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ACQUISITIONS | 12 Months Ended
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Jun. 30, 2023
Business Combination and Asset Acquisition [Abstract] |
ACQUISITIONS | ACQUISITIONS We completed the following acquisitions in fiscal year 2023 and 2022. Financial results of each transaction are included in our consolidated financial statements from the date of each acquisition. Three Square Market On December 1, 2022, the Company acquired all of the equity interests of Three Square Market, Inc., a Wisconsin corporation, and Three Square Market Limited, a UK private limited company (collectively "32M") pursuant to an Equity Purchase Agreement. 32M is a leading provider of software and self-service kiosk-based point of sale and payment solutions to the micro market industry and the acquisition expanded the Company's presence in that industry. In addition to new technology and services, due to 32M’s existing customer base, the acquisition expands the Company’s footprint into new global markets. The acquisition of 32M was accounted for as a business combination using the acquisition method of accounting. The purchase price of the acquired company was allocated between tangible and intangible assets acquired and liabilities assumed from the acquired business based on their estimated fair values using primarily Level 3 inputs under ASC Topic 820, Fair Value Measurement, with the residual of the purchase price recorded as goodwill. The Company paid an aggregate purchase price consideration of $41.1 million, which consisted of $36.6 million in cash and 1,240,920 shares of the Company's common stock (the "Stock Consideration") with an aggregate fair value of $4.5 million for the acquisition of 32M. The aggregate cash consideration includes $0.5 million of cash paid into an escrow account for net working capital and other post-closing adjustments. The Stock Consideration of 1,240,920 shares ("Escrowed Shares") referred to above were placed into an escrow account to resolve indemnification claims for breach of certain representations and warranties and will be released 50% on the first anniversary of the acquisition date and 50% on the second anniversary of the acquisition date, less any shares that may be returned to Company on account of any indemnity claims. The Escrowed Shares are considered to be issued and outstanding shares of the Company as of the acquisition date. The Company funded the cash consideration of the acquisition by borrowing $25 million of debt from the JPMorgan Credit Facility and the remaining consideration utilizing existing cash on hand. The estimated fair value of the purchase price consideration consisted of the following:
($ in thousands) |
Closing cash consideration | $ | 36,605 |
Stock Consideration | 4,506 |
Fair value of total consideration transferred | $ | 41,111 |
The following table summarizes the adjusted fair value assigned to the assets acquired and liabilities assumed as of June 30, 2023.
($ in thousands) | Amount
Cash and cash equivalents | $ | 891 |
Accounts receivable | 1,780 |
Inventories | 2,011 |
Intangible assets | 14,904 |
Other assets | 670 |
Total identifiable assets acquired | 20,256 |
Accounts payable | (2,358) |
Tax liabilities | (2,095) |
Total liabilities assumed | (4,453) |
Total identifiable net assets | 15,803 |
Goodwill | 25,308 |
Fair value of total consideration transferred | $ | 41,111 |
The Company determined the fair value of the identifiable intangible assets acquired with the assistance of third-party valuation consultants. Amounts allocated to identifiable intangible assets included $9.0 million related to developed technology, $5.4 million related to customer relationships, and $0.5 million related to tradenames. The fair value of the acquired developed technology was determined using a multi-period excess earnings method. The fair value of the acquired customer relationships was determined using the with-and-without method which estimates the value using the cash flow impact in a scenario where the customer relationships are not in place. The significant unobservable inputs used in the valuation of the customer relationship asset and acquired developed technology asset are the revenue growth rates used in the development of the projected financial information used as an input to calculate those values and the discount rate applied. Th e recognized intangible assets will be amortized on a straight-line basis over the estimated useful lives of the respective assets. The estimated useful lives for developed technology, customer relationship, trade names were 5, 5 and 3 years, respectively. Goodwill of $25.3 million arising from the acquisition includes the expected synergies between 32M and the Company and intangible assets that do not qualify for separate recognition at the time of acquisition. The goodwill, which is deductible for income tax purposes, was assigned to the Company’s only reporting unit. Subsequent to the acquisition closing date and within the one-year measurement period, the Company adjusted the purchase price allocation from what was initially recognized to reflect facts and circumstances in existence as of the acquisition close date. These adjustments included a net increase of $0.3 million to the overall purchase price consideration, a net decrease of $1.1 million in working capital related accounts and a net increase of $1.7 million in intangible assets. Recognized goodwill decreased by $0.3 million as a result of these adjustments. Furthermore, the Company recorded additional amortization expense of $0.2 million associated with the increase in fair value of the recognized intangible assets in its Consolidated Statement of Operations. The Company is substantially complete with the purchase price allocation as of June 30, 2023, except for the finalization of the valuation of the acquired customer relationships and developed technology intangible assets. Additional purchase price adjustments could be recorded during the remaining measurement period if additional facts and circumstances in existence as of the acquisition close date are identified that require adjustment to the value the assets acquired and liabilities assumed. The Company recognized $3.1 million of acquisition related costs that were expensed during the year ended June 30, 2023. These costs were recorded within Integration and acquisition expenses in the Consolidated Statements of Operations. The amount of 32M revenue included in the Company’s Consolidated Statement of Operations from the acquisition date through June 30, 2023 was $13.2 million. The amount of 32M earnings included in the Company’s Consolidated Statement of Operations from the acquisition date through June 30, 2023 was $2.5 million. Unaudited supplemental disclosure of pro forma information The following table presents unaudited pro forma information as if the acquisition of 32M had occurred on July 1, 2021. The unaudited pro forma information presented combines the historical condensed consolidated results of operations of the Company and 32M after giving effect to the preliminary purchase accounting impact of the 32M acquisition related costs (including, but not limited to, amortization associated with the acquired intangible assets, interest expense associated with the Credit Facility to finance a portion of the purchase price, acquisition related costs) and the alignment of accounting policies. This supplemental unaudited pro forma information has been prepared for comparative purposes and does not purport to be indicative of what would have occurred had the acquisition been made on July 1, 2021, nor are they indicative of any future results. Furthermore, cost savings and other business synergies related to the acquisition are not reflected in the pro forma amounts.
