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Business Combinations

9 Months Ended

Sep. 30, 2023

Business Combinations [Abstract]

Business Combinations

3.

Business Combinations

On May 15, 2023 (the “Acquisition Date”), the Company acquired 100% of the outstanding equity of Callin Corp. (“Callin”), a podcasting and live streaming platform. Callin creates a seamless experience for its users to create, discover, and consume live and recorded content. The Company has determined that Callin meets the definition of a business and has accounted for the acquisition as a business combination. A provisional estimate of the fair value of the assets acquired and the liabilities assumed by the Company in connection with the acquisition is as follows:

Total consideration		$	18,226,572

Net assets acquired:
Cash		$	1,000,989
Accounts receivable			10,939
Prepaid expenses			200,651
Property and equipment			37,841
Intangible assets			7,758,000
Accounts payable, accruals, and other liabilities			(1,137,814	)
Deferred tax liability			(1,629,180	)
Total net assets acquired		$	6,241,426

Goodwill		$	11,985,146

The provisional estimate of fair value of the consideration consists of the following:

		Fair Value
Shares issued		$	6,055,409
Shares to be issued			3,747,209
Replacement awards			15,578
Contingent consideration (liability) – retention payments			3,491,741
Contingent consideration (equity) – milestone 1			2,490,152
Contingent consideration (equity) – milestone 2			2,356,483
Contingent consideration payable			70,000
Total consideration		$	18,226,572

Under the terms of the acquisition agreement, the Company is required to issue upfront share consideration of 981,243 shares of Class A Common Stock to the preferred shareholders and SAFE note holders of Callin, of which 606,147 shares had been issued as of September 30, 2023. The fair value of the Company’s Class A Common Stock on the acquisition date was $9.99 per share. In addition, the Company issued rights to four payments of 375,000 contingently issuable shares of Class A Common Stock to the common shareholders, series FF preferred shareholders, option holders and continuing employees of Callin contingent on the following conditions being met:

	●	Retention payment 1: Services are provided by a selling shareholder for 12 months;

	●	Retention payment 2: Services are provided by a selling shareholder for 24 months;

	●	Milestone payment 1: Within 12 months, certain feature development and technical performance criteria are achieved, and the acquired technology is integrated into the Company’s existing software and

●

Milestone payment 2: Within 24 months, certain feature development and technical performance criteria are achieved.

In assessing what is part of the business combination, the Company has determined that because the two retention payments are contingent on a selling shareholder providing services post-combination, the portion of those tranches earned by the party providing services should be reflected in the Company’s financial statements as post-combination expense. In addition, where future services are required by employees in order to earn rights to the contingent consideration, such rights are being accounted for either entirely as post-combination expense or as replacement awards where the rights replace unvested options or restricted series FF preferred shares that were originally granted by Callin. For the remainder, the four tranches of contingently issuable shares have been accounted for as contingent consideration.

The following table shows the breakdown of the contingently issuable shares:

		Number of Shares
Contingent consideration			903,689
Share-based compensation (Note 13)			596,311
Total contingently issuable shares			1,500,000

The fair value of the contingent consideration has been estimated as follows:

Retention payments 1 and 2

The Company has determined that retention payments 1 and 2 are one unit of account requiring the Company to issue a variable number of shares that is not indexed to the Company’s stock. As a result, the consideration that is contingent on one of the selling shareholder’s providing services has been classified as a liability. The contingent consideration is classified Level 3 in the fair value hierarchy. The key inputs into the fair value determination are the expected number of shares to be issued and the share price on the acquisition date. At the acquisition date, management estimated the number of shares to be issued is 349,523. The Company has recognized a change in fair value of this contingent consideration of $1,709,173 due to the change in the Company’s stock price and the probability of each contingency being met during the period between the acquisition date and the period end.

Milestone payments 1 and 2

The Company has determined that milestone payments 1 and 2 are separate units of account because a fixed number of shares will be issued if each contingency is met, and meeting one contingency is not dependent on the other. The key inputs into the fair value determination are the probability of each contingency being met, and the share price on the acquisition date.

Due to the complexity of the valuation process and short period between the acquisition date and the period end, the identification and measurement of the assets acquired, and liabilities assumed, as well as the measurement of consideration and contingent consideration is provisional and is subject to adjustment upon the completion of the valuation process and analysis of resulting tax effects. The Company will finalize the accounting for the acquisition no later than one year from the acquisition date and will reflect these adjustments in the reporting period in which the adjustments are determined as required by ASC 805. Differences between these provisional estimates and the final acquisition accounting may occur and these differences could have a material impact on the Company’s future financial position and results of operations.

During the three months ended September 30, 2023, the Company adjusted certain provisional amounts recognized at the acquisition date. An adjustment was made to increase upfront share consideration by $143,716 with a corresponding adjustment to goodwill.

The acquired goodwill relates to Callin’s workforce and synergies that are expected to be realized upon the integration of Callin’s technology with the Rumble platform. Such synergies will include the ability to leverage the creator relationships that Rumble has secured to date and will allow for a greater ability to establish brand recognition and monetization of the Callin platform in the future. The goodwill is not expected to be deductible for tax purposes.

Acquisition-related transaction costs incurred by the Company in the three and nine months ended September 30, 2023 were $130,833 and $835,035, respectively.