchase Agreement (the “Melon Purchase Agreement”) with Melon, Inc., a Delaware corporation (“Melon”), pursuant to which the Company acquired substantially all of the assets of Melon (the “Melon Assets”) (the “Melon Acquisition”). The consummation of the Acquisition (the “Melon Closing”) occurred simultaneously with the execution of the Melon Purchase Agreement. Melon is a development studio building innovative virtual worlds in partnership with powerful consumer brands across music, film, TV, sports, fashion and youth culture. The acquisition of Melon further strengthens the Company’s position as a one-stop solutions provider and strategic operating partner for brands and businesses seeking to expand and activate communities throughout the gaming metaverse. At the Melon Closing, the Company paid an aggregate total of $900,000 to Melon (the “Melon Closing Consideration”), of which $150,000 was paid in cash, and the remaining $750,000 was paid in the form of shares of the Company’s common stock (with a closing date fair value of $722,000), valued at $9.64 (the “Melon Closing Share Price”), the VWAP, as quoted on the Nasdaq Capital Market, for the five (5) trading days immediately preceding May 4, 2023. Refer to the table below for calculation of the fair value of consideration paid. Pursuant to the terms and subject to the conditions of the Melon Purchase Agreement, up to an aggregate of $2,350,000 (the “Melon Contingent Consideration”) was payable to Melon in connection with the achievement of certain revenue milestones for the period from the Melon Closing until December 31, 2023 (the “Melon First Earnout Period”) in the amount of $1,000,000, and for the year ending December 31, 2024 (the “Melon Second Earnout Period) in the amount of $1,350,000 (the “Melon Second Earnout Period” and the “Melon First Earnout Period” are collectively referred to as the “Melon Earnout Periods”). The Melon Contingent Consideration is payable in the form of cash and common stock, with $600,000 of the aggregate Melon Contingent Consideration being payable in the form of cash, and $1,750,000 payable in the form of common stock, valued at the greater of (a) the Melon Closing Share Price, and (b) the VWAP for the five trading days immediately preceding the end of each respective Melon Earnout Period. Additionally, pursuant to the Melon 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 103,780 shares of the Company’s common stock. The awards were granted pursuant to terms and conditions fixed by the Compensation Committee of the Board and as an inducement material to each new employee entering employment with Super League in accordance with Nasdaq Listing Rule 5635I(4). Of the 103,780 RSUs: (A) 41,512 of the RSUs will vest in 25 equal monthly installments beginning on May 4, 2023, and on the first of each calendar month, subject to the applicable employee’s continued service with Super League on each such vesting date; and (B) 62,268 of the RSUs will vest as follows: (i) 25% will vest upon the achievement of certain net revenue targets for the fiscal year ending December 31, 2024, to be determined by the Board in its discretion; (ii) 25% upon the achievement of certain net revenue targets for the fiscal year ending December 31, 2025, to be determined by the Board in its sole discretion; (iii) 25% upon Super League’s common stock maintaining a minimum closing price of at least $30.00 over a rolling 30 consecutive trading day period, as quoted on the Nasdaq Capital Market; and (iv) 25% upon Super League’s common stock maintaining a minimum closing price of at least $50.00 over a rolling 30 consecutive trading day period, as quoted on the Nasdaq Capital Market. The vesting of the RSUs will accelerate upon a change of control of the Company. In addition, upon (Y) the Company’s termination of the employment of the respective employee without cause, or (Z) the respective employees resignation for good reason, the RSUs will continue to vest as if (Y) or (Z) had not occurred. The RSUs are subject to the terms and conditions of the RSU agreement covering each grant. The Acquisition was approved by the board of directors of each of the Company and Melon and was approved by the sole stockholder of Melon. In accordance with the acquisition method of accounting, the financial results of Super League presented herein include the financial results of Melon subsequent to the Melon Closing Date. Disclosure of revenue and net loss for Melon on a stand-alone basis for the applicable periods presented is not practical due to the integration of Melon activities, including sales, products, advertising inventory, resource allocation and related