Business Acquisition

9 Months Ended

Dec. 31, 2021

Business Combination and Asset Acquisition [Abstract]

Business Acquisition

BUSINESS ACQUISITION

On September 17, 2021, we acquired VAY AG (“VAY”) for an aggregate purchase consideration of approximately $26.9 million using cash on hand. Headquartered in Zurich, Switzerland, VAY specializes in computer vision and AI technology solutions and has developed software solutions for human motion analysis using any normal RGB (red-green-blue) camera from a device, such as a laptop, smartphone, or tablet. With a mission to democratize professional human motion analysis, VAY enables clients in fitness and health industries to understand and analyze human movement, providing personalized feedback on repetitions and form in real-time.

We accounted for the transaction as a business combination. Goodwill from the acquisition of $24.5 million represents the excess of the purchase price over the fair value of the net tangible and intangible assets and liabilities assumed and is not deductible for tax purposes. Goodwill recorded in connection with this acquisition is primarily attributable to VAY intellectual property base, employee workforce and application to future digital technologies. Acquired assets were recorded at estimated fair value as of the acquisition date. Certain liabilities were acquired as part of the transaction and were recorded at estimated fair value.

Total acquisition costs incurred through the nine-months ended December 31, 2021 were $1.0 million and were expensed in general and administrative costs. Since the acquisition occurred on September 17, 2021, no material amount of net sales or net income related to the VAY business was included in our reported December 31, 2021 financial statements.

The sellers of VAY have the opportunity to earn additional contingency consideration subject to the achievement of continued employment over an 18 month period and a total of twenty software engineers. The contingent consideration arrangement of $3.9 million will be paid to the former owners of VAY upon achievement of these milestones and recognized as compensatory expense over the service period. An escrow account was funded for the contingency consideration and is reported on the Condensed Consolidated Balance Sheets as Other assets - restricted, non-current.

Purchase Price Allocation

The purchase price allocation was determined based on the fair values of the assets and liabilities identified as of the acquisition date and may be adjusted, within a period of no more than 12 months from the acquisition date, if the final fair values change as a result of circumstances existing at the acquisition date, and upon receipt of final appraisals and valuations. Such fair value adjustments may arise in respect of property, plant and equipment upon completion of the necessary valuations and physical verifications of such assets.

The following table summarizes the preliminary fair values of the net assets acquired and liabilities assumed and measurement period adjustments since September 17, 2021, the acquisition date (in thousands):

	Preliminary valuation at September 17, 2021		Measurement period adjustments		Adjusted valuation at December 31, 2021
Cash	$	230	$	637	$	867
Accounts receivable	9		—		9
Prepaid expenses	15		(2)		13
Deferred tax assets	58		1		59
Developed technology (included in property, plant and equipment)	3,000		—		3,000
Identifiable assets acquired	3,312		636		3,948
Accrued liabilities	187		745		932
Unearned revenue	53		3		56
Deferred tax liabilities, non-current	591		—		591
Total liabilities assumed	831		748		1,579
Net identifiable assets acquired	2,481		(112)		2,369
Goodwill	24,508		2		24,510
Total assets acquired	$	26,989	$	(110)	$	26,879

The allocation of the purchase price is preliminary and is based upon valuation information available and estimates and assumptions made as of December 31, 2021. We are still in the process of verifying data and finalizing information including valuation and recording of the assets acquired and liabilities assumed, and the resulting amount of recognized goodwill

This acquisition is not material to our net sales, results of operations or total assets during any period presented. Accordingly, our consolidated results from operations do not differ materially from historical performance as a result of this acquisition, and, therefore, pro forma results are not presented.