|  | Year ended June 30,
(In thousands) |  | 2023 |  | 2022
Revenues |  | $ | 251,979 |  |  | $ | 222,185 |
Net loss |  | (75) |  |  | (7,117) |
The unaudited supplemental pro forma financial information for the year ended June 30, 2023 was adjusted to exclude $3.1 million of acquisition related costs, the components of which were previously described. The unaudited supplemental pro forma financial information for the year ended June 30, 2022 was adjusted to include the $3.1 million of acquisition related costs. Yoke Payments In August 2021, we completed the acquisition of certain assets and liabilities of Delicious Nutritious LLC, doing business as Yoke Payments (“Yoke”), a micro market payments company. The acquisition of Yoke was accounted for as a business combination using the acquisition method of accounting which includes the results of operations of the acquired business from the date of acquisition. The purchase price of the acquired company is allocated between tangible and intangible assets acquired and liabilities assumed from the acquired business based on their estimated fair values using primarily Level 3 inputs under ASC Topic 820, Fair Value Measurement, with the residual of the purchase price recorded as goodwill. Through the acquisition, Yoke’s point of sale platform extended its offering to provide self-checkout while seamlessly integrating with Cantaloupe’s inventory management and payment processing platforms. The consideration transferred for the acquisition includes payments of $3 million in cash at the close of the transaction and $1 million in deferred cash payment due on or before July 30, 2022 based on the achievement of certain sales growth targets. On July 27, 2022, the Company made the cash payment of $1 million in accordance with the agreement consideration. Additionally in connection with the acquisition, the Company will issue common stock to the former owners of Yoke based on the achievement of certain sales growth targets for software licenses through July 31, 2024 and continued employment as of the respective measurement dates. The accounting treatment for these awards in the context of the business combination is to recognize the awards as a post-combination expense and were not included in the purchase price. We will begin recognizing compensation expense for these awards over the requisite service period when it becomes probable that the performance condition would be satisfied. At each reporting date, we assess the probability of achieving the sales targets and fulfilling the performance condition. For the year ended June 30, 2023, we determined that it is not probable that the performance condition would be satisfied and, accordingly, have not recognized compensation expense related to these awards. The following table summarizes the total consideration paid for Yoke, total net assets acquired, identifiable assets and goodwill recognized at the acquisition date:
($ in thousands) | Amount
Consideration |
Cash | $ | 2,966 |
Contingent consideration arrangement | 1,000 |
Fair value of total consideration transferred | 3,966 |
Recognized amounts of identifiable assets |
Total net assets acquired | 21 |
Identifiable intangible assets | 1,235 |
Total identifiable net assets | 1,256 |
Goodwill | $ | 2,710 |
Amounts allocated to identifiable intangible assets included $0.9 million related to developed technology, $0.3 million related to customer relationships, and $0.1 million related to other intangible assets. The fair value of the acquired developed technology was determined using a multi-period excess earnings method. The fair value of the acquired customer relationships was determined using the with-and-without method which estimates the value using the cash flow impact in a scenario where the customer relationships are not in place. The recognized intangible assets will be amortized on a straight-line basis over the estimated useful lives of the respective assets. Goodwill of $2.7 million arising from the acquisition includes the expected synergies between Yoke and the Company and intangible assets that do not qualify for separate recognition at the time of acquisition. The goodwill, which is deductible for income tax purposes, was assigned to the Company’s only reporting unit. The above table represents the final allocation of the purchase price, noting no material measurement period adjustments. Pro forma financial information of the acquisition is not presented due to the immaterial impact of the financial results of Yoke in the Company's Consolidated Financial Statements.

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- 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
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