XML 29 R19.htm IDEA: XBRL DOCUMENT v3.23.4
Business Combination
 6 Months Ended
Nov. 30, 2023
Business Combination and Asset Acquisition [Abstract]  
Business Combination

Note 13 – Business Combination

 

On June 16, 2022, the Company completed the acquisition of certain assets of AXIL, a Delaware corporation, pursuant to the Asset Purchase Agreement dated May 1, 2022 and amended on June 15, 2022 and September 8, 2022. by and among the Company, its subsidiary, AXIL, and certain of AXIL’s stockholders, providing for the acquisition of AXIL’s hearing protection business and ear bud business. The business constituted substantially all of the business operations of AXIL but did not include AXIL’s hearing aid line of business.

 

One of the stockholders of AXIL is Intrepid. As of June 16, 2022, Intrepid held 4.68% of the outstanding common stock of AXIL and 22.33% of the outstanding Common Stock of the Company. As of November 30, 2023, Intrepid held no outstanding common shares of AXIL, as they were distributed with the Asset Purchase Agreement. Jeff Toghraie, Chairman and Chief Executive Officer of the Company, is a managing director of Intrepid.

 

As consideration for the Asset Purchase, AXIL received a total of 323,183,893 shares comprised of (a) 73,183,893 shares of the Company’s Common Stock and (b) 250,000,000 shares of non-voting Series A Preferred Stock, which are convertible into shares of Company Common Stock on a one-to-one ratio. The Preferred Shares may not be converted or transferred for a period of two years following the closing of the acquisition. Thereafter, no holder of Preferred Shares may convert such shares into a number of shares of Company Common Stock that would cause the holder to beneficially own more than 5% of the Company’s Common Stock, as determined in accordance with Sections 13(d) and (g) of the Exchange Act. The purchase price was computed to be $4,007,480 based on a fair value of $0.0124 per share on the date of acquisition.

 

The Company is utilizing the AXIL assets to expand into the hearing enhancement business through its newly incorporated subsidiary.

 

The acquisition is accounted for by the Company in accordance with the acquisition method of accounting pursuant to ASC 805 “Business Combinations” and pushdown accounting is applied to record the fair value of the assets acquired by the Company. Under this method, the purchase price is allocated to the identifiable assets acquired and liabilities assumed based on their estimated fair values at the date of acquisition. Any excess of the amount paid over the estimated fair values of the identifiable net assets acquired was allocated to goodwill.

 

The following is a summary of the fair value of the assets acquired and liabilities assumed at the date of acquisition:

     
Cash  $1,066,414 
Accounts receivable   227,786 
Inventory   1,342,461 
Prepaid expenses   62,452 
Other assets   108,030 
Accounts payable   (285,665)
Contract liabilities   (1,043,332)
Other current liabilities   (79,826)
Net tangible assets acquired  $1,398,320 
      
Identifiable intangible assets     
Licensing rights  $11,945 
Customer relationships   70,000 
Tradenames   275,000 
Website   100,000 
Total Identifiable intangible assets  $456,945 
      
Consideration paid  $4,007,480 
Total net assets acquired   1,855,265 
Goodwill purchased  $2,152,215