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4. ACQUISITION OF P2KLABS, INC.
 12 Months Ended
Sep. 30, 2020
P2K  
Business Acquisition [Line Items]  
4. ACQUISITION OF P2KLABS, INC.

4. ACQUISITION OF P2KLABS, INC.

 

On January 31, 2020, the Company, entered into an agreement with p2k, and its sole stockholder, Amer Tadayon, whereby the Company purchased all of the issued and outstanding shares of p2k in exchange for an aggregate purchase price of cash and equity of $1,688,935. The transaction closed simultaneously upon the execution of the agreement by the parties on January 31, 2020.

 

As a result of the transaction, p2k is now a wholly-owned subsidiary of the Company.

 

Pursuant to the terms of the Agreement, the purchase price was as follows:

 

a)$1,039,500 in cash was paid to the Seller;

 

b)31,183 restricted shares of the Company’s common stock, valued at $145,000, were issued to the Seller (the “Shares”). The Shares are subject to certain lock-up and leak-out provisions whereby the Seller may sell an amount of Shares equal to ten percent (10%) of the daily dollar trading volume of the Company’s common stock on its principal market for the prior 30 days (the “Leak-Out Terms”);

 

c)$115,500 in cash was paid to an independent third-party escrow where such cash is subject to offset for adjustments to the purchase price and indemnification purposes; and

 

   
d)64,516 restricted shares of the Company’s common stock, valued at $300,000, were issued to an independent third-party escrow (the “Holdback Shares”). The Holdback Shares will be released to Seller once p2k achieves certain revenue milestones for the future performance of p2k. The Holdback Shares will also be subject to the Leak-Out Terms once they are released from escrow 12 months from closing.

 

The Shares and Holdback Shares were deemed to have a fair market value of $4.65 per share which was the closing price of the Company’s common stock on January 31, 2020.

 

e)26,950 Common Stock options which were deemed to have a fair market value of $88,935 on the date of the closing of the Transaction.

 

The Company accounted for the acquisition of p2k as an acquisition of a business under ASC 805.

The Company determined the fair value of the consideration given to the Seller in connection with the transaction in accordance with ASC 820 was as follows:

 

Consideration:  Fair Value
Cash  $1,155,000
95,699 shares of common stock  $445,000
26,950 common stock options  $88,935
Total Consideration  $1,688,935

 

The total purchase price of the Company’s acquisition of p2k was allocated to identifiable assets deemed acquired, and liabilities assumed, based on their estimated fair values as indicated below.

 

Purchase Price Allocation:   
Customer list  $730,000
Design and other assets  $123,000
Goodwill  $957,388
Other assets and liabilities assumed, net  $(121,453)
Total  $1,688,935

 

The following is the unaudited pro forma information assuming the acquisition of p2k occurred on October 1, 2018: 

               
    For the Year Ended
    September 30, 2020  September 30, 2019
Net sales   $10,296,510   $5,454,972
           
Net loss    (23,353,924)   (26,003,965)
           
Loss per common share - basic and diluted   $(2.42)  $(6.08)
         
Weighted average common shares outstanding - basic and diluted    9,646,325    4,273,101

 

 

The unaudited pro forma consolidated financial results have been prepared for illustrative purposes only and do not purport to be indicative of the results of operations that actually would have resulted had the acquisition occurred on the first day of the earliest period presented, or of future results of the consolidated entities. The unaudited pro forma consolidated financial information does not reflect any operating efficiencies and cost savings that may be realized from the integration of the acquisition. All transitions that would be considered inter-company transactions for proforma purposes have been eliminated.