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BUSINESS COMBINATIONS
 6 Months Ended
Jun. 30, 2022
Business Combination and Asset Acquisition [Abstract]  
BUSINESS COMBINATIONS

8. BUSINESS COMBINATIONS

 

Overview of AVLP Acquisition

 

On June 1, 2022, the Company converted the principal amount under the convertible promissory notes issued to it by AVLP and accrued but unpaid interest into common stock of AVLP. The Company converted $20.0 million in principal and $5.9 million of accrued interest receivable at a conversion price of $0.50 per share and received 51,889,168 shares of common stock increasing its common stock ownership of AVLP from less than 20% to approximately 92%.

 

Prior to the conversion of the convertible promissory notes, the Company accounted for its investment in AVLP as an investment in an unconsolidated entity under the equity method of accounting. In connection with the conversion of the convertible promissory notes, the Company’s consolidated financial statements now include all of the accounts of AVLP, and any significant intercompany balances and transactions have been eliminated in consolidation.

 

The consideration transferred for the Company’s approximate 92% ownership interest in connection with this acquisition aggregated $20.7 million, which represented the fair value of the Company’s holdings in AVLP immediately prior to conversion. The carrying amount of the Company’s holdings in AVLP immediately prior to conversion was $23.4 million, resulting in a $2.7 million loss for the related remeasurement, which was recognized in interest and other income. The allocation of the total consideration transferred to the assets acquired, including intangible assets and goodwill, and the liabilities assumed is preliminary and could be revised as a result of additional information obtained due to the finalization of a third-party valuation report, leases and related commitments, tax related matters and contingencies and certain assets and liabilities, including receivables and payables. Amounts will be finalized within the measurement period, which will not exceed one year from the acquisition date. The goodwill resulting from this acquisition is not tax deductible.

 

 

The following table presents the preliminary allocation of the consideration transferred to the assets acquired and liabilities assumed based on their fair values.

     
   Preliminary
allocation		 
 Total purchase consideration  $20,706,000 
 Fair value of non-controlling interest   6,706,000 
 Total consideration   $27,412,000 
      
 Identifiable net liabilities assumed:     
 Cash  $1,245,000 
 Prepaid expenses and other current assets   55,000 
 Property and equipment   5,057,000 
 Note receivable   800,000 
 Accounts payable and accrued expenses   (6,935,000)
 Convertible notes payable, principal   (9,734,000)
 Fair value of embedded derivative   (1,226,000)

Fair value of bifurcated conversion option

   

(4,425,000

)

Fair value of bifurcated put option

   

(200,000

)
 Net liabilities assumed   (15,363,000)
 Goodwill  $42,775,000 

 

The Company consolidates the results of AVLP on a one-month lag, therefore the statements of operations do not include results for AVLP for the three and six months ended June 30, 2022.

 

Overview of SMC Acquisition

 

Beginning in June 2022, the Company, through its subsidiary Digital Power Lending, LLC (“DP Lending”), began making open market purchases of SMC common stock. These purchases granted the Company a greater than 20% effective ownership on June 9, 2022, and subsequently, on June 15, 2022, the Company owned more than 50% of the issued and outstanding common stock of SMC. The Company’s ownership of SMC stands at 51.6% as of June 30, 2022.

 

As of June 15, 2022 (“Acquisition Date”), the purchase price of the common stock acquired totaled $7.4 million and on June 15, 2022 a $3.1 million gain was recognized in interest and other income for the remeasurement of the Company’s previously held ownership interest to $10.5 million, based on the trading price of SMC common stock. The Company also recognized non-controlling interest at fair value as of the Acquisition Date in the amount of $10.3 million.

 

The allocation of the total consideration transferred to the assets acquired, including intangible assets and goodwill, and the liabilities assumed, is preliminary and could be revised as a result of additional information obtained due to the finalization of a third-party valuation report, leases and related commitments, tax related matters and contingencies and certain assets and liabilities, including receivables and payables. Amounts will be finalized within the measurement period, which will not exceed one year from the Acquisition Date. The goodwill resulting from this acquisition is not tax deductible.

 

The Company consolidates the results of SMC on a one-quarter lag as it enables the Company to report its quarterly results independent from the timing of when SMC reports its results, therefore the statements of operations do not include results for SMC for the three and six months ended June 30, 2022.

 

 

The following table presents the preliminary allocation of the consideration transferred to the assets acquired and liabilities assumed based on their fair values.

     
   Preliminary
Allocation		 
 Total purchase consideration  $10,517,000 
 Fair value of non-controlling interest   10,336,000 
 Total consideration  $20,853,000 
      
 Identifiable net assets acquired:     
 Cash  $2,278,000 
 Accounts receivable   9,891,000 
 Prepaid expenses and other current assets   673,000 
 Inventories   12,840,000 
 Property and equipment, net   529,000 
 Right-of-use assets   1,073,000 
 Other assets   83,000 
 Intangible assets:     
 Trade names-estimated useful life of 19 years   2,470,000 
 Customer relationships-estimated useful life of 16 years   1,380,000 
 Proprietary technology-estimated useful life of 3 years   600,000 
Accounts payable and accrued expenses   (10,052,000)
 Notes payable   (2,972,000)
 Lease liabilities   (1,124,000)
 Net assets acquired   17,669,000 
 Goodwill  $3,184,000 

 

Unaudited Pro Forma Financial Information

 

The following unaudited pro forma consolidated results of operations for the three and six months ended June 30, 2022 have been prepared as if the SMC acquisition had occurred on January 1, 2022.

          
   Three Months Ended   Six Months Ended 
   June 30, 2022   June 30, 2022 
 Total revenues  $29,058,000   $64,717,000 
 Net loss attributable to BitNile Holdings, Inc.  $(26,206,000)  $(56,531,000)

 

The unaudited pro forma information is presented for informational purposes only and is not necessarily indicative of the results of operations that would have been achieved had the acquisition been consummated as of that time, nor is it intended to be a projection of future results.