Quarterly report [Sections 13 or 15(d)]

Business Combination and Asset Purchase

v3.26.1
Business Combination and Asset Purchase
 3 Months Ended
Mar. 31, 2026
Business Combination, Asset Acquisition, Transaction between Entities under Common Control, and Joint Venture Formation [Abstract]  
Business Combination and Asset Purchase Business Combination and Asset Purchase
On May 20, 2025, the Company completed its previously announced asset purchase of technology assets, customer contracts, trademarks, and other intellectual property (collectively, the “CSI Acquired Assets”) from CompuSystems, Inc. (“CSI”). At the closing (the “CSI Closing”), pursuant to an asset purchase agreement, by and between the Company and CSI, dated as of December 19, 2024, as amended by that certain amendment to the asset purchase agreement, dated as of December 30, 2024, and as further amended by that certain second amendment to the asset purchase agreement, dated as of February 25, 2025, and as further amended by that certain third amendment to the asset purchase agreement, dated March 31, 2025, and as further amended by that certain fourth amendment to the asset purchase agreement, dated May 14, 2025 (the “CSI Asset Purchase Agreement”), the Company acquired the CSI Acquired Assets for an aggregate purchase consideration of $32.8 million consisting of (i) exclusivity fee of $1.0 million paid in the fourth fiscal quarter of 2024 (the “Exclusivity Fee”), (ii) amount in cash of $1.0 million paid to an escrow account in January 2025 (the “Escrow Amount”) (iii) an amount in cash equal to $5.0 million, (iv) 10,600,000 validly issued, fully paid and nonassessable shares of restricted common stock of the Company, (the “Closing Stock Consideration”), (v) $5.0 million payable in the form of the convertible note (the “Initial Convertible Note”) issued by the Company to CSI, (vi) $5.0 million payable in the form of the convertible note (the “First Convertible Note”) issued by the Company to CSI, (vii) $5.0 million payable in the form of convertible note (the “Second Convertible Note”, and together with the Initial Convertible Note and First Convertible Note, the “CSI Convertible Notes”) issued by the Company to CSI, (viii) $500,000 for the reimbursement of fees incurred by CSI due to the acquisition, and (ix) the assumption of certain transferred liabilities, as described in the CSI Asset Purchase Agreement.
Pursuant to the CSI Asset Purchase Agreement, in connection with the CSI Closing, the Company issued the CSI Convertible Notes in an aggregate principal amount of $15.0 million, each due on the second anniversary of the closing (the “Maturity Date”). For additional information on the CSI Convertible Notes, refer to Note 5, Borrowings.
The acquisition was accounted for under ASC 805, Business Combinations and uses preliminary purchase price allocations, with adjustments permitted within the measurement period (not exceeding one year). Adjustments beyond the measurement period are recorded in earnings.
A summary of the purchase consideration follows:
Cash $ 7,500 
Closing Stock Consideration 10,283 
Convertible Notes 9,717 
Total purchase price consideration $ 27,500 
Cash of $7.5 million includes initial cash paid of $1.0 million as Exclusivity Fee in December 2024, $1.0 million Break-up Fee paid in January 2025, and cash paid at closing in May 2025 amounting to $5.5 million
The final purchase price and purchase price allocation of assets acquired and liabilities assumed follows:
Unbilled receivable $ 300 
Inventory 163 
Other assets 202 
Equipment 275 
Intangible assets 8,870 
Goodwill 19,135 
Accrued expenses (104)
Loan for purchase of equipment (141)
Deferred revenue (1,200)
Total purchase consideration $ 27,500 
The acquired intangible assets values were estimated using the discounted cash flow method and estimated discount rate. The useful lives are based on estimates of benefits derived from the future cash flows.
The acquired intangible assets, useful lives and a final estimate of fair value at the acquisition date follows:
Useful Life (years) Fair Value
Tradename 10 $ 900 
Customer relationships 10 5,160 
Internal use technology 4 2,810 
Total $ 8,870 
The results of operations of CSI are included in the unaudited consolidated financial statements of the Company for the three months ended March 31, 2026. The goodwill recorded in the CSI acquisition is not deductible for tax purposes.
API Media Innovations
On January 22, 2026, the Company completed its previously announced acquisition of all of the outstanding shares of API Media Innovations Inc. (“API Media”) pursuant to a Stock Purchase Agreement dated October 28, 2025, by and among the Company, API Media, and its shareholders. The aggregate purchase price was $14 million paid in cash, including a $1 million non-refundable deposit paid upon execution of the agreement, which was credited toward the purchase price at closing. The acquisition was accounted for as a business combination in accordance with ASC 805, Business Combinations. The purchase price allocation is preliminary and subject to adjustment during the measurement period (not to exceed one year from the acquisition date). Any such adjustments will be recorded in the period in which they are identified.
The following table summarizes the preliminary allocation of the purchase price to the estimated fair values of assets acquired and liabilities assumed at the acquisition date:
Cash $ 51 
Accounts receivable 396 
Prepaid expenses 39 
Other receivable 2 
Right of use asset 87 
Property and equipment 231 
Intangible assets 5,490 
Goodwill 8,150 
Accrued expenses (271)
Right of use liability (87)
Accounts payable (88)
Total $ 14,000 
The acquired intangible assets, useful lives and a final estimate of fair value at the acquisition date follows:
Useful Life (years) Fair Value
Tradename 5 $ 170 
Customer relationships 5 4,080 
Internal use technology 3 1,240 
Total $ 5,490 
The Company expects to derive synergy from the acquired intangibles from API with it's own intellectual property. The goodwill recorded in the CSI acquisition is not deductible for tax purposes. The Company recorded fees in three months ended March 31, 2026 of $84,000.
Supplemental Pro Forma Information:
The revenue and net loss of API included in consolidated statement of operations since the acquisition date were $187,000 and $311,000, respectively. Had the acquisition occurred on January 1, 2025, consolidated pro forma revenue, net loss and net loss per common share, basic and diluted would have been as follows:
Pro Forma (Unaudited) for the three months ended March 31,
2026 2025
Net revenue $ 3,469  $ 883 
Net loss $ (52,715) $ (10,387)

Other Intangible Asset Acquisitions
For the three months ended March 31, 2026, the Company acquired an additional patent from three inventors for an aggregate fair value of $5.4 million and a useful life of 10 years, based on expected future economic benefit, in exchange for the issuance of 7,500,000 shares of common stock. This transaction was considered a related party
transaction as described in the related party note. The Company recorded amortization expense of $0.1 million and $0 for the three months ended March 31, 2026 and 2025, respectively.