Quarterly report pursuant to Section 13 or 15(d)

CAPITALIZED SOFTWARE DEVELOPMENT COSTS

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CAPITALIZED SOFTWARE DEVELOPMENT COSTS
9 Months Ended
Sep. 30, 2023
Research and Development [Abstract]  
CAPITALIZED SOFTWARE DEVELOPMENT COSTS

3. CAPITALIZED SOFTWARE DEVELOPMENT COSTS

 

In 2020, the Company began developing MARKET.live, a livestream ecommerce platform, and has capitalized $7,131 and $7,108 of internal and external development costs as of September 30, 2023 and December 31, 2022, respectively. In October 2021, the Company entered into a 10-year license and services agreement with a third party (the “Primary Contractor”) to develop on a work-for-hire basis certain components of MARKET.live. The Primary Contractor’s fees for developing such components, including the license fee, is $5,750. The Primary Contractor was paid an additional $500 bonus in April 2022 for services rendered pursuant to the license and service agreement. In addition, as of September 30, 2023 and December 31, 2022, the Company had paid or accrued $605 and $604, respectively, of other capitalized software development costs.

 

For the three and nine months ended September 30, 2023 and 2022, the Company amortized $538 and $394, respectively, and $1,615 and $394, respectively.

 

Capitalized software development costs, net consisted of the following:

 

    September 30, 2023     December 31, 2022  
             
Beginning balance   $ 6,176     $ 4,348  
                 
Additions     23       2,760  
Amortization     (1,615 )     (932 )
Ending balance   $ 4,584     $ 6,176  

 

The expected future amortization expense for capitalized software development costs as of September 30, 2023, is as follows:

 

Year ending   Amortization  
2023 remaining   $ 594  
2024     2,377  
2025     1,445  
2026     168  
Total amortization   $ 4,584  

 

Option to Acquire Primary Contractor

 

In August 2021, the Company entered into a term sheet that provided the Company the option to purchase the Primary Contractor provided certain conditions are met. In November 2021, the Company exercised this option. The Company and the Primary Contractor subsequently reached an agreement-in-principle on the terms for the Company’s acquisition of the Primary Contractor, the final consummation of which is subject to the execution of a share purchase agreement (the “SPA”) and the completion of an audit of the Primary Contractor that is satisfactory to the Company (the “Primary Contractor Audit”), as well as the fulfillment by the Primary Contractor of certain other conditions set forth in the term sheet. The term sheet stipulates that if the Company had entered into the SPA and the Primary Contractor had the Primary Contractor Audit successfully completed prior to May 22, 2022 (or a subsequent mutually agreed upon date) and the Company thereafter determines not to consummate the acquisition of the Primary Contractor, the Company would have been liable for a $1,000 break-up fee payable to the Primary Contractor. However, as of May 22, 2022, the SPA had not been executed and the Primary Contractor Audit was not completed. The parties are still working together and in discussions regarding the transaction. Based on the term sheet, the purchase price for the Primary Contractor would have been $12,000, which could be paid in cash and/or stock, although the final terms of the acquisition if pursued will be set forth in the final executed SPA. There can be no assurance that the acquisition will be completed on the terms set forth in the term sheet or at all.