On January 7, 2021, Digital Locations, Inc. (the “Company”), SmallCellSite.com LLC, a Virginia limited liability company (“SCS” or “Seller”), and SmallCellSite, Inc., a newly formed Nevada corporation and wholly owned subsidiary of the Company (the “Subsidiary”) entered into an asset purchase agreement (“APA”) to acquire substantially all of the assets of the Seller’s wireless communications marketing and database services business in consideration for a total purchase price of $10,000 in cash and a 5-year convertible promissory note in the amount of $1,000,000 made in favor of the Seller or its assignees (the “Note”).
The Seller is a source of more than 80,000 cell sites offered by property owners for use by wireless network operators. Current customers include Verizon and T-Mobile Sprint.
Pursuant to the APA, the Seller instructed the Company to assign $500,000 principal amount of the Note to each of the Seller’s two members (the “Assigned Notes”).
At any time after December 31, 2021, each month, each holder of the Assigned Notes may convert the principal amount of the Assigned Note into a number of shares of the Company’s common stock not exceeding 5% of the total trade volume of the Company’s common stock publicly reported for the previous calendar month at a conversion price of $0.013 per share. The Note also imposes an overall limitation on the number of conversions to common stock that the holder may affect such that it prohibits the holder from beneficially owning more than 4.99% of the total issued and outstanding common stock of the Company at any time that the Note is outstanding
The asset purchase and sale of assets closed on January 7, 2021.
On January 7, 2021, Digital Locations, Inc. (the “Company”), SmallCellSite.com LLC, a Virginia limited liability company (“SCS” or “Seller”), and SmallCellSite, Inc., a newly formed Nevada corporation and wholly owned subsidiary of the Company (the “Subsidiary”) entered into an asset purchase agreement (“APA”) to acquire substantially all of the assets of the Seller’s wireless communications marketing and database services business in consideration for a total purchase price of $10,000 in cash and a 5-year convertible promissory note in the amount of $1,000,000 made in favor of the Seller or its assignees (the “Note”). The transaction has been recorded as a purchase.
Pro forma adjustments to the attached condensed combined financial statements include the following:
a)
To record the payment of $10,000 cash and the issuance of two five-year convertible notes payable of $500,000. Based on the report of an independent valuation firm, the notes payable are discounted to $645,095 using an interest rate of 9.54% and a derivative liability of $1,450,994 has been calculated for the conversion feature of the notes. The total value of the consideration paid of $2,106,089 has been allocated to the following assets based on the report:
Net assets recorded by SCS
$
42,569
Identifiable intangible assets:
IP technology
4,000
Customer base
6,000
Total identifiable intangible assets
10,000
Goodwill
2,053,520
Total
$
2,106,089
The identifiable intangible assets are amortized using the straight-line method over an estimated life of 5 years. The goodwill is not amortized but evaluated periodically for impairment.
b)
To eliminate the operating assets and liabilities of SCS as of September 30, 2020.
c)
To record the amortization of intangible assets over an estimated useful life of 5 years.
d)
To record additional interest expense on the convertible notes at the stated rate of 0.39% per annum and the amortization of debt discount.
e)
To reflect decrease in net income per common share for the pro forma adjustments.
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