Quarterly report pursuant to Section 13 or 15(d)

Acquisitions

v3.21.2
Acquisitions
6 Months Ended
Jun. 30, 2021
Acquisitions  
Acquisitions

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. Due to the timing of the acquisition, the valuation of net assets acquired has not been finalized and is expected to be completed by the end of September 2021, and in any case, no later than one year from the acquisition date in accordance with GAAP.

Acquisition of Naberly

On March 1, 2021 the Company acquired substantially all of the assets of Naberly for cash consideration of $2,665,000. 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 $95,000, was $2,760,000 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 $9,824,509 cash consideration and $16,633,713 common stock consideration for a total purchase price of $26,458,222. The aggregate purchase price exceeded the fair value of the net tangible and intangible assets acquired, and accordingly the Company recorded goodwill of approximately $14,418,437.

The total purchase consideration and the fair values of the assets and liabilities at the acquisition date were as follows:

Recognized amounts of identifiable assets acquired and liabilities assumed

    

    

Cash

$

2,843,379

Accounts receivable

 

957,669

Mortgage loans held for sale

 

8,147,195

Derivative assets

 

89,669

Prepaid and other current assets

 

121,837

Property & equipment

 

355,887

Intangible assets

 

11,780,000

Lease right of use assets

 

1,498,085

Other long-term assets

 

7,499

Total identifiable assets acquired

 

25,801,220

Accounts payable and accrued liabilities

937,766

Escrow liabilities

 

74,890

Derivative liabilities

 

120,000

Warehouse lines of credit

 

7,958,271

Notes payable

 

485,600

Lease liability, current portion

 

337,339

Lease liability, net of current portion

 

1,160,746

Deferred tax liabilities

 

2,686,823

Total liabilities assumed

 

13,761,435

Total identifiable net assets

 

12,039,785

Goodwill

 

14,418,437

Net assets acquired

$

26,458,222

The Company recognized approximately $289,000 of acquisition related costs that were expensed in the three and six months ended June 30, 2021 and are included in general and administrative expenses.

Goodwill of approximately $7.4 million and $7.0 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. None of the goodwill is expected to be deductible for income tax purposes.

The fair value associated with identifiable intangible assets was $11,780,000, comprised of customer relationships of $6,160,000, tradenames of $5,190,000 and know-how of $430,000. 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.

Due to the timing of the acquisition, the valuation of net assets acquired has not been finalized and is expected to be completed by the end of December 2021, and in any case, no later than one year from the acquisition date in accordance with GAAP.

The Company’s condensed consolidated financial statements for the three and six months ended June 30, 2021 include the results of operations of E4:9 since the closing on April 16, 2021 during which period E4:9 contributed approximately $2,873,000 and $1,166,000 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 $3,376,284 cash consideration and $5,604,467 common stock consideration for a total purchase price of $8,980,751. The aggregate purchase price exceeded the fair value of the net tangible and intangible assets acquired, and accordingly the Company recorded goodwill of approximately $4,192,667.

The total purchase consideration and the fair values of the assets and liabilities at the acquisition date were as follows:

Recognized amounts of identifiable assets acquired and liabilities assumed

    

    

Cash

$

516,082

Accounts receivable

 

138,459

Intangible assets

4,920,000

Prepaid and other current assets

 

1,671

Total identifiable assets acquired

 

5,576,212

Deferred tax liabilities

620,879

Accounts payable and accrued liabilities

 

167,249

Total liabilities assumed

 

788,128

Total identifiable net assets

 

4,788,084

Goodwill

 

4,192,667

Net assets acquired

$

8,980,751

The Company recognized approximately $231,000 of acquisition related costs that were expensed in the three and six months ended June 30, 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.

Due to the timing of the acquisition, the valuation of net assets acquired has not been finalized and is expected to be completed by the end of December 2021, and in any case, no later than one year from the acquisition date in accordance with GAAP.

The Company’s consolidated financial statements for the three and six months ended June 30, 2021 include the results of operations of LiveBy since the closing on April 20, 2021 during which period LiveBy contributed approximately $455,000 and $140,000 of revenues and net loss, respectively.

Acquisition of Epic Realty

On June 30, 2021, the Company completed the acquisition of Epic Realty (“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 the end of December 2021, and in any case, no later than one year from the acquisition date in accordance with GAAP.

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. 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.

    

Six months ended June 30,

    

2021

    

2020

Revenue

$

139,341,692

$

74,814,491

Net loss

$

(9,242,236)

$

(562,883)

Net loss per share (basic)

$

(0.64)

$

(0.05)