Acquisition of Melon, Inc. – Contingent Consideration

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”).

Contingent consideration related to the Melon Acquisition is recorded as a liability in the accompanying condensed 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 condensed statements of operations. The fair value of the Melon Contingent Consideration on the respective valuation dates through to the end of fiscal year 2024 final earn out period 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 fair value, which is included in contingent consideration expense in the condensed statements of operations for the applicable periods presented was comprised of the following: 

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”).

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 was 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 Super Biz Contingent Consideration was 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 condensed 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 condensed statements of operations (December 31, 2024 condensed balance sheet only).

As described below, in August 2024 the accrued Super Biz Contingent Consideration, comprised solely of the cash portion of the continent consideration for the final earn out period, was converted into an unsecured promissory note. The net change in fair market value related to accrued Super Biz Contingent Consideration for the three and nine months ended September 30, 2024 totaled $0 and $9,000, respectively. Accrued contingent consideration expense related to accrued Super Biz Consideration for the three and nine months ended September 30, 2024 totaled $0 and $142,000, respectively. Payments related to accrued Super Biz Consideration for the three and nine months ended September 30, 2024 totaled $0 and $38,000 (758 shares of Common Stock), respectively.

Issuance of Promissory Note. In August 2024, the Company issued an unsecured promissory note to the Founders in connection with the accrued contingent consideration outstanding related to the final earn out period, with a principal amount totaling approximately $1.8 million (the “Super Biz Note”).

Interest accrued on the outstanding principal at the rate of 8.5% per annum, and accrued 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 three and nine months ended September 30, 2025 totaled $36,000 and $128,000, respectively.

Restricted Common Stock Issuance. In addition, in connection with the August 2024 issuance of the Super Biz Note, the Company issued 6,563 shares of the Company’s common stock to the Founders in January 2025.

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 condensed statements of operations for the three and nine months ended September 31, 2024, primarily comprised of the fair value of the 6,563 shares of restricted stock (based on closing price of our common stock on the date of issuance of the Super Biz Note) issued, as described above.

On June 13, 2025, the Company entered into: (a) Amendment No. 1 to Super Biz Note (the “Drozdov Amendment”), originally issued on August 1, 2024, to Sam Drozdov (“Drozdov”)(the “Drozdov Note”); (b) Amendment No. 1 to Super Biz Note (the “Khakshoor Amendment”), originally issued on August 1, 2024, to Ben Khakshoor (“Khakshoor”) (the “Khakshoor Note”); and (c) Amendment No. 1 to Super Biz Note (the “Firepit Amendment”, and collectively with the Drozdov Amendment and the Khakshoor Amendment, the “Super Biz Note Amendments”), originally issued on August 1, 2024, to Firepit Partners Co. (f/k/a Bloxbiz Co.) (“Firepit”, and collectively with Drozdov and Khakshoor, the “Super Biz Lenders”) (the “Firepit Note”, and collectively with the Drozdov Note and the Khakshoor Note, the “Super Biz Amended Notes”).

Pursuant to the Super Biz Note Amendments: (a) the maturity date for each of the Super Biz Amended Notes was extended to August 1, 2025 (the “Amended Maturity Date”); and (b) beginning on June 1, 2025, through the Amended Maturity Date, the interest rate on each of the Super Biz Amended Notes was increased to 20%. As consideration for entering into the Super Biz Note Amendments, the Company agreed to pay: (x) two payments of $18,750 to each of Drozdov and Khakshoor; and (y) two payments of $12,500 to Firepit (collectively, the “Consideration Payments”). The first Consideration Payment was paid on June 15, 2025.

The June 13, 2025 modification of the Super Biz Note was accounted for as a modification as the lender did not grant any concessions and the debt terms were not determined to be “substantially different” from the original debt, as described at Note 2.

On July 8, 2025, the Company entered into exchange agreements with: (i) Khakshoor, pursuant to which the Company and Khakshoor agreed that in exchange for the surrender and forgiveness of that certain promissory note issued to Khakshoor, dated August 1, 2024, and amended on June 13, 2025, with the principal and interest thereon being equal to $711,361, Khakshoor will be issued 711,361 shares of the Company’s Series AAAA Jr. Convertible Preferred Stock (the “Khakshoor Agreement”); (ii) Drozdov, pursuant to which the Company and Drozdov agreed that in exchange for the surrender and forgiveness of that certain promissory note issued to Drozdov, dated August 1, 2024, and amended on June 13, 2025, with the principal and interest thereon being equal to $711,361, Drozdov would be granted 711,361 shares of the Company’s Series AAAA Jr. Convertible Preferred Stock (the “Drozdov Agreement”); and (iii) Firepit, pursuant to which the Company and Firepit agreed that in exchange for the surrender and forgiveness of that certain promissory note issued to Firepit, dated August 1, 2024, and amended on June 13, 2025, with the principal and interest thereon being equal to $474,242, Firepit would be granted 474,242 shares of the Company’s Series AAAA Jr. Convertible Preferred Stock (the “Firepit Agreement”, and collectively with the Khakshoor Agreement and Drozdov Agreement, the “SB Exchange Agreements”).

The July 8, 2025 exchange of the Super Biz Amended Notes for shares of the Company’s Series AAAA Junior Preferred Stock was accounted for as an extinguishment of the related promissory notes, resulting in a loss on extinguishment of liability of $161,000, included in the condensed statement of operations for the three and nine months ended September 30, 2025.