Note 14 - Acquisitions

9 Months Ended

Jun. 30, 2022

Notes to Financial Statements

Business Combination Disclosure [Text Block]

14.   Acquisitions

Woorank Acquisition

On March 1, 2021, the Company, pursuant to a Share Purchase Agreement (the “Woorank Purchase Agreement”), acquired all of the issued and outstanding shares of Woorank, an entity located in Belgium. The Company accounted for the Woorank transaction as a business combination in accordance with the Accounting Standard Codification (“ASC”) Topic 805, Business Combinations. The purchase price consisted of (1) cash paid at closing, (2) deferred cash payable in installments post-closing, (3) a seller note issued to one of the selling shareholders, and (4) amounts payable to one selling shareholder as consideration for assistance with certain matters related to the acquisition for a period of one year from the closing date of the acquisition. The Woorank Purchase Agreement also provides for additional consideration, in the event of achievement of certain revenue targets and operational goals, to the selling shareholders. On the closing date, the Company issued 29,433 shares of its common stock for a portion of the purchase price.

The Company accounted for the Woorank transaction as a business combination. The Company determined that the fair value of the gross assets acquired was not concentrated in a single identifiable asset or a group of similar assets. Assets acquired and liabilities assumed have been recognized at their estimated fair values as of the acquisition date. The fair value of common stock issued as part of consideration transferred was determined based on the acquisition date closing market price of the Company’s common stock. The estimated fair value of the contingent consideration was determined based on the Company’s expected probability of future payment, discounted using a weighted average cost of capital. The fair value of the contingent consideration is included within ‘Purchase price and contingent consideration payable’ on the consolidated balance sheets. The fair value of intangible assets was based on valuations using a discounted cash flow model (Level 3 inputs) which requires significant estimates and assumptions, including estimating future revenues and costs. The fair value of debt obligations assumed was based on the interest rates underlying these instruments in relation to the market rates available for similar instruments. The excess of the purchase price over the assets acquired and liabilities assumed was recognized as goodwill. The goodwill is attributable to expected synergies and customer cross-selling opportunities between the Company and Woorank.

Hawk Search Acquisition

On May 28, 2021, the Company, pursuant to a Share Purchase Agreement (the “Hawk Purchase Agreement”), acquired all of the issued and outstanding shares of Hawk Search, an Illinois corporation. The purchase price consisted of (1) an initial cash payment at closing, (2) an issuance of 1,500 shares of the Company’s newly designated Series D Preferred Stock, and (3) deferred cash payable on or before December 31, 2021. The Hawk Purchase Agreement also provides for additional consideration, in the event of achievement of certain revenue targets, to the selling shareholders as an additional earn-out, payable in two installments, as amended and as follows: (i) on or before July 1, 2022, the aggregate sum of $1,779 thousand (which was paid on July 1, 2022); and (ii) on or before October 3, 2022, the aggregate sum of $250 thousand, as included within the Amendment to the Stock Purchase Agreement, dated June 15, 2022.

The Company accounted for the Hawk Search transaction as a business combination. The Company determined that the fair value of the gross assets acquired was not concentrated in a single identifiable asset of a group of similar assets. Assets acquired and liabilities assumed have been recognized at their estimated fair values as of the acquisition date. The fair value of Series D Preferred Stock issued as part of consideration transferred was determined based on the price paid by third-party investors in the Private Placement (see Note 8) which occurred in close proximity to the acquisition date. As more fully described in Note 8, the Series D Preferred Stock contains an embedded beneficial conversion feature. The intrinsic value of $724 was calculated as of the acquisition date. The fair value of contingent consideration was determined based on the probability of achievement of the revenue targets and operational goals, which includes estimating future revenues. The fair value of intangible assets was based on valuations using a discounted cash flow model (Level 3 inputs) which requires significant estimates and assumptions, including estimating future revenues and costs. The excess of the purchase price over the assets acquired and liabilities assumed was recognized as goodwill. The goodwill is attributable to expected synergies and customer cross-selling opportunities between the Company and Hawk Search.

The acquisition date fair value of consideration transferred was as follows:

	Woorank		Hawk Search		Total
Cash paid at or in close proximity to closing	$	285	$	4,800	$	5,085
Future deferred payments		376		2,000		2,376
Common stock (29,433 shares at $3.38 per share)		99		-		99
Series D Convertible Preferred Stock (1,500 shares at $618 per share)		-		930		930
Seller’s note		352		-		352
Contingent consideration (earn-outs)		1,289		2,190		3,479
Total consideration paid	$	2,401	$	9,920	$	12,321

The acquisition date fair value of assets acquired, and liabilities assumed was as follows:

	Woorank		Hawk Search		Total
Assets acquired:
Cash	$	577	$	100	$	677
Non-cash current assets		23		780		803
Property and equipment		5		-		5
Intangible assets:
Acquired software		282		560		842
Customer relationships		1,280		3,410		4,690
Domain and trade names		116		620		736
Goodwill		2,888		7,540		10,428
Total assets acquired		5,171		13,010		18,181
Liabilities assumed:
Current liabilities		208		1,909		2,117
Assumed debt obligations		2,159		-		2,159
Deferred tax liabilities		403		1,181		1,584
Total liabilities assumed		2,770		3,090		5,860
Total consideration paid	$	2,401	$	9,920	$	12,321

The average useful lives of the identifiable intangible assets acquired were as follows:

	Woorank		Hawk Search
	(in years)
Acquired software		5		5
Customer relationships		8		10
Domain and trade names		12		15

Total earnings from the acquisitions are impracticable to disclose as the operations were merged with existing operations and certain costs were not accounted for separately.

Pro Forma Information (Unaudited)

The following is the unaudited pro forma information assuming the acquisitions occurred on October 1, 2020:

	Three months ended June 30, 2021			Nine months ended June 30, 2021
(in thousands, except share and per share data)
Revenue	$	4,412		$	13,342
Net income (loss) attributable to common shareholders - basic	$	(3,605	)	$	(5,841	)
Net income (loss) attributable to common shareholders - diluted	$	(3,605	)	$	(5,841	)
Net income (loss) per share attributable to common shareholders:
Basic	$	(0.61	)	$	(1.14	)
Diluted	$	(0.61	)	$	(1.14	)
Weighted average common shares outstanding - basic		5,939,021			5,117,586
Weighted average common shares outstanding - diluted		5,939,021			5,117,586

Pro forma information for the three and nine months ended June 30, 2022, is not presented as the amounts reported in the Condensed Consolidated Statements of Operations include the activities of these acquisitions for the period then ended.