Note 3. Acquisitions

Acquisition of Red Barn

On March 1, 2021, the Company completed the acquisition of Red Barn, in a transaction deemed immaterial to the Company. The Red Barn acquisition was accounted for as a business combination using the acquisition method of accounting.

Acquisition of Naberly

On March 1, 2021 the Company acquired substantially all of the assets of Naberly for cash consideration of approximately $2.7 million. Based on the Company’s preliminary estimation of the fair value of the assets acquired, the Naberly acquisition was accounted for as an asset acquisition. The total acquisition cost, including transaction costs of approximately $0.1 million, was approximately $2.8 million and was recorded as software intangible assets.

During the year ended December 31, 2020, in connection with, and in advance of the closing under the asset purchase agreement to acquire the assets of Naberly, the Company issued to Naberly an unsecured loan (the “Loan”) in the principal amount of up to $165,000 with an interest rate of two percent (2%) per annum, compounded annually, and a maturity date of February 28, 2021. The outstanding principal balance of the Loan was forgiven in connection with the closing of the acquisition and was accounted for as part of the purchase consideration transferred to Naberly.

Acquisition of E4:9

On April 16, 2021 the Company purchased 100% of outstanding capital stock of E4:9. The Company accounted for the E4:9 acquisition as a business combination. The purchase price consisted of approximately $9.8 million cash consideration and $16.6 million common stock consideration for a total purchase price of approximately $26.5 million. The aggregate purchase price exceeded the fair value of the net tangible and intangible assets acquired, and accordingly the Company recorded goodwill of approximately $14.4 million.

The total purchase consideration and the fair values of the assets and liabilities at the acquisition date were as follows (amount in thousands):

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The Company recognized approximately $0.3 million of acquisition related costs that were expensed in the year ended December 31, 2021 and are included in general and administrative expenses.

Goodwill of approximately $7.4 million and $7.1 million was assigned to the Company’s Mortgage and Other services reporting units, respectively, and is attributable primarily to our assembled workforce and the anticipated future economic benefits of the vertical integration of E4:9’s mortgage lending and insurance product offerings available to our real estate agents. There is carryover basis in goodwill for tax purposes of $5.2 million that is deductible for income tax purposes.

The fair value associated with identifiable intangible assets was approximately $11.8 million, comprised of customer relationships of $6.2 million, tradenames of $5.2 million and know-how of $0.4 million. Customer relationships is being amortized on an accelerated basis over a useful life of 8 years. Tradenames and know-how are amortized on a straight-line basis over 10 years and 5 years, respectively.

The Company’s consolidated financial statements for the year ended December 31, 2021 include the results of operations of E4:9 since the closing on April 16, 2021 during which period E4:9 contributed approximately $11.0 million and $3.5 million of revenues and net loss, respectively.

Acquisition of LiveBy

On April 20, 2021 the Company purchased 100% of outstanding capital stock of LiveBy. The Company accounted for the LiveBy acquisition as a business combination. The purchase price consisted of approximately $3.4 million cash consideration and $5.6 million common stock consideration for a total purchase price of approximately $9.0 million. The aggregate purchase price exceeded the fair value of the net tangible and intangible assets acquired, and accordingly the Company recorded goodwill of approximately $4.2 million.

The total purchase consideration and the fair values of the assets and liabilities at the acquisition date were as follows (amount in thousands):

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The Company recognized approximately $0.2 million of acquisition related costs that were expensed in the year ended December 31, 2021 and are included in general and administrative expenses.

Goodwill was assigned to the technology reporting unit and is attributable primarily to our assembled workforce and the anticipated future economic benefits to the Company’s agents through technology product offerings. None of the goodwill is expected to be deductible for income tax purposes. Customer relationships, tradename and software are being amortized on an accelerated basis over a useful life of 10 years, 10 years, and 5 years, respectively.

The fair value associated with identifiable intangible assets was approximately $4.9 million, comprised of customer relationships of $2.0 million, tradename of $1.0 million and software of $1.9 million. Customer relationships and tradename are being amortized on a straight-lined basis over a useful life of 10 years. Software is amortized on a straight-line basis over 5 years.

The Company’s consolidated financial statements include the results of operations of LiveBy since the closing on April 20, 2021 during which period LiveBy contributed approximately $1.7 million and $0.1 million of revenues and net loss, respectively.

Acquisition of Epic and Woodhouse

On June 30, 2021, the Company completed the acquisition of Epic in a transaction deemed immaterial to the Company. The Epic acquisition was accounted for as a business combination using the acquisition method of accounting. Due to the timing of the acquisition, the valuation of net assets acquired has not been finalized and is expected to be completed by no later than one year from the acquisition date in accordance with GAAP. In late November 2021 the Company completed the acquisition of Woodhouse, in a transaction deemed immaterial to the Company.

Acquisition of Verus

On November 24, 2020 the Company purchased 100% of outstanding capital stock of Verus. The Company accounted for the Verus acquisition as a business combination. The purchase price consisted of $0.7 million in cash consideration and $0.3 million in common stock consideration for a total purchase price of $1.0 million. The aggregate purchase price exceeded the fair value of the net tangible and intangible assets acquired, and accordingly the Company recorded goodwill of approximately $0.8 million, which is assigned to the Other segment and is attributable primarily to the real estate agent and attorney relationships. None of the goodwill is expected to be deductible for income tax purposes.

The Company recognized approximately $0.1 million of acquisition related costs that were expensed during the year ended December 31, 2020, and are included in general and administrative expenses.

Supplemental Pro Forma Financial Information

On an unaudited pro forma basis, the revenues and net loss of the Company assuming the acquisitions of E4:9 and LiveBy occurred on January 1, 2020, are shown below (amount in thousands except share data). The unaudited pro forma information does not purport to present what the Company’s actual results would have been had the acquisition happened on January 1, 2020, nor is the financial information indicative of the results of future operations. The pro forma financial information includes the estimated amortization expense based on the fair value and estimated useful lives of intangible assets as part of the acquisitions of E4:9 and LiveBy.

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