operating expense, with those of the consolidated Company upon acquisition, consistent with Super League operating in one reporting segment. The Company determined that the Melon Acquisition constitutes a business acquisition as defined by ASC 805. Accordingly, the assets acquired, and liabilities assumed in the transaction were recorded at their estimated acquisition date fair values, while transaction costs associated with the acquisition, totaling approximately $47,000, were expensed as incurred pursuant to the acquisition method of accounting in accordance with ASC 805. Super League’s preliminary purchase price allocation was based on an evaluation of the appropriate fair values of the assets acquired and liabilities assumed and represents management’s best estimate based on available data. Fair values are determined based on the requirements of ASC 820. The following table summarizes the determination of the fair value of the purchase price consideration paid in connection with the Melon Acquisition, as of the Melon Closing Date:
Cash consideration |  |  |  |  | $ | 150,000 |
Equity consideration– shares of common stock |  |  | 77,833 |  |  |  |  |
Super League closing stock price per share on the Melon Closing Date |  | $ | 9.28 |  |  |  |  |
Fair value of equity consideration issued |  | $ | 722,000 |  |  |  | 722,000 |
Fair value of contingent consideration |  |  |  |  |  |  | 1,350,000 |
Fair value of total consideration paid |  |  |  |  |  | $ | 2,222,000 |
The purchase price allocation was based upon an estimate of the fair value of the assets acquired and the liabilities assumed by the Company in connection with the Melon Acquisition, as of the Melon Closing Date, as follows:
|  | Amount |
Assets Acquired and Liabilities Assumed: |  |  |  |
Accounts receivable and other assets |  | $ | 36,000 |
Liabilities assumed |  |  | (188,000 | )
Identifiable intangible assets |  |  | 510,000 |
Identifiable net assets acquired |  |  | 358,000 |
Goodwill |  |  | 1,864,000 |
Total purchase price |  | $ | 2,222,000 |
The following table presents details of the fair values of the acquired intangible assets of Melon:
|  | Estimated Useful Life (in years) |  |  | Amount |
Developed technology |  |  | 5 |  |  | $ | 250,000 |
Developer relationships |  |  | 2 |  |  |  | 50,000 |
Customer relationships |  |  | 6 |  |  |  | 190,000 |
Trade names / trademarks |  |  | 0.5 |  |  |  | 20,000 |
Total intangible assets acquired |  |  |  |  |  | $ | 510,000 |
Contingent consideration is recorded as a liability in the accompanying consolidated balance sheets in accordance with ASC 480, which requires freestanding financial instruments where the Company must or could settle the obligation by issuing a variable number of its shares, and the obligation’s monetary value is based solely or predominantly on variations in something other than the fair value of the Company’s shares, to be recorded as a liability at fair value and re-valued at each reporting date, with changes in the fair value reported in the consolidated statements of operations. The fair value of the Melon Contingent Consideration on the respective valuation dates was determined utilizing a Monte Carlo simulation model and measured using Level 3 inputs, as described at Note 2. Assumptions utilized in connection with utilization of the Monte Carlo simulation model for the periods presented included risk free interest rates ranging from 4.04% to 5.35%, volatility rates ranging from 70% to 85%, and discount rate of 30%. The change in accrued Melon Contingent Consideration, which is included in contingent consideration expense in the consolidated statements of operations for the years ended December 31, 2024 and 2023, was comprised of the following:
|  | 2024 |  |  | 2023 |
Beginning balance |  | $ | 538,000 |  |  | $ | - |
Contingent Consideration – Initial accrual – May 2023 |  |  | - |  |  |  | 1,350,000 |
Change in fair value(4) |  |  | (148,000 | ) |  |  | (682,000 | )
Current period accrued contingent consideration |  |  | (130,000 | ) |  |  | 61,000 |
Post closing adjustments(2) |  |  | - |  |  |  | (191,000 | )
Contingent consideration payments (3) |  |  | (122,000 | ) |  |  | - |
Accrued contingent consideration(1) |  | $ | 138,000 |  |  | $ | 538,000 |
(1) | As of December 31, 2024, the accrual for the Melon Second Earn Out Period included 35,775 shares of common stock valued at $0.62, the closing price of our common stock as of December 31, 2024. As of December 31, 2023, the accrual for the Melon First Earn Out Period totaling $333,000, included 72,118 shares of common stock valued at $1.52, the closing price of our common stock as of December 31, 2023.
