Note 3 - Business Combination |
12 Months Ended | ||||||||||||
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Jan. 31, 2025 | |||||||||||||
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| Business Combination [Text Block] |
NOTE 3 — BUSINESS COMBINATION
Avelead Acquisition
The Company acquired all of the equity interests of Avelead as part of the Company’s strategic expansion into the revenue cycle management, acute-care healthcare space (the “Transaction”). The Transaction was completed on August 16, 2021.
The aggregate consideration for the purchase of Avelead was approximately $29.7 million (at fair value) consisting of (i) $12.5 million in cash, net of cash acquired, (ii) $6.5 million in common stock, and (iii) approximately $10.7 million in contingent consideration (see below). The Company issued 334,798 shares of its restricted common stock (the “Acquisition Restricted Common Stock”). The Acquisition Restricted Common Stock had a fair value as of the closing date of the acquisition of $6.5 million. Additionally, the Transaction included two types of contingent consideration; the first is referred to herein as “SaaS Contingent Consideration” and the second is referred to herein as “Renewal Contingent Consideration.” The SaaS Contingent Consideration and Renewal Contingent Consideration had an aggregate value of approximately $10.7 million as of the date of closing. The owners of Avelead are also referred to herein as “Sellers” and are enumerated in the UPA (as defined below).
The Unit Purchase Agreement (hereafter referred to as the “UPA”), stated that the purchase price for Avelead at closing included a cash payment of $11.9 million. Additionally, the Company paid $285,000 of the Sellers’ closing costs, $285,000 related to the working capital adjustment as defined in the UPA. Finally, at closing, the Company issued the Acquisition Restricted Common Stock with a fair value of approximately $6.5 million, based on a 30-day average of the closing price of the Company’s common stock prior to the closing date. The SaaS Contingent Consideration and the Renewal Contingent Consideration described in more detail below were included in the UPA as potential future consideration for the Transaction. These are reflected on the Company’s consolidated balance sheet as “Acquisition earnout liability.”
The contingent consideration is comprised of “SaaS Contingent Consideration” and “Renewal Contingent Consideration” which are described in more detail as follows:
On November 21, 2022, the Company made the first year earnout payments and issued shares of restricted common stock to the Sellers in accordance with the UPA. In connection with the first year earnout payment, the Company made an aggregate cash payment of $2,012,000 and issued a combined total of 124,735 unregistered securities in the form of restricted common stock, par value $0.01 per share (“restricted common stock”), with respect to the first year earnout consideration. The estimated aggregate value of the first year earnout payment was $4,000,000 with respect to the SaaS Contingent Consideration and $1,000,000 with respect to the Renewal Contingent Consideration.
As of January 31, 2024, the estimated aggregate value of the second year earnout consideration was $1,794,000. On March 27, 2024, the Company issued 105,958 unregistered securities in the form of restricted common stock, par value $0.01 per share, with respect to the second year earnout consideration. The Company has made cash payments of $887,000 related to the second year earnout consideration. The remaining outstanding amounts were originally contractually due by October 31, 2024, and is reflected on the Company’s consolidated balance sheet as “acquisition earnout liability” totaling $377,000 as of January 31, 2025.
The Company entered into an employment agreement and a separation agreement with each of the two Sellers. Acquisition-related costs include the cost of a two-year separation agreement with one of the Sellers. The separation agreement was expensed at the closing of the transaction as there were no material future obligations of the Seller to the Company within acquisition-related costs. The employment agreement with the other Seller had a two-year term and entitled the Seller to six-months separation pay in the event of termination without cause. The expense for the employment agreement is recognized ratably over the service period customary with other employment agreements within selling, general, and administrative expense. On September 1, 2023, the Company terminated the employment agreement. In exchange for a general release from the Seller, the Company agreed to accelerate the vesting of 10,000 outstanding and unvested shares of restricted common stock of the Company previously granted to the Seller, subject to such Seller’s non-revocation of a general release of claims against the Company.
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