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Business Combination
3 Months Ended
Mar. 31, 2022
Business Combinations [Abstract]  
Business Combination

9. Business Combination

On January 3, 2022, the Company completed its acquisition of EVRYTHNG, a London-based product cloud company. The aggregate preliminary purchase price for the acquisition was $36,634, which included the fair value of the 772 shares issued of common stock of the Company of $31,519 and the warrants issued to purchase 231 shares of common stock of the Company of $1,601 (see Note 6 for more information). The fair value of the warrants was determined using the Black-Scholes option pricing model using the Company’s stock price on the date of issuance of $40.84, the strike price on the warrants of $36.56 and expected volatility of 60%. The aggregate preliminary purchase price also included $3,986 of cash paid by the Company to pay closing costs on behalf of the EVRYTHNG sellers, less cash acquired of $474. A portion of the consideration was held back by the Company to secure any post-closing adjustments to the initial consideration and the indemnification obligations of the sellers. The aggregate purchase price remains preliminary, as the Company is still finalizing the issuance of the held back consideration.

On December 10, 2021, the Company entered into a Loan Agreement with EVRYTHNG (the “Loan Agreement”) pursuant to the Purchase Agreement. The Loan Agreement provided a loan facility of $2,000 to EVRYTHNG at an interest rate of 1% per annum. The loan matures on December 9, 2022. The loan balance of $2,001 on January 3, 2022, was included in “loan payable to related party” below in the preliminary purchase price allocation, as the liability was assumed by the combined company. The loan payable balance is eliminated in consolidation in the Consolidated Balance Sheet as of March 31, 2022.


 

The following table presents the preliminary purchase price allocation:

 

 

Preliminary

 

 

 

Purchase Price

 

 

 

Allocation

 

 

 

January 3, 2022

 

Trade accounts receivable, net

 

$

717

 

Other current assets

 

 

1,947

 

Property and equipment, net

 

 

99

 

Lease right of use assets and other long-term assets

 

 

484

 

Intangibles

 

 

37,740

 

Goodwill

 

 

5,439

 

Accounts payable and other accrued liabilities

 

 

(5,782

)

Deferred revenue

 

 

(1,804

)

Loan payable to related party

 

 

(2,001

)

Lease liability and other long-term liabilities

 

 

(205

)

Total preliminary purchase price

 

$

36,634

 

The Company preliminarily allocated $23,990 to EVRYTHNG developed technology and $13,750 to EVRYTHNG customer relationships. Preliminary goodwill recognized of $5,439 from the acquisition was primarily attributed to an assembled workforce and expected synergies. The preliminary allocation above is subject to future adjustments during the measurement period. Open areas in the preliminary allocation include finalizing the opening balance sheet, the fair value of acquired intangible assets and recognition of income tax assets and liabilities. The Company incurred transaction costs related to the acquisition of $1,140 during 2021 and $444 in 2022, respectively.

The following unaudited pro forma consolidated results of operations include the financial results of Digimarc and EVRYTHNG assuming the acquisition was completed on January 1, 2021, the beginning of the earliest period presented. Pro forma adjustments are primarily comprised of preliminary estimates of amortization expense on acquired intangible assets, transaction expenses and the elimination of EVRYTHNG’s historical interest expense on long-term debt that was settled at closing. The pro forma results of operations are presented for informational purposes only and are not indicative of the results of operations that would have been achieved or of results that may occur in the future.

 

 

Three

 

 

Three

 

 

 

Months

 

 

Months

 

 

 

Ended

 

 

Ended

 

 

 

March 31,

 

 

March 31,

 

 

 

2022

 

 

2021

 

Revenue

 

$

7,411

 

 

$

7,933

 

Net loss

 

$

(17,337

)

 

$

(16,359

)

Loss per common share:

 

 

 

 

 

 

 

 

Basic

 

$

(1.00

)

 

$

(0.96

)

Diluted

 

$

(1.00

)

 

$

(0.96

)