Business Combinations

6 Months Ended

Sep. 30, 2022

Business Combination and Asset Acquisition [Abstract]

K2 Cyber Security Inc.

On September 14, 2022, the Company acquired all of the equity interests in K2 Cyber Security Inc. (“K2”), a company that provides a differentiated, signatureless approach to vulnerability and hack detection. The aggregate purchase price of $16.6 million consisted of approximately (i) $4.5 million in cash (of which the Company held back approximately $3.3 million for 18 months after the transaction closing date for indemnification purposes, which has been accrued as a long-term liability) and (ii) 202,752 shares of the Company’s common stock with an aggregate fair value of approximately $12.1 million, after taking into account the holdback arrangement with the K2 founders, as described below. The fair value of the consideration transferred was determined based on a $59.74 per share price of the Company’s common stock on the closing date of the acquisition.

The total purchase price was allocated to the developed technology acquired with an estimated useful life of three years and net assets assumed. Deferred tax related to the developed technology was deemed immaterial. The excess purchase price was recorded as goodwill, as set forth below. Goodwill generated from the acquisition is attributable to expected synergies from future growth and is not deductible for tax purposes.

The following table presents the preliminary purchase price allocation related to the acquisition (in thousands):


Cash consideration	$	4,497
Fair value of common shares	$	16,132
Total consideration	$	20,629
Post-business combination compensation expense	$	(4,019)
Total purchase price	$	16,610
Net assets assumed	$	(589)
Developed technology acquired	$	(7,400)
Goodwill	$	8,621

The acquisition has been accounted for as a business combination in accordance with ASC 805. The estimated fair value of developed technology acquired of $7.4 million was determined through the use of a third-party valuation firm using cost approach methodology. The direct transaction costs of the acquisition have been accounted for separately from the business combination and expensed as incurred. Total direct transaction costs incurred by the Company were $0.9 million, which were included in general and administrative expenses in the Company’s condensed consolidated statement of operations for the three months ended September 30, 2022. The Company paid approximately $0.6 million in acquisition-related expenses incurred by K2 for its advisors which were included as part of the purchase consideration. The business combination did not have a material impact on the condensed consolidated financial statements and therefore historical and pro forma disclosures have not been presented.

The acquisition also included a holdback arrangement with the two founders of K2, totaling approximately 67,278 shares of the Company’s common stock, contingent upon their continued employment with the Company. The fair value of these awards, which are subject to the recipients’ continued service, was $4.0 million and was excluded from the aggregate purchase price. These awards will be recognized as stock-based compensation expenses over the vesting period, which is 24 and 36 months for the two founders, respectively.

CodeStream Inc.

On June 8, 2021, the Company acquired all of the equity interests in CodeStream Inc. (“CodeStream”), a company that provides an integrated developer collaboration platform. The aggregate purchase price of $28.6 million consisted of approximately $15.1 million in cash (of which the Company held back approximately $7.3 million from the aggregate purchase price for 18 months after the transaction closing date, and which has been accrued as a long-term liability) and 202,561 shares of the Company’s common stock with an aggregate fair value of approximately $13.5 million. The fair value of the consideration transferred was determined based on a $66.58 per share price of the Company’s common stock on the closing date of the acquisition. The total purchase price was allocated to the developed technology acquired with an estimated useful life of three years, net assets assumed, and a deferred tax liability related to the developed technology. The excess purchase price was recorded as goodwill. The acquisition was accounted for as a business combination in accordance with ASC 805. The estimated fair value of developed technology acquired of $10.3 million was determined through the use of a third-party valuation firm using cost approach methodology. The business combination did not have a material impact on the condensed consolidated financial statements and therefore historical and proforma disclosures have not been presented.

The acquisition also included a holdback arrangement with certain employees of CodeStream, totaling approximately 199,492 shares of the Company’s common stock, contingent upon their continued employment with the Company. The fair value of these awards, which are subject to the recipients’ continued service, was $13.3 million and was excluded from the aggregate purchase price. These awards are being recognized as stock-based compensation expense over the vesting period, which is 42 months.