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Bloomia Acquisition | 9 Months Ended
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Sep. 30, 2024
Bloomia Acquisition |
Bloomia Acquisition | 3. Bloomia Acquisition On February 22, 2024, the Company completed the acquisition of a majority interest in Bloomia and its subsidiaries (the “Acquisition”). The Acquisition was completed by the Company through its wholly owned subsidiaries, Tulp 24.1 and Tulipa Acquisitie Holding B.V. (“Tulipa”), pursuant to an Agreement for the Sale and Purchase of Shares by and among Tulp 24.1, Tulipa, Botman Bloembollen B.V., W.F. Jansen (“Jansen”), and H.J. Strengers, and Lendway, as the Guarantor. Jansen will continue to serve as chief executive officer of Bloomia following the Acquisition. As a result of the Acquisition, Tulp 24.1 became the holder of 100% of the ownership interests of Bloomia. The acquisition has been accounted for in accordance with ASC Topic 805, “Business Combinations,” using the acquisition method of accounting. Under the acquisition method of accounting, the total purchase price was allocated to the net identifiable tangible and intangible assets of Bloomia acquired, based on their fair values at the date of the acquisition. The acquisition was funded through a combination of debt and cash on hand. The total consideration transferred for the Bloomia acquisition was $53,360,000. Consideration comprised of $34,919,000 of cash paid, $15,451,000 of seller bridge loans in lieu of cash, and $2,990,000 of equity issued of Tulp 24.1 which is reflected as noncontrolling interest within these condensed consolidated financial statements. Following the noncontrolling equity issued, the Company owns 81.4% of Tulp 24.1 and the CEO of Bloomia owns the remaining 18.6%. Refer to Note 9 for further discussion on the debt used to finance the Acquisition. Provisional fair value measurements were made for acquired assets and liabilities, and adjustments to those measurements may be made in subsequent periods as information necessary to complete the fair value analysis is obtained. The fair value measurements associated with working capital and the allocation of certain intangible assets are preliminary as of the date these financial statements are available to be issued. We expect to finalize the valuation and complete the purchase price allocation as soon as practicable, but no later than one year from the acquisition date. The preliminary allocation of the purchase price to assets acquired and liabilities assumed is as follows:
Fair value of purchase consideration |  |  |
Cash consideration |  | $ | 34,919,000 |
Equity in subsidiary issued (noncontrolling interest) |  |  | 2,990,000 |
Seller bridge loans |  |  | 15,451,000 |
Total fair value of consideration |  | $ | 53,360,000 |
Fair value of assets acquired and liabilities assumed: |  |  |  |
Cash and cash equivalents |  | $ | 739,000 |
Accounts receivable |  |  | 3,430,000 |
Inventories |  |  | 12,493,000 |
Prepaid and other |  |  | 2,509,000 |
Property and equipment |  |  | 11,740,000 |
Intangible assets |  |  | 26,870,000 |
Equity method investment |  |  | 167,000 |
Finance lease - right of use assets |  |  | 22,000 |
Operating lease - right of use assets |  |  | 34,289,000 |
Other assets |  |  | 358,000 |
Total assets acquired |  |  | 92,617,000 |
Accounts payable |  |  | 2,064,000 |
Accrued expenses |  |  | 3,066,000 |
Finance lease liabilities - current |  |  | 13,000 |
Operating lease liabilities - current |  |  | 945,000 |
Finance lease liabilities - long-term |  |  | 9,000 |
Operating lease liabilities - long-term |  |  | 33,344,000 |
Deferred tax liabilities |  |  | 10,290,000 |
Total liabilities assumed |  |  | 49,731,000 |
Net identifiable assets acquired |  |  | 42,886,000 |
Goodwill |  |  | 10,474,000 |
Total consideration transferred |  | $ | 53,360,000 |
The goodwill recognized is primarily attributable to the growth potential of the Company and is not deductible for tax purposes. The fair value of customer relationships was estimated using a discounted present value income approach. Under the income approach, an intangible asset’s fair value is equal to the present value of future economic benefits to be derived from ownership of the asset. Indications of value are developed by discounting future net cash flows to their present value at market-based rates of return. The fair value of the trade names was estimated using an income approach, specifically known as the relief from royalty method. The relief from royalty method is based on the hypothetical royalty stream that would be received if the Company were to license the trade name and was based on expected revenues. The useful life of the customer relationships was determined considering the period of expected cash flows used to measure the fair value of the intangible assets adjusted as appropriate for the entity-specific factors including legal, regulatory, contractual, competitive, economic or other factors that may limit the useful life of the customer relationships. The issued equity of the subsidiary, now reflected as noncontrolling interest was valued considering the total value of the acquired company and comparing that to the rollover value of the shares being converted. Revenue, net and net loss before taxes for Bloomia since the date of acquisition included in the condensed consolidated statements of operations were approximately $6,628,000 and $910,000, respectively for three months ended September 30, 2024. Revenue, net and net income before taxes for Bloomia since the date of acquisition included in the condensed consolidated statements of operations were approximately $31,581,000 and $1,745,000 for the nine months ended September 30, 2024, respectively. Unaudited pro forma information has been prepared as if the acquisition had taken place on January 1, 2023. The unaudited pro forma information is not necessarily indicative of the results that we would have achieved had the transaction actually taken place on January 1, 2023, and the unaudited pro forma information does not purport to be indicative of future financial operating results. The unaudited pro forma condensed consolidated financial information does not reflect any operating efficiencies and cost savings that may be realized from the integration of the acquisitions. In accordance with ASC 270-10, the Company is unable to provide unaudited pro forma information for revenue and net earnings for the three and nine months ended September 30, 2023 due to lack of available information during the period prior to ownership. Unaudited pro forma information for the three and nine months ended September 30, 2024, excluding the impact of debt and intangible asset amortization, is as follows:
|  | Three Months Ended |  |  | Nine Months Ended |
|  | September 30, 2024 |  |  | September 30, 2024 |
Revenue, net |  | $ | 6,628,000 |  |  | $ | 33,955,055 |
Net loss attributable to Lendway |  |  | (1,125,000 | ) |  |  | (2,552,000 | )
The Company incurred approximately $1,542,000 of acquisition-related costs that were expensed during the three months ended March 31, 2024 and an additional $542,000 in integrations costs that were expensed in the nine months ended September 30, 2024. These costs are included in sales, general and administrative expenses in the condensed consolidated statements of operations.

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