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Business Combinations
 3 Months Ended
Jul. 31, 2025
Business Combination, Asset Acquisition, Transaction between Entities under Common Control, and Joint Venture Formation [Abstract]  
Business Combinations

Note 3 Business Combinations

 

On June 6, 2025 (the “Acquisition Date”, the Company acquired the Fat Panda Group of Companies, a Central Canada’s leading retailer and manufacturer of vaping products, holding a significant market share across Manitoba, Ontario, and Saskatchewan. With 33 retail locations and a thriving e-commerce platform, the company offers a wide range of high-quality vape devices and e-liquids, including its own premium in-house line.

 

The purchase price was $12.8 million comprised of approximately $10.6 million in cash to the sellers, 39,000 shares of VAPE common stock with an agreed value of $0.3 million and seller notes totaling $1.9 million. A portion of the purchase price was funded by a short-term loan from a United States based lender in the amount of $4.0 million, which is due in six months. In addition, $1.9 million has been placed in escrow to support post-closing adjustments, indemnity obligations, and employee-related matters.

 

The purchase price has been allocated to the tangible assets and identifiable intangible assets acquired and liabilities assumed based upon their preliminary estimated fair values as of the Acquisition Date. The excess of the purchase price over the tangible and intangible assets acquired and liabilities assumed has been recorded as goodwill. The goodwill is primarily attributable to the assembled workforce, synergies expected from combining operations, and future growth opportunities.

 

 

CEA Industries Inc.

Notes to Condensed Consolidated Financial Statements

July 31, 2025

(in US Dollars except share numbers)

(Unaudited)

 

The following table summarizes the preliminary fair value of assets acquired and liabilities assumed as of the acquisition date and is based on the best estimate of management, which is subject to change within the measurement period.

 

Fair value of assets acquired and liabilities assumed:    
Cash and cash equivalents  $1,921,662 
Accounts receivable   176,455 
Related party receivables   673,281 
Inventory   3,684,675 
Prepaid expenses   113,200 
Fixed assets   314,042 
Right-of-use asset   1,851,228 
Deposits   219,000 
Intangibles – Trade name   5,228,990 
Goodwill   4,218,445 
Accounts payable and accrued liability   (2,307,942)
Income taxes payable   (107,867)
Royalty liability, current   (12,950)
Deferred tax liability   (1,255,721)
Lease liabilities - short-term   (532,855)
Lease liabilities - long-term   (1,332,273)
Total net assets acquired  $12,851,369 

 

As part of the purchase price allocation, the Company determined the identifiable intangible assets were a trade name. The fair value of the intangible assets was estimated using variations of the income approach. Specifically, the relief from royalty method was utilized to estimate the fair value of the trade name. The valuation of intangible assets incorporates significant unobservable inputs (Level 3 inputs) and requires significant judgment and estimates, including the amount and timing of future cash flows and discount rates. The cash flows were based on estimates used to price the transaction, and the discount rates applied were benchmarked with reference to the implied rate of return from the transaction model and the weighted average cost of capital. 

 

Due to the timing of the completion of the acquisition, the purchase price and related allocations are preliminary and could be revised as a result of adjustments made to the purchase price and additional information obtained regarding assets acquired and liabilities assumed. The purchase price allocation will be finalized within the measurement period of up to one year from the acquisition date.

 

The following table summarizes the acquired identifiable intangible assets, acquisition date estimated fair value and estimated useful lives:

 

Summarizes the acquired identifiable intangible assets

Identifiable Intangible Assets  Acquisition Date Fair Value   Useful Life (In Years)
Intangible asset - trade name  $5,228,990   10 years

 

The Company’s buyer transaction costs to acquire the Fat Panda Group of Companies totaled approximately $1,000,000 and are included within transaction costs in the condensed consolidated statement of operations for the period from June 7, 2025, through July 31, 2025 (Successor). Payments for buyer transaction costs were made on behalf of the Company by the Company’s controlling stockholder and have been included as contributed capital in the consolidated statement of stockholders’ equity.

 

The following unaudited pro forma consolidated financial information reflects the results of operations of the Company for the three months ended July 31, 2025 and 2024, as if the Fat Panda Acquisition and related financing had occurred on May 1, 2024.

  

 

CEA Industries Inc.

Notes to Condensed Consolidated Financial Statements

July 31, 2025

(in US Dollars except share numbers)

(Unaudited)

 

This information gives effect to certain purchase accounting and financing adjustments and is based on the historical financial statements of CEA Industries Inc. It is presented for illustrative purposes only and is not necessarily indicative of the Company’s actual operating results had the Fat Panda Acquisition and related financing occurred on May 1, 2024, nor is it indicative of future results.

 

  

Proforma

For the three months ended July 31, 2025

  

Proforma

For the three months ended July 31, 2024

 
Revenue  $

10,526,669

   $

8,718,970

 
Net Income/(loss)  $

(1,451,472

)  $

127,099

 

 

Pro forma financial information is presented as if the operations of Fat Panda had been included in the consolidated results of the Company since May 1, 2024, and reflects transactions that are directly attributable to the Fat Panda Acquisition and related financing. Pro forma adjustments to the three months ended July 31, 2025 and 2024 include adjustments for amortization of preliminary marketing-related intangible assets, elimination of non-recurring transaction costs incurred related to the acquisition, debt discount amortization and interest expense on the $4,000,000 bridge loan, and debt discount amortization and interest expense on the promissory notes issued to the sellers of Fat Panda.