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Business Combination
 12 Months Ended
Sep. 30, 2025
Business Combination [Abstract]  
Business Combination

4. BUSINESS COMBINATION

On October 4, 2023, the Company completed the acquisition of all of the membership interests in Evertel Technologies, LLC. (“Evertel”), pursuant to a Membership Interest Purchase Agreement (“Purchase Agreement”) with Word Systems Operations, LLC (“Seller”) and Evertel.

Evertel offers a secure and compliant mission-critical collaboration platform for the public safety market that connects public safety personnel, information, and tools in one space.

The Evertel acquisition was accounted for as a business combination using the acquisition method pursuant to ASC Topic 805. As the acquirer for accounting purposes, the Company has estimated the purchase consideration, assets acquired and liabilities assumed as of the acquisition date, with the excess of the purchase consideration over the fair value of net assets acquired recognized as goodwill. The estimated fair value of assets purchased, and liabilities assumed, in certain cases may be subject to revision based on the final determination of fair value.

The consideration consisted of the following:

 

Cash paid

 

$

923

 

Common stock issued

 

 

2,082

 

Contingent Consideration

 

 

890

 

Acquisition holdback liability

 

 

230

 

Common stock to be issued

 

 

527

 

Working capital adjustment

 

 

(15

)

 

$

4,637

 

 

The Company funded the cash portion of the total consideration with available cash on hand. The Company also issued 986,486 shares of the Company’s common stock to the former owners of Evertel on the acquisition date. The fair value of the Company’s stock on the closing date was $1.95, resulting in the addition of $1,924 to additional-paid-in-capital. The contingent consideration liability was a current liability and recorded in the current portion of accrued liabilities. Under the terms of the Purchase Agreement, the Company recorded a $158 credit to additional-paid-in-capital and an addition to goodwill as this was consideration transferred to the former owners of Evertel during the second quarter of fiscal year 2024, and the Company issued common stock of 81,083 shares to the former owners of Evertel and three key employees during the third quarter of 2024 to settle the obligation.

The Company also recorded a holdback liability and an obligation to issue common stock as security for potential indemnification claims against the seller. The holdback liability was initially recorded at $230, which represented the fair value of the holdback liability as of the acquisition date, and was subsequently adjusted with the change in fair value recorded in the condensed consolidated statement of operations at each reporting period. The holdback liability was recorded at $250 as of September 30, 2024, and released on October 4, 2025.

The obligation to issue common stock was recorded as a credit to additional paid in capital for $527 on the acquisition date, and 270,271 shares of common stock were issued on October 4, 2024 to settle the obligation. During the second quarter of 2024, the Company and the former owners of Evertel, agreed on a working capital adjustment that resulted in a payment of $15 to the Company.

During the second quarter of fiscal year 2024, $874 of the contingent consideration was issued to the former owners of Evertel, including $219 paid in cash and 236,343 shares of common stock. During the third quarter of fiscal year 2024, it was determined the additional $60 contingent consideration was not eligible for payout, and as of September 30, 2024, no contingent consideration liability remained outstanding.

The Company incurred $151 in expenses related to this business combination, of which $112 were recorded in selling, general and administrative expenses in the consolidated statement of operations during fiscal year 2024.

The final allocation of the purchase price was as follows:

 

Assets acquired

 

 

 

Accounts receivable

 

$

142

 

Prepaid expenses

 

 

27

 

Intangible assets

 

 

2,550

 

Goodwill

 

 

2,923

 

Total Assets

 

$

5,642

 

 

 

 

 

Liabilities assumed

 

 

 

Accrued commissions

 

$

10

 

Deferred revenue

 

 

470

 

Deferred tax liability

 

 

525

 

Total liabilities

 

 

1,005

 

 

 

 

Net assets acquired

 

$

4,637

 

The estimated fair value of identifiable intangible assets acquired and their estimated useful lives were as follows:

 

 

 

Fair Value

 

 

Est. Useful Life (in years)

Developed technology

 

$

2,290

 

 

7

Customer relationships

 

 

260

 

 

5

 

$

2,550

 

 

 

Identifiable intangible assets consist of certain technology and customer relationships purchased from Evertel. Identifiable intangible assets are amortized over their estimated useful lives based upon several assumptions, including the estimated period of economic benefit and utilization. The weighted average amortization period for identifiable intangible assets acquired was 6.8 years. These intangible assets were classified as Level 3 in the ASC Topic 820 three-tier fair value hierarchy.

The goodwill for Evertel was attributable to combining the Company’s existing emergency communications solutions with the software and software development capabilities of Evertel to enhance product offerings. Goodwill was also attributable to the skill level of the acquired workforce. Goodwill from the Evertel acquisition was not be deductible for tax purposes.