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Business Combinations | 6 Months Ended
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Mar. 31, 2022
Business Combination and Asset Acquisition [Abstract] |
BUSINESS COMBINATIONS | 3. BUSINESS COMBINATIONS Acquisition of ID R&D, Inc. On May 28, 2021 (the “Closing Date”), the Company completed the acquisition of ID R&D (the “ID R&D Acquisition”) pursuant to an Agreement and Plan of Merger (the “Merger Agreement”) dated May 28, 2021, by and among the Company, ID R&D and Alexey Khitrov (the “Representative”). Upon completion of the ID R&D Acquisition, ID R&D became a direct wholly owned subsidiary of the Company. ID R&D is an award-winning provider of artificial intelligence-based voice and face biometrics and liveness detection. As consideration for the ID R&D Acquisition, the Company agreed to pay an aggregate purchase price of up to $49.0 million. On the Closing Date, the equityholders of ID R&D received from the Company: (i) $13.0 million in cash, subject to adjustments for transaction expenses, escrow amounts, indebtedness and working capital adjustments (the “Initial Cash Payment”); and (ii) 867,226 shares or $13.9 million of Common Stock. In addition to the foregoing, the equityholders of ID R&D may become entitled to receive additional consideration from the Company upon achievement of certain milestones as follows (collectively, the “Earnout Payments”): subject to ID R&D’s achievement of target revenue for the period commencing on the Closing Date and ending on the one year anniversary thereof and the period commencing on the one year anniversary of the Closing Date and ending on the one year anniversary thereof (each such period, an “Earnout Period”): (i) an aggregate maximum amount of approximately $12.3 million with respect to the first Earnout Period and (ii) approximately $9.8 million with respect to the second Earnout Period, with 15% of the first Earnout Period’s payment to be deposited (as additional funds) into an escrow fund described below. The Company will make the Earnout Payments in the form of cash and shares of Common Stock as set forth in the Merger Agreement. The Company has granted the Representative an option to shift the Earnout Period(s) out by one year, pursuant to the terms of the Merger Agreement. Moreover, in the event actual revenue for an Earnout Period exceeds the target revenue for such period, the amount of such excess will be credited towards the achievement of the subsequent Earnout Period’s Earnout Payment. The Company estimated the fair value of the consideration for the Earnout Periods to be $15.7 million on the Closing Date, which was determined using a discounted cash flow methodology based on financial forecasts determined by management that included assumptions about revenue growth and discount rates, and is included in level three of the fair value hierarchy. Each quarter the Company revises the estimated fair value of the consideration for the Earnout Periods and changes in the fair value are included in acquisition-related costs and expenses in the consolidated statements of operations and other comprehensive income (loss). See Note 4. “Investments,” of the notes to consolidated financial statements for more information relating to the consideration for the Earnout Periods. The Company incurred $0.6 million of expense in connection with the acquisition primarily related to legal fees, outside service costs, and travel expense, which are included in acquisition-related costs and expenses in the consolidated statements of operations and other comprehensive income (loss). On the Closing Date, the Company deposited a portion of the Initial Cash Payment and a number of shares of Common Stock having a collective value of approximately $4.0 million into an escrow fund to serve as collateral and partial security for working capital adjustments and certain indemnification rights of the Company. As indicated above, 15% of the Earnout Payment with respect to the first Earnout Period, if and when earned, will also be deposited into the escrow fund. The escrow fund will be maintained for up to 24 months following the completion of the ID R&D Acquisition or until such earlier time as the escrow fund is exhausted. The Company used cash on hand for the Initial Cash Payment. Acquisition of HooYu Ltd On March 23, 2022, the Company completed the acquisition of HooYu Ltd (the “HooYu Acquisition”) pursuant to the Purchase Agreement (the “Purchase Agreement”) dated March 23, 2022, by and among the Company and certain persons identified in the Purchase Agreement (the “Sellers”). Pursuant to the Purchase Agreement, the Company, among other things, acquired 100% of the outstanding share capital of HooYu Ltd (“HooYu”), a leading global customer onboarding platform designed to increase the integrity of KYC and maximize the success of customer onboarding. As consideration for the HooYu Acquisition, the Company paid aggregate consideration in the amount of $129.1 million in cash (the “Closing