Annual report pursuant to Section 13 and 15(d)

Acquisitions and Divestitures

v3.21.1
Acquisitions and Divestitures
12 Months Ended
Dec. 31, 2020
Business Combinations [Abstract]  
Acquisitions and Divestitures

Note 3 — Acquisitions and Divestitures

 

Divestiture of Subsidiary - Cloud B

 

On February 17, 2020, the Company divested its Cloud B, Inc. subsidiary and entered into an Agreement for the Purchase and Sale of Cloud B, Inc.(the “Purchase Agreement”), with Pearl 33 Holdings, LLC (the “Buyer”), pursuant to which the Buyer purchased from the Company (and the Company sold and assigned) 80,065 shares of common stock of Cloud B (the “Cloud B Shares”) for $1.00 and an indemnification agreement as described below, constituting a 72.15% ownership interest in Cloud B, based on 110,964 shares of Cloud B’s common stock outstanding as of February 17, 2020. In accordance with the agreement, all of the liabilities of Cloud B were assumed by Pearl 33.

 

On February 17, 2020, as part of the sale of Cloud B, Inc., the Company entered into an indemnification agreement with Pearl 33 Holdings, LLC in connection with the divestiture of Cloud B, Inc., whereby pursuant to such agreement the Company is limited to the issuance of 150,000 shares of the Company’s common stock to the Buyer for indemnification of claims against Cloud B Inc. In addition, the Company shall indemnify the Buyer for expenses (including attorneys’ fees and all other costs, expenses and obligations) in connection with defending any Claim in connection with the Cloud B. The Company has recorded $405,000 related to the fair value of the 150,000 shares of common stock which were issued to the Buyer on June 30, 2020.

 

The table below shows the assets and liabilities that the Company was relieved of in the transaction:

 

    February 17, 2020  
Accounts payable     4,005,605  
Accrued Expenses     370,289  
Income Tax Payable     14,473  
Notes Payable     900,000  
Non-Controlling Interest     26,393  
Shares to be issued to Buyer     (405,000 )
Gain on divestiture   $ 4,911,760  

 

Divestiture of Subsidiary- SRM Entertainment, LTD

 

On November 30, 2020, the Company and its wholly owned subsidiary, SRM Entertainment, LTD entered into a Stock Exchange Agreement with Jupiter Wellness, Inc. (“Jupiter”). Under the terms of the Exchange Agreement, Jupiter agreed to purchase all outstanding shares of common stock (the “Exchange Shares”) issued by SRM from the Company. As consideration for the purchase of the Exchange Shares, Jupiter issued the Company 200,000 shares of its restricted common stock, symbol JUPW as listed on NASDAQ Capital Markets.. Please see Note 18 — Discontinued Operations for further information.

 

Acquisitions

 

On September 29, 2020, the Company entered into a Purchase and Sale Agreement (the “Agreement”) with Graphene Holdings, LLC, Mercury FundingCo, LLC, Ventus Capital, LLC and Jetco Holdings, LLC (together the “Sellers”) to acquire all outstanding Membership Units (the “Units”) of TBD Safety, LLC (“TBD”). Collectively, the Sellers owned all outstanding Units of TBD. Under the terms of the Agreement, the Company issued a total of Two Million Two Hundred Ten Thousand Three Hundred Eighty-Two (2,210,382) shares of the Company’s common stock and a total of Seven Hundred Sixty-Four Thousand Six Hundred Eighteen (764,618) shares of a newly designated Preferred Stock (the “Preferred”). In addition, the Company and Sellers entered into a Registration Rights Agreement (the “Registration Rights Agreement”) in favor of the Sellers obligating the Company to register such common stock and shares of common stock to be issued upon conversion of the Preferred within 120 days after the Closing. The Sellers also had an Earn Out Consideration, which provides that at such time as the assets purchased in the Agreement achieve cumulative revenue of $10,000,000, the Sellers will earn a total of One Hundred Twenty-Five Thousand (125,000) shares of common stock. The closing of the transaction occurred on October 16, 2020.

 

Asset Acquisition

 

On March 11, 2020, the Company issued 238,750 shares of our common stock to acquire the assets of HMNRTH, LLC. On July 1, 2020, the Company made payment in the amount of $70,850 to the principals of HMNRTH, LLC. The transaction was treated as an asset purchase and not accounted for as a business combination due to the limited inputs, processes and outputs, which did not meet the requirements to be a business.

 

On November 6, 2019, the Company issued 45,000 shares of our common stock to acquire the assets of Uber Mom, LLC for $52,352, which was the approximate value of Uber Mom, LLC’s inventory.

 

Joint Venture

 

On August 23, 2019, the Company formed Ed Roses, LLC, a 50% joint venture with 4Keeps Roses, Inc., to distribute preserved roses, flowers and associated gift products. The operations are currently not material.

 

The following table summarizes the preliminary purchase price allocation of fair values of the assets acquired and liabilities assumed during 2019 at the date of acquisition:

 

    Uber Mom  
Inventory   $ 52,352  
Goodwill     98,613  
Total assets acquired   $ 150,965  

 

The following table summarizes the aggregate purchase price consideration paid for acquisitions during 2020:

 

    TBD Safety, LLC  
Fair value of issued common shares   $ 4,203,632  
Fair value of issued preferred shares     764,618  
Fair value of contingent consideration     200,000  
Purchase consideration   $ 5,168,250  

 

The following table summarizes the purchase price allocation of fair values of the assets acquired and liabilities assumed during 2020 at the date of acquisition:

 

    TBD Safety, LLC  
Cash and cash equivalents   $ 180,489  
Accounts receivable     20,217  
Inventory     492,793  
Other current assets     346,095  
Goodwill     591,729  
Intangible assets     3,600,000  
Total assets acquired   $ 5,231,323  
Notes payable     62,500  
Current liabilities     573  
Total liabilities assumed     63,073  
Total net assets acquired     5,168,250  

 

The following represents the unaudited pro forma consolidated income statement as if the acquisitions had been included in the consolidated results of the Company for the entire years ending December 31, 2020:

 

    Year Ended December 31, 2020     Year Ended December 31, 2019  
             
Revenues, net   $ 16,801,734     $ 13,197,684  
Cost of revenues     11,994,549       8,095,723  
Gross profit     4,807,185       5,101,961  
                 
Operating expenses:                
Selling, general and administrative     12,589,513       14,900,658  
Impairment     -       4,443,000  
Change in fair value of earnout     -       (520,000 )
Operating loss     (7,782,328 )     (13,721,697 )
                 
Other income (expense):                
Other income (expense)     1,615,016       (1,189,966 )
Loss before income taxes     (6,167,312 )     (14,911,663 )
Income tax expense (benefit)     19,197       (22,373
Net loss from continuing operations   $ (6,186,509 )   $ (14,889,290 )

 

The following table summarizes the aggregate purchase price consideration paid for acquisitions during 2019:

 

    Uber Mom  
Cash paid   $ 52,352  
Fair value of issued common shares     98,613  
Purchase consideration   $ 150,965  

 

The Company believes that these combinations will further strengthen its future growth opportunities while also increasing product diversification. The Company accounted for these acquisitions as a business combination under the acquisition method of accounting.