(2) | The Melon Purchase Agreement provided for adjustments to the calculated Melon Contingent Consideration amounts to account for advanced payments made to Melon from customers prior to the Melon Acquisition Date, for which the corresponding work was not performed as of the Melon Acquisition Date.
(3) | In May 2024, the Company paid accrued Melon Contingent Consideration related to the Melon First Earn Out Period, comprised of $32,000 of cash payments and payment of 72,118 shares of our common stock valued at $90,000 on the date of issuance.
(4) | Reflected in the consolidated statements of operations for the applicable period.
Aggregated amortization expense for the years ended December 31, 2024 and 2023, related to intangible assets acquired in connection with the Melon Acquisition, totaled $107,000 and $90,000, respectively. Goodwill represents the excess of the purchase price of the acquired business over the acquisition date fair value of the net assets acquired. Goodwill recorded in connection with the Melon Acquisition is primarily attributable to expected synergies from combining the operations and assets of Super League and Melon, and also includes residual value attributable to the assembled and trained workforce acquired in the acquisition. Management is primarily responsible for determining the fair value of the tangible and identifiable intangible assets acquired and liabilities assumed as of the Melon Closing Date. Management considered a number of factors, including reference to a preliminary independent analysis of estimated fair values solely for the purpose of allocating the purchase price to the assets acquired and liabilities assumed. The analysis included a discounted cash flow analysis which estimated the future net cash flows expected to result from the respective assets acquired as of the Melon Closing Date. A discount rate consistent with the risks associated with achieving the estimated net cash flows was used to estimate the present value of future estimated net cash flows. The fair values of the acquired intangible assets, as described above, was determined using the following methods:
Description |  | Valuation Method Applied |  | Valuation Method Description |  | Assumptions
Customer relationships |  | Multi-Period Excess Earnings Method “MPEE”) under the Income Approach |  | MPEEM is an application of the DCF Method, whereby revenue derived from the intangible asset is estimated using the overall business revenue, adjusted for attrition, obsolescence, cost of goods sold, operating expense, and taxes. Required returns attributable to other assets employed in the business are subtracted. The “excess” earnings are attributable to the intangible asset and are discounted to present value at a rate of return to estimate the fair value of the intangible asset. |  | Discount rate: 30.0%; Forecast period: 6.7 years; Attrition Rate: 30.0%.
Trade names / trademarks |  | Relief-from-Royalty Method under the Income Approach |  | Under the Relief-from-Royalty method, the royalty savings is calculated by estimating a reasonable royalty rate that a third-party would negotiate in a licensing agreement. Such royalties are most commonly expressed as a percentage of total revenue involving the technology. |  | Forecast period: 8.0 months; Royalty Rate: 1.0%; Discount Rate: 30.0%.
Non-Compete agreements |  | Differential Cash Flows |  | The Differential Cash Flows Approach is a version of the income approach that values an intangible asset as the present value of the cash flows that a company would lose if they did not have the asset in place. The differential cash flow is calculated as the difference between the cash flow assuming competition and the cash flow without competition. |  | Competition Probability: 30.0%; Revenue impact: 20.0%; Discount Rate: 30.0%; Term 2.16 years.
Developed technology |  | Replacement Cost Method |  | In the Replacement Cost Method, value is estimated by determining the current cost of replacing an asset with one of equivalent economic utility. The premise of the approach is that a prudent investor would pay no more for an asset than the amount for which the utility of the asset could be replaced. |  | Rate of Return: 30.0%; Discount rate: 30.0%; Replacement period: 3.0 months.