Consideration”), as such amount may be adjusted for transaction expenses and indebtedness. Pursuant to the Purchase Agreement, $0.9 million was withheld as a reduction to the Closing Consideration and is being retained by the Company for the final working capital adjustments and indemnification of certain tax matters under the Purchase Agreement. The Company incurred $1.9 million of expense in connection with the acquisition primarily related to legal fees, outside service costs, foreign currency and realized losses on investments, and travel expense, which are included in acquisition-related costs and expenses in the consolidated statements of operations and other comprehensive income (loss). On March 23, 2022, the Company transferred an aggregate of $127.1 million to the Sellers and its third-party legal and investment advisors. The Company used cash on hand for the cash paid on March 23, 2022. Acquisitions are accounted for using the acquisition method of accounting in accordance with ASC Topic 805, Business Combinations. Accordingly, the results of operations of ID R&D and HooYu have been included in the accompanying consolidated financial statements since the date of such acquisition. The purchase price has been allocated to the tangible and intangible assets acquired and liabilities assumed based upon the respective estimates of fair value as of the date of the ID R&D Acquisition and HooYu Acquisition and are based on assumptions that the Company’s management believes are reasonable. The Company is in the process of completing its valuation of certain intangible assets and the valuation of the acquired deferred income taxes related to the HooYu Acquisition. The final allocations of the purchase price to intangible assets and deferred income taxes may differ materially from the information presented in these unaudited consolidated financial statements. The following table summarizes the estimated fair values of the assets acquired and liabilities assumed from the ID R&D Acquisition and HooYu Acquisition as of their respective closing dates (amounts shown in thousands):
| ID R&D |  | HooYu |  | Total
Current assets | $ | 320 |  |  | $ | 1,865 |  |  | $ | 2,185 |
Property, plant, and equipment | 114 |  |  | 243 |  |  | $ | 357 |
Intangible assets | 16,930 |  |  | 73,100 |  |  | $ | 90,030 |
Goodwill | 27,748 |  |  | 75,691 |  |  | $ | 103,439 |
Current liabilities | (425) |  |  | (5,068) |  |  | $ | (5,493) |
Other non-current liabilities | (2,355) |  |  | (18,275) |  |  | $ | (20,630) |
Net assets acquired | $ | 42,332 |  |  | $ | 127,556 |  |  | $ | 169,888 |
The goodwill recognized is due to expected synergies and other factors and is not expected to be deductible for income tax purposes. The Company estimated the fair value of identifiable acquisition-related intangible assets with definite lives primarily based on discounted cash flow projections that will arise from these assets. The Company exercised significant judgment with regard to assumptions used in the determination of fair value such as with respect to discount rates and the determination of the estimated useful lives of the intangible assets. The following table summarizes the estimated fair values and estimated useful lives of intangible assets with definite lives acquired from the ID R&D Acquisition and the HooYu Acquisition as of their respective closing dates (amounts shown in thousands, except for years): ID R&D
| Amortization Period |  | Amount assigned
Completed technologies | 7.0 years |  | $ | 14,020 |
Customer relationships | 3.0 years |  | 2,540 |
Trade name | 5.0 years |  | 370 |
Total intangible assets acquired |  |  | $ | 16,930 |
HooYu
| Amortization Period |  | Amount assigned
Completed technologies | 7.0 years |  | $ | 61,400 |
Customer relationships | 5.0 years |  | 5,000 |
Trade name | 5.0 years |  | 6,100 |
Covenants not to compete | 3.0 years |  | $ | 600 |
Total intangible assets acquired |  |  | $ | 73,100 |
The following unaudited pro forma financial information should not be taken as representative of the Company’s future consolidated results of operations and includes adjustments for the amortization expense related to the identified intangible assets. The following table summarizes the Company’s unaudited pro forma financial information and is presented as if the ID R&D Acquisition and the HooYu Acquisition occurred on October 1, 2020 (amounts shown in thousands):
| Three months ended March 31, |  | Six months ended March 31, |  |  |
| 2022 |  | 2021 |  | 2022 |  | 2021 |  |  |  |  |
Pro forma revenue | $ | 37,635 |  |  | $ | 31,640 |  |  | $ | 72,090 |  |  | $ | 59,458 |  |  |  |  |  |  |  |
Pro forma net income (loss) | $ | (1,416) |  |  | $ | (511) |  |  | $ | 4,525 |  |  | $ | 262 |  |  |  |  |  |  |  |

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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://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -URI http://asc.fasb.org/topic&trid=2303972 + Details
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