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Acquisition of FSA Travel, LLC
 3 Months Ended
May 31, 2025
Business Combination, Asset Acquisition, Transaction between Entities under Common Control, and Joint Venture Formation [Abstract]  
Acquisition of FSA Travel, LLC

Note 4 – Acquisition of FSA Travel, LLC

 

On February 6, 2025, the Company acquired a 49% non-controlling interest in FSA Travel, LLC (“FSA”) pursuant to a Membership Purchase Agreement (the “FSA Purchase Agreement”) and accounted for the investment under the equity method. The Company recorded its proportional share of FSA’s net loss from February 7, 2025 through February 28, 2025, the Company’s fiscal year-end.

 

On April 9, 2025, the Company exercised its option to purchase the remaining 51% interest in FSA for additional consideration of $1.0 million comprised of $0.5 million in cash, and $0.5 million in shares of Series O Preferred (161,291 shares at $3.10 per share), pursuant to the FSA Purchase Agreement. In addition, on April 28, 2025, the Company paid an additional $0.8 million in contingent consideration (comprised of both cash and shares of Series O Preferred stock) to the former owners of FSA (the “FSA Unitholders”) pursuant to the FSA Purchase Agreement.

 

The contingent consideration issued as purchase consideration provides for additional distributions to the FSA Unitholders, the amount of which is dependent on the acquired business’ achievement of certain milestones. The Company determined the fair value of the contingent consideration as of the acquisition date (April 9, 2025) based on the probability and timing of achieving the respective milestones.

 

Upon completion of the acquisition of the remaining 51% of FSA membership units, the acquisition of the remaining 51% interest together with the initial 49% interest acquired on February 6, 2025 was accounted for as a step acquisition (business combination) under ASC 805, Business Combinations, with the Company identified as the acquirer. A step acquisition occurs when a shareholder obtains control over an entity (that is considered a business) by acquiring an additional interest in that entity. Under step acquisition accounting, the acquirer’s previously held equity interest is remeasured to its fair value as of the date in which control was obtained and included as part of the total consideration when determining goodwill. Given the short duration between the initial equity purchase of FSA (which was accounted for under the equity method of accounting) and the purchase of the remaining outstanding shares of FSA, it was determined that the book value of such equity method accounting equaled its fair value at the time control was obtained. In accordance with the acquisition method of accounting, the purchase price has been assigned to the assets acquired, and the liabilities assumed, based on their estimated fair value at the acquisition date. The Company did not incur any acquisition-related costs in connection with the acquisition.

 

The Company has completed a preliminary analysis to assign fair values to all assets acquired and liabilities assumed. The table below sets forth the consideration paid and the fair value of the assets acquired and liabilities assumed for the acquisition:

 

Consideration paid     
Cash  $500,000 
Series O Preferred stock   500,000 
Earnout Payment   800,000 
Fair value of Initial Purchase   981,303 
Total consideration  $2,781,303 
      
Assets acquired and liabilities assumed     
Cash and cash equivalents  $471,660 
Accounts receivable   13,460 
Intangibles   960,000 
Goodwill   1,669,058 
Total assets  $3,114,178 
      
Accounts payable   12,474 
Due to FSA Unitholders   221,481 
SBA Loan   98,920 
Total liabilities  $332,875 
Total net assets  $2,781,303 

 

The fair value of the working capital items, including accounts receivable, other receivables, trade payables and deferred revenue, approximates their respective carrying values at the date in which control was obtained. Effective January 1, 2021, the Company has adopted ASU 2021-08, Accounting for Contract Assets and Contract Liabilities from Contracts with Customers, which created an exception to the recognition and measurement principles of ASC 805, Business Combinations, for the Company’s contract assets and liabilities, including deferred revenue, essentially resulting in the carryover of the historical amounts determined in accordance with ASC 606, Revenue from Contracts with Customers, rather than fair value.

 

 

The fair value of the acquired tradename and acquired technology was determined using the relief from royalty method, which utilized projected financial information. The goodwill recognized in the acquisition primarily represents synergies with the existing operations of the Company, and the value of yet-to-be-acquired/developed customers, technology, assembled workforce, and any other assets.

 

The Company is currently finalizing its valuation of the acquired assets and liabilities and has recorded these preliminary amounts as of the acquisition date. The final purchase price allocation may result in adjustments to the amounts presented.