For tax purposes, consistent with the accounting for book purposes, the Melon Closing Consideration was allocated to the assets acquired and liabilities assumed based on their estimated fair values as of the acquisition date, with the excess purchase price allocated to goodwill. As a result, no deferred tax assets or liabilities were recorded with the acquisition and all of the goodwill is expected to be deductible for tax purposes. The following unaudited pro forma combined results of operations for the periods presented are provided for illustrative purposes only. The unaudited pro forma combined statements of operations assume the acquisition occurred as of January 1, 2022. The unaudited pro forma combined financial results do not purport to be indicative of the results of operations for future periods or the results that actually would have been realized had the entities been a single entity during these periods.
|  | 2023 |  |  | 2022 |
Revenue |  | $ | 25,794,000 |  |  | $ | 22,451,000 |
Net Loss |  |  | (31,178,000 | ) |  |  | (88,463,000 | )
Pro forma adjustments primarily relate to the amortization of identifiable intangible assets acquired over the estimated economic useful life as described above, the exclusion of nonrecurring transaction costs, the exclusion of depreciation related to tangible and intangible assets of Melon existing immediately prior to the Melon Acquisition Date, and adjustments related to administrative redundancies. Acquisition of Super Biz – Contingent Consideration On October 4, 2021 (“Super Biz Closing Date”), the Company entered into an Asset Purchase Agreement (the “Super Biz Purchase Agreement”) with Super Biz Co. and the founders of Super Biz (the “Founders”), pursuant to which the Company acquired (i) substantially all of the assets of Super Biz (the “Super Biz Assets”), and (ii) the personal goodwill of the Founders regarding Super Biz’s business, (the “Super Biz Acquisition”). The consummation of the Super Biz Acquisition (the “Super Biz Closing”) occurred simultaneously with the execution of the Super Biz Purchase Agreement on the Super Biz Closing Date. Pursuant to the terms and subject to the conditions of the Super Biz Purchase Agreement, up to an aggregate amount $11.5 million would be payable to Super Biz and the Founders in connection with the achievement of certain revenue milestones for the period from the Super Biz Closing Date until December 31, 2022 (“Initial Earn Out Period”) and for the fiscal year ending December 31, 2023 (the “Super Biz Contingent Consideration”) (“Super Biz Earn Out Periods”). The Super Biz Contingent Consideration is payable in the form of both cash and shares of the Company’s common stock, in equal amounts, as more specifically set forth in the Super Biz Purchase Agreement. The Company hired the Founders of Super Biz in connection with the Super Biz Acquisition. Pursuant to the provisions of the Super Biz Purchase Agreement, in the event that a Founder ceases to be an employee during any of the Super Biz Earn Out Periods, as a consequence of his resignation without good cause, or termination for cause, the Super Biz Contingent Consideration will be reduced by one-half (50%) for the respective Super Biz Earn Out Periods, if and when earned. Under ASC 805, a contingent consideration arrangement in which the payments are automatically forfeited if employment terminates is considered to be compensation for post-combination services, and not acquisition consideration. As such, the Super Biz Contingent Consideration is accounted for as post-combination services and expensed in the period that payment of any amounts of contingent consideration is determined to be probable and reasonably estimable. Contingent consideration is recorded as a liability in the accompanying consolidated balance sheets in accordance with ASC 480, which requires freestanding financial instruments where the company must or could settle the obligation by issuing a variable number of its shares, and the obligation’s monetary value is based solely or predominantly on variations in something other than the fair value of the company’s shares, to be recorded as a liability at fair value and re-valued at each reporting date, with changes in the fair value reported in the consolidated statements of operations. The change in accrued Super Biz Contingent Consideration and the related income statement impact was comprised of the following for the years ended December 31:
|  | 2024 |  |  | 2023 |
Beginning balance |  | $ | 1,670,000 |  |  | $ | 3,206,000 |
Change in fair value(3) |  |  | (9,000 | ) |  |  | 137,000 |
Current period accrued contingent consideration |  |  | 142,000 |  |  |  | 1,750,000 |
Contingent consideration payments(2) |  |  | (38,000 | ) |  |  | (3,423,000 | )
Issuance of Super Biz Note (as described below)(1) |  |  | (1,765,000 | ) |  |  | - |
Accrued contingent consideration(1) |  | $ | - |  |  | $ | 1,670,000 |
| (1) | As of December 31, 2024, reflects the cash portion of the Super Biz Second Earn Out Period related contingent consideration payable. As of December 31, 2023, included 27,968 shares of common stock valued at $1.52, the closing price of our common stock as of December 31, 2023.
