ACQUISITION

3 Months Ended

Mar. 31, 2022

Karani, LLC

On October 29, 2021, the Company entered into a membership interest purchase agreement (the “MIPA”) by and among the Company, Hudson Global Resources Management, Inc. (“HGRM”), a wholly owned subsidiary of the Company, and Daniel Williams (“Williams”), and completed the acquisition (the “Karani Acquisition”) by HGRM of all of the membership interests of Karani, LLC, a Delaware limited liability company.

Karani, LLC partners with recruitment and staffing firms to assist with recruiting, sourcing, screening, onboarding, and other talent-related services across a variety of industries to customers primarily located in the United States. On the date of acquisition, Karani, LLC had approximately 560 employees in India and 120 employees in the Philippines.

As outlined in the MIPA, Williams received (i) $6,805 in cash subject to certain adjustments set forth in the MIPA at the closing of the Karani Acquisition; and (ii) a non-interest bearing promissory note in the aggregate principal amount of $2,000, payable in installments on the six-month and eighteen-month anniversaries of the closing date subject to the satisfaction of certain conditions as further described in the MIPA. There are no employment stipulations for Williams associated with the MIPA.

The Karani Acquisition was accounted for as a business combination under the acquisition method of accounting. The purchase price of $8,673, which consists of the amount paid in cash of $6,805, a promissory note of $2,000, and a working capital credit of $132, was allocated to the net tangible and intangible assets and liabilities based on their fair values on the acquisition date of October 29, 2021, with the excess recorded as goodwill. The purchase price included $737 of cash and cash equivalents acquired. The Company incurred transaction costs related to the acquisition of approximately $200 that were expensed as part of Office and general on the Consolidated Statements of Operations included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021. In addition to the purchase price, Hudson agreed to pay a $250 retention payment to the Chief Financial Officer of Karani, LLC, which is classified as compensation expense, recorded on a straight-line basis.

The Company’s Consolidated Statements of Operations for the three months ended March 31, 2022 included external revenue of $2,568 and net income of $235, from the acquired company.

Below is a summary of the fair value of the net assets acquired on the acquisition date based on external valuations at the date of acquisition.


	Fair Value
Assets Acquired:
Cash and cash equivalents	$	737
Accounts receivable	1,521
Restricted cash, current	50
Prepaid expenses and other assets	177
Property and equipment	119
Operating lease right-of-use assets	100
Restricted cash	3
Other long-term assets	19
Intangible assets	4,540
Goodwill	2,131
Assets Acquired	$	9,397
Liabilities Assumed:
Accrued expenses and other current liabilities	$	436
Operating lease obligations, current	88
Operating lease obligations, non current	12
Other long-term liabilities	188
Liabilities Assumed	$	724

Fair value of assets acquired and consideration transferred	$	8,673

Intangible assets are amortized on a straight-line basis over their estimated useful lives. The following table sets forth the components of identifiable intangible assets acquired and their estimated useful lives on the date of acquisition.


	Fair Value		Useful Life
Developed technology	$	640	3 years
Customer lists	2,800		6 years
Trade name	1,100		10 years
Total identifiable assets	$	4,540

Unaudited Pro Forma Financial Information

The following unaudited consolidated pro forma information gives effect to the acquisition of Karani, LLC as if the transaction had occurred on January 1, 2021.


	Three Months Ended
	March 31, 2021
Revenue	$	36,152
Net loss	$	(228)

The unaudited pro forma supplemental information provided above is based on estimates and assumptions that the Company believes are reasonable, and reflects the pro forma impact of additional amortization related to the fair value of acquired intangible assets for the three months ended March 31, 2021. This supplemental pro forma information has been prepared for comparative purposes and is not intended to reflect what would have occurred had the Karani Acquisition taken place on January 1, 2021.

Coit Staffing, Inc.

On October 1, 2020, the Company, entered into an asset purchase agreement (the “APA”) by and among the Company, Hudson Coit, Inc. (“Buyer”), a wholly-owned subsidiary of the Company, Coit Staffing, Inc. (“Seller”), Joe Belluomini, and Tim Farrelly (together with Mr. Belluomini, the “Principals”) and completed the acquisition by Buyer of substantially all of the assets used in the business of the Seller, as set forth in the APA (the “Coit Acquisition”).

Per the terms of the APA, the Seller received (i) $3,997 in cash subject to certain adjustments set forth in the APA at the closing of the Coit Acquisition; (ii) a promissory note in the aggregate principal amount of $1,350, payable in annual installments of $450 per year on the first, second, and third anniversaries of the closing; (iii) $500 in shares of the Company’s common stock, with the amount of such shares to be determined by dividing $500 by the weighted average price of the Company’s common stock for the five trading days prior to the closing date, to be issued in three equal installments on each of the 10-month, 20-month, and 30-month anniversaries of the closing date; and (iv) earn-out payments not to exceed $1,500 and $2,030 in the years ended December 31, 2021 and 2022, respectively, based upon the achievement of certain performance thresholds in those years. In addition, the Principals each entered into employment agreements with the Company for a term of two years.

The Coit Acquisition was accounted for as a business combination under the acquisition method of accounting. The purchase price consists of the amount paid in cash of $3,997, which was allocated to the net tangible and intangible assets and liabilities based on their fair values on the acquisition date of October 1, 2020, with the excess recorded as goodwill. The Company incurred transaction costs related to the acquisition of $436 that were expensed as part of Office and general on the Consolidated Statements of Operations included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020.

The promissory note and shares of the Company’s common stock to be paid to the Seller as outlined in the APA are tied to the continuing employment of the Principals at the Company, and therefore have been accounted for as compensation expense. This compensation expense is recorded on a straight-line basis under the assumption that the Principals will remain employed by the Company, and therefore that the note will be paid in full and the shares will be issued. For the three months ended March 31, 2022 and 2021, the Company recognized $42 and $90, respectively in stock-based compensation associated with the 52,226 restricted shares of common stock which were issued over 30 months (see Note 6 to the Condensed Consolidated Financial Statements). In addition, in the three months ended March 31, 2022, the Company recognized expense of $112 related to the promissory note, and $508 related to earn-out payments. For the three months ended March 31, 2021, the Company recognized expense of $91 related to the promissory note, and $200 related to earn-out payments. The amount due associated with the promissory note payable to the Principals is reflected in Accrued salaries, commissions, and benefits on the Condensed Consolidated Balance Sheets. The compensation expense recognized of $662 and $381 for the three months ended March 31, 2022 and 2021, respectively, is reflected in Salaries and related expenses on the Condensed Consolidated Statements of Operations.

The Company’s Consolidated Statements of Operations for the three months ended March 31, 2022 and 2021 included revenue of $5,982, and $1,316, respectively, and net income of $1,259 and net loss of $334, respectively, from the acquired company.