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Acquisition of Marine Advanced Robotics, Inc.

12 Months Ended

Apr. 30, 2022

Business Combination and Asset Acquisition [Abstract]

Acquisition of Marine Advanced Robotics, Inc.

(18) Acquisition of Marine Advanced Robotics, Inc.

On November 15, 2021, the Company acquired all of the outstanding equity interest of Marine Advanced Robotics, Inc. (“MAR”), a Richmond (San Francisco Bay Area), California-based developer and manufacturer of autonomous surface vehicles.

The Company accounted for the transaction as a business combination under ASC 805, “Business Combinations.” Accordingly, the assets and liabilities acquired were recorded at their estimated fair value on the date of acquisition. Under ASC 805, acquisition-related transaction costs of approximately $0.3 million (such as advisory, legal, valuation, other professional fees) were expensed in the Consolidated Statement of Operations in the period incurred.

The Company paid cash consideration of $4.0 million and issued 3,330,162 shares of our common stock, valued at approximately $5.9 million based on the closing price of $2.10, and reduced by a lack of marketability discount since they were restricted for a 12 month period. The Company assumed liability for advances payable to the former owners of MAR for approximately $456,000.

The contingent consideration is based on the achievement of certain milestones over a 30-month period. As of the acquisition date, the contingent consideration had a fair value of $1.6 million. Under the terms of the MAR purchase agreement, the contingent consideration consists of two earn-out periods, one running from the date of the acquisition through April 30, 2023 in which the maximum earn-out is $1.5 million and the other from May 1, 2023 through April 30, 2024 where the maximum earn-out is $2 million. The fair value as of the date of acquisition was determined using a simulation model based on an estimate of revenues during these periods and discount factors ranging from 5.8% to 14.5%. As discussed in Note 15 per ASC Topic 820, we consider this to be a Level 3 liability.

Total consideration including cash, restricted shares, liabilities assumed, and contingent consideration was valued at approximately $11.9 million.

Purchase consideration consisted of the following:

 Schedule of Business Combination Purchase Consideration

		(in thousands)
Cash		$	4,000
Advance payable - MAR			456
Fair value of restricted shares			5,855
Fair value of contingent consideration			1,591
Total consideration		$	11,902

The preliminary allocation of the fair value of the MAR acquisition is shown in the table below. The allocation of the fair value will be finalized when the valuation is completed, and the differences will be trued up for the final allocated amounts, hence, actual results may differ from preliminary estimate. In the fourth quarter of fiscal year 2022, the Company recorded a purchase accounting adjustment related to income taxes resulting in an increase to goodwill of approximately $580,000.

 Schedule Of Preliminary Allocation of Fair Value Assumptions

		(in thousands)
Total Purchase Consideration		$	11,902
Cash			12
Inventory			150
Property and equipment, net			38
Trademarks			2,755
Patents			1,193
Goodwill			8,537
Contract liabilities acquired			(203)
Deferred income tax liability			(580)
Net asset acquired		$	11,902

The net assets were recorded at their estimated fair value. In valuing acquired assets and liabilities, fair value estimates were based primarily on future expected cash flows, market rate assumptions, and appropriate discount rates. In connection with the acquisition of MAR, we acquired approximately $3.9 million of intangible assets, including trademarks with an indefinite life and patents that will be amortized over a useful life of nine years.

Goodwill is considered an indefinite-lived asset that relates primarily to intangible assets that do not qualify for separate recognition.

The unaudited pro forma financial information in the table below summarizes the combined results of operations for the Company and MAR as if the companies had been combined as of May 1, 2020. The following unaudited pro forma financial information is for informational purposes only and is not necessarily indicative of the results of operations that would have been achieved as if the acquisition had taken place as of May 1, 2020.

Schedule of Pro Forma Financial Information 

		$	2022			$	2021
		Twelve months ended April 30,
		2022				2021
Revenue		$	2,621			$	2,302
Net loss		$	(18,413	)		$	(14,174	)
Basic and diluted net loss per share		$	(0.34	)		$	(0.47	)

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- References

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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 https://asc.fasb.org/topic&trid=2303972

Reference 2: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 805
-SubTopic 20
-Section 50
-Paragraph 5
-Subparagraph (b)
-URI https://asc.fasb.org/extlink&oid=128092470&loc=d3e4946-128472

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