Quarterly report pursuant to Section 13 or 15(d)

BUSINESS COMBINATIONS

v3.20.2
BUSINESS COMBINATIONS
6 Months Ended
Jun. 30, 2020
BUSINESS COMBINATIONS  
NOTE 13. BUSINESS COMBINATIONS

NOTE 13 - BUSINESS COMBINATIONS

 

On February 14, 2020, the Company acquired all of the assets of OneQor Technologies, Inc. (“OneQor”). The acquisition of OneQor was accounted for in accordance with ASC 805-10, “Business Combinations.” The total consideration transferred included 58,154,027 shares of the Company’s common stock, with a fair value of $9.31 million. The preliminary allocation of the purchase price was based upon a preliminary valuation, and the Company’s estimates and assumptions of the assets acquired and liabilities assumed were subject to change within the measurement period pending the finalization of a third-party valuation. The multi-period excess earnings method, an income approach, was utilized to estimate the fair value of OneQor’s customer relationships. The relief-from-royalty method, an income approach, was utilized to estimate the fair value of OneQor’s trade name. The following table summarizes the preliminary allocation of the purchase price:

  

 

 

(in thousands)

 

Assets acquired

 

 

 

Accounts receivable

 

$

51

 

Inventory

 

 

81

 

Prepaid expenses

 

 

241

 

Property, plant and equipment

 

 

80

 

Customer relationships

 

 

3,070

 

Trade name

 

 

690

 

Goodwill

 

 

6,763

 

Other long-term assets

 

 

260

 

Total Assets acquired

 

$

11,237

 

 

 

 

 

 

Liabilities assumed

 

 

 

 

Accounts payable and accrued expenses

 

$

1,481

 

Deferred income

 

 

300

 

Short-term debt

 

 

100

 

Long-term lease liabilities

 

 

108

 

Total liabilities assumed

 

$

1,990

 

During the six months ended June 30, 2020, the Company recognized $0.87 million of revenue and a net loss of $1.44 million from OneQor. In the view of management, goodwill reflects the future cash flow expectations for OneQor’s market position in the growing CBD industry, synergies and the assembled workforce. Goodwill recorded for the OneQor transaction is non-deductible for tax purposes.

 

Supplemental Pro-Forma Information

 

Supplemental information on an unaudited pro-forma basis is reflected as if each of the OneQor acquisition had occurred at the beginning of 2019, after giving effect to certain pro forma adjustments primarily related to interest expense, amortization of acquired intangible assets and the elimination of expense associated with convertible debt securities that were accounted for as derivative instruments.

 

The unaudited pro-forma supplemental information is based on estimates and assumptions that the Company believes are reasonable. The supplemental unaudited pro-forma financial information is presented for comparative purposes only and is not necessarily indicative of what the Company’s financial position or results of operations actually would have been had the Company completed the acquisitions at the dates indicated, nor is it intended to project the future financial position or operating results of the Company as a result of the OneQor acquisition.

 

 

(in thousands)

 

 

 

 

 

 

For the Six Months Ended

 

 

 

 

 

 

June 30, 2020

 

 

 

 

 

 

 

 

Pro-forma revenues

 

 

 

$ 8,056

 

Pro-forma net loss from continuing operations

 

 

 

 

$ (30,129 )

 

 

 

 

 

 

 

 

 

 

(in thousands)

 

 

 

For the Three Months Ended

 

 

For the Six Months Ended

 

 

 

June 30, 2019

 

 

June 30, 2019

 

 

 

 

 

 

 

 

 

Pro-forma revenues

 

$ 4,851

 

 

$ 7,270

 

Pro-forma net loss from continuing operations

 

$ (13,149 )

 

$ (23,548 )