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14. ACQUISITION | 12 Months Ended
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Mar. 31, 2021
ACQUISITION |
NOTE 14 - ACQUISITION | NOTE 14—ACQUISITION On November 23, 2015, the Company acquired all of the outstanding capital stock of privately held MikaMonu Group Ltd. (“MikaMonu”), a development-stage, Israel-based company that specialized in in-place associative computing for markets including big data, computer vision and cyber security. MikaMonu, located in Tel Aviv, held 12 United States patents and had a number of pending patent applications. The acquisition was accounted for as a purchase under authoritative guidance for business combinations. The purchase price of the acquisition was allocated to the intangible assets acquired, with the excess of the purchase price over the fair value of assets acquired recorded as goodwill. The Company performs a goodwill impairment test in February of each fiscal year. Consideration Under the terms of the acquisition agreement, the Company paid the former MikaMonu shareholders initial cash consideration of approximately $4.9 million. The Company is also required to pay the former MikaMonu shareholders future contingent consideration consisting of retention payments and “earnout” payments, as described below. The Company made cash retention payments of $2.5 million to the three former MikaMonu shareholders in installments over a four-year period, that were conditioned on the continued employment of Dr. Avidan Akerib, MikaMonu’s co-founder and chief technologist. The retention amount of $2.5 million was deposited in escrow. Of this amount, $743,000, $750,000 and $1.0 million was paid to the former MikaMonu shareholders during the quarters ended December 31, 2017, 2018 and 2019, respectively. The Company is not required to make any further retention payments. The Company will also make “earnout” payments to the former MikaMonu shareholders in cash or shares of the Company’s common stock, at the Company’s discretion, during a period of up to ten years following the closing if certain product development milestones and revenue targets for products based on the MikaMonu technology are achieved. Earnout amounts of $750,000 were paid in the fiscal year ended March 31, 2021 based on the achievement of certain product development milestones. Additional earnout amounts of $4.0 million will be payable if certain revenue milestones are achieved by January 1, 2022, and additional payments, up to a maximum of $30.0 million, equal to 5% of net revenues from the sale of qualifying products in excess of certain thresholds, will be made quarterly through December 31, 2025. The portion of the retention payment contingently payable to Dr. Akerib (approximately $1.2 million) was recorded as compensation expense over the period that his services were provided to the Company. The portion of the retention payment made to the other former MikaMonu shareholders (approximately $1.3 million) plus the maximum amount of the potential earnout payments as of March 31, 2021 totals approximately $36.0 million. The Company determined that the fair value of this contingent consideration liability was $5.8 million at the acquisition date. The contingent consideration liability is included in contingent consideration, non-current on the Consolidated Balance Sheet at March 31, 2021 and 2020 in the amount of $4.2 million and $3.9 million, respectively. At each reporting period, the contingent consideration liability is re-measured to fair value with changes recorded in selling, general and administrative expenses in the Consolidated Statements of Operations. Re-measurement of the contingent consideration liability resulted in an increase (reduction) in fair value for the years ended March 31, 2021, 2020 and 2019 of $229,000, $80,000 and ($326,000), respectively. See Note 7 for the valuation of contingent consideration.

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