On February 10, 2025, we acquired all of the outstanding equity interests of Formation Nation, Inc. in exchange for a total consideration of $83.2 million consisting of cash and equity consideration comprising

2,205,445 restricted shares of our common stock. The shares are subject to a lock-up and voting agreement, and a portion of the cash consideration is subject to a one-year holdback and customary adjustments. Upon closing of the transaction, Formation Nation and its subsidiaries – including Inc Authority, LLC and Nevada Corporate Headquarters, Inc. – became wholly owned subsidiaries of LegalZoom.

Formation Nation is a Nevada-based small business services company with a range of legal and business solutions, from highly personalized offerings, to lower-cost value options. The acquisition of Formation Nation, along with its subsidiaries, was completed in order to accelerate our strategy of attracting higher value customers by leveraging Formation Nation’s best-in-class customer service teams, expand our portfolio of offerings, and enable us to reach a broader customer base.

The acquisition meets the criteria to be accounted for as a business combination which requires, among other things, that assets acquired and liabilities assumed be recognized at their fair values as of the acquisition date and that the difference between the fair value of the consideration paid for the acquired entity and the fair value of net assets acquired be recorded as goodwill, which is not amortized but is tested at least annually for impairment.

Approximately $12.9 million of the consideration was deferred to satisfy any necessary adjustments, including without limitation, indemnification claims related to general representations and warranties, any net working capital adjustments and deferred change in control bonuses. This deferred consideration is expected to be settled in cash after a 12-month holdback period, net of any amounts necessary to satisfy all unsatisfied or disputed claims for indemnification and net working capital adjustments. An additional $0.2 million in consideration is payable in two installments on the one- and two-year anniversary of the acquisition date. The current portion of deferred consideration was recognized within accrued expenses and other current liabilities and the non-current portion was recognized within other liabilities on our condensed consolidated balance sheet based on their respective due dates.

The identifiable assets acquired and liabilities assumed were recorded at their preliminary fair values as of the acquisition date and consolidated with those of the Company based on management's estimates and assumptions. Assigning fair market values to the assets acquired and liabilities assumed at the date of an acquisition requires the use of significant judgments regarding estimates and assumptions that may change during the measurement period, which will not exceed one year from the acquisition date. The estimated fair values of the customer relationships were calculated using income and cost approaches, including the multi-period excess earnings method. The estimated fair values of developed technology and in-process research & development were calculated using cost approaches, and the estimated fair value of trade names was calculated using the relief from royalty method.

Goodwill represents the excess of the purchase price over the identifiable net assets acquired arising from the business combination. The goodwill related to the acquisition was attributable largely to the assembled workforce and synergies expected from combining our operations, and is not deductible for tax purposes.


Cash and cash equivalents	$	1,953
Accounts receivable	276
Prepaid expenses and other current assets	257
Operating lease right-of-use assets	3,884
Other assets	80
Intangible assets	17,300
Goodwill	77,813
Total assets acquired	$	101,563

Accounts payable	$	535
Accrued expenses and other current liabilities	4,744
Operating lease liabilities, current and non-current	3,504
Deferred revenue	9,582
Other liabilities	16
Net assets acquired	$	83,182


	Fair Value		Estimated remaining useful life
Customer relationships	$	11,200	5
Developed technology	3,400		4
Trade names	2,500		5
In-process research & development	200		N/A
Total identifiable intangible assets	$	17,300

Acquisition costs related to this transaction of approximately $1.5 million were expensed as incurred and are included in general and administrative expenses on the unaudited condensed consolidated statements of operations.

Results of Formation Nation, inclusive of any synergy effects, cross-selling, or cross-marketing benefits, have been included within the unaudited condensed consolidated financial statements since February 10, 2025, the date of the acquisition. Revenue and net loss attributable to Formation Nation included within the unaudited condensed consolidated statements of operations since the acquisition date were approximately $8.6 million and $0.8 million, respectively, for the three months ended March 31, 2025.