| (2) | In May 2024, the Company paid accrued contingent consideration related to the Super Biz Second Earn Out Period, comprised of 30,330 shares of our common stock valued at $38,000. In April 2023, the Company paid accrued contingent consideration related to the Initial Earn Out Period, comprised of $2.9 million of cash payments and payment of 49,399 shares of our common stock valued at $548,000.
| (3) | Reflected in the consolidated statements of operations for the applicable period
Issuance of Promissory Note. 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 principal 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”):
| (i) | upon receipt of new equity funding in the aggregate amount of $3.0 million or more subsequent to the date of the Super Biz Note, in one transaction or series of transactions, the Super Biz Note shall be repaid with interest in four (4) equal monthly installments commencing on the initial closing date of such equity funding;
| (ii) | upon receipt of new equity funding in the aggregate amount of $5.0 million or more subsequent to the date of the Super Biz Note, in one transaction or series of transactions, the Super Biz Note shall be repaid with interest in three (3) equal monthly installments commencing on the initial closing date of such equity funding;
| (iii) | upon new equity funding received by the Company in the aggregate amount of $7.0 million or more subsequent to the date of the Super Biz Note, in one transaction or series of transactions, the Super Biz Note shall be repaid with interest in two (2) equal monthly installments commencing on the initial closing date of such equity funding; or
| (iv) | in the event none of subsections 2(i)-(iii) occur, then the Super Biz Note shall be repaid in full on June 1, 2025 (the “Maturity Date”).
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; provided, however, during the existence of an event of default, as defined in the Super Biz Note, interest shall accrue on all outstanding principal at the contractual default rate, as defined in the Super Biz Note. Super Biz Note related interest expense for the year ended December 31, 2024 totaled $64,000. All outstanding principal and accrued interest may be prepaid by the Company prior to the Maturity Date at the election of the Company. Upon the occurrence of any event of default, as defined in the Super Biz Note, the Founders may at any time declare all unpaid obligations to be immediately due and payable. Restricted Common Stock Issuance. In addition, in connection with the issuance of the Super Biz Note, in January 2025, the Company issued 262,501 shares of the Company’s common stock to the Founders. 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 loss on extinguishment totaling $336,000 was recorded in the consolidated statements of operations, and credited to additional paid-in capital (included in “Other” in the consolidated statements of stockholder’s equity), for the year ended December 31, 2024, primarily comprised of the fair value of the 262,501 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. The default interest provision included in the Super Biz Note represents an embedded derivative with an initial 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 December 31, 2024 consolidated balance sheets under the caption “Promissory note – contingent consideration,” and is required to be marked to market at each balance sheets. As of December 31, 2024 the fair value of the default interest provision derivative liability was $77,000. The change in fair value of the default interest provision derivative liability for the year ended December 31, 2024 totaled $94,000, and is included in other income (expense) in the consolidated statements of operations.

X
- Definition The entire disclosure for a business combination (or series of individually immaterial business combinations) completed during the period, including background, timing, and recognized assets and liabilities. The disclosure may include leverage buyout transactions (as applicable). + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Topic 805 -SubTopic 20 -Name Accounting Standards Codification -Section 50 -Paragraph 5 -Subparagraph (b) -Publisher FASB -URI https://asc.fasb.org/1943274/2147479907/805-20-50-5 Reference 2: http://fasb.org/us-gaap/role/ref/legacyRef -Topic 805 -Name Accounting Standards Codification -Publisher FASB -URI https://asc.fasb.org/805/tableOfContent + Details
Name: | us-gaap_BusinessCombinationDisclosureTextBlock
Namespace Prefix: | us-gaap_
Data Type: | dtr-types:textBlockItemType
Balance Type: | na
Period Type: | duration

X
- References No definition available. + Details
Name: | us-gaap_DisclosureTextBlockAbstract
Namespace Prefix: | us-gaap_
Data Type: | xbrli:stringItemType
Balance Type: | na
Period Type: | duration