23. Acquisitions

Ergatta Acquisition

On March 11, 2026, the Company completed the Ergatta Acquisition (see Note 1) for a total purchase price of approximately $13.4 million, consisting of (i) cash paid at closing of $2.1 million; (ii) a senior secured promissory note delivered at the Closing and maturing on April 30, 2027 in the amount of $1.9 million (which includes a working capital adjustment in accordance with the terms of the Merger Agreement); (iii) contingent consideration initially valued at $1.6 million payable on April 30, 2027, as provided by the calculations, formulas, and other procedures set forth in the Merger Agreement; (iv) assumption of post-closing Ergatta liabilities of $0.2 million; and (v) 4,749,974 shares of the Company's Series D-1 Preferred Stock (see Note 16).

At the closing, the Company entered into a registration rights agreement with the Securityholders' Representative, on behalf of the parties entitled to receive equity consideration under the Merger Agreement, pursuant to which the Company granted customary registration rights with respect to equity consideration issuable under the Merger Agreement.

The Acquisition was accounted for under the acquisition method of accounting under ASC 805, Business Combinations. Assets acquired and liabilities assumed were recorded in the condensed consolidated balance sheet at their estimated fair values as of March 11, 2026, with the remaining unallocated purchase price recorded as goodwill. The table below summarizes the consideration transferred to Ergatta shareholders on March 11, 2026:

Ergatta is a connected fitness company with an emphasis on game-based fitness content. The Ergatta Acquisition was a strategic acquisition intended to help accelerate the Company’s commercialization path and achieve immediate scale, resulting in a high growth, profitable platform that sells connected fitness equipment and digital fitness services across B2B and B2C channels.

The Series D-1 preferred stock was recorded at its estimated fair value and recognized as a long-term liability in the accompanying condensed consolidated balance sheet. Settlement of this liability is based on Ergatta's free cash flow, as defined below, and the settlement value will be a minimum of $5.25 million and a maximum of $9.5 million.

The purchase price allocation is preliminary and subject to change, including the valuation of intangible assets. The amounts recognized will be finalized as the information necessary to complete the analysis is obtained, but no later than one year after the acquisition date.

The identified intangible assets of $9.8 million are comprised of (i) software developed technology of $2.4 million that has an estimated useful life of 5 years, (ii) direct-to-consumer subscription of $5.3 million that has an estimated useful life of 2 years, (iii) license agreement of $1.3 million having an estimated useful life of 6 years; and (iv) trademarks and trade name of $0.8 million with an estimated useful life of 9 years. Significant assumptions utilized in the valuation of identified intangible assets were based on company specific information and projections which are not observable in the market and are thus considered Level 3 measurements as defined by U.S. GAAP. Estimated annual amortization expense related to these intangible assets for each of the next five fiscal years is included in Note 7.

Earn Out

As part of the Ergatta Acquisition, the sellers are entitled to receive a cash contingent payment on April 30, 2027 that is secured by the $1.9 million senior note previously discussed. The amount of the contingent payment is based on Ergatta's 2026 Free Cash Flow less $1.75 million multiplied by 2.0, with a maximum payment of $3.5 million. The fair value of this payment as of March 11, and March 31, 2026 is estimated to be $1.6 million. Additionally, the ultimate settlement of the Series D-1 Preferred Stock is contingent upon on Ergatta's 2026 Free Cash Flow, which is defined as earnings before interest, taxes, deprecation and amortization, stock-based compensation, other income/expense and certain mutually agreed-upon non-recurring charges, less capitalized software development expenses and other capital expenditures incurred in the ordinary course of business. The amount of the settlement associated with the Series D-1 Preferred Stock is expected to be between a minimum of $5.25 million and a maximum of $9.5M. “

The unaudited pro forma consolidated results for the three months ended March 31, 2026 and 2025 were prepared using the acquisition method of accounting and are based on the historical financial information of Ergatta and the Company. The unaudited pro forma consolidated results incorporate historical financial information for all significant acquisitions pursuant to SEC regulations since January 1, 2025. The historical financial information has been adjusted to give effect to pro forma adjustments that are: (i) directly attributable to the acquisition, (ii) factually supportable and (iii) expected to have a continuing impact on the combined results. The unaudited pro forma consolidated results are not necessarily indicative of what the Company’s consolidated results of operations actually would have been had it completed these acquisitions on January 1, 2025.