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Business Combination
 9 Months Ended
Jan. 31, 2022
Business Combination and Asset Acquisition [Abstract]  
Business Combination

(18) Business Combination

 

3dent Technologies, LLC

 

On February 1, 2021, the Company acquired all of the outstanding equity interest of 3dent Technologies, LLC (“3Dent”), a Houston, Texas based company that offers offshore energy engineering and design services that are complementary to the Company’s technology and products. As consideration for the purchase, the Company issued 361,991 shares of its common stock to the sellers, subject to a 12-month post acquisition employment condition, which has now been achieved. In addition, the former owners of 3Dent would have been eligible for awards of performance stock with a potential value of $360,000 if certain revenue targets are achieved over the 12 month-period post acquisition. As of January 31, 2022, it was determined that 3Dent did not meet these revenue targets.

 

Marine Advance 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. 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 14 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:

 

   (in thousands) 
Cash  $4,000 
Liabilities assumed   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.

 

Total Purchase Consideration  $11,902 
      
Cash  $12 
Inventory   150 
Property and equipment, net   38 
Trademarks   2,755 
Patents   1,193 
Goodwill   7,754 
Net assets 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 Company is currently evaluating the tax implications on the business combination accounting and compiling the information needed for a pro forma disclosure related to the acquisition of MAR which is expected in our year end reporting.