b)Pro forma financial information.
ALPINE 4 HOLDINGS, INC. AND DTI SERVICES LIMITED LIABILITY COMPANY AND AFFILIATES | |||||||||||||
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET | |||||||||||||
SEPTEMBER 30, 2021 | |||||||||||||
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| Alpine 4 Holdings, Inc |
| DTI Services Limited Liability Company |
| Pro Forma Adjustments |
|
Notes |
|
Pro Forma Consolidated |
ASSETS |
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CURRENT ASSETS: |
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| Cash |
| $ | 5,425,913 | $ | 18,458 | $ | - |
|
| $ | 5,444,371 | |
| Accounts receivable, net |
| 12,990,229 |
| 4,220,518 |
| - |
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|
| 17,210,747 | ||
| Contract assets |
| 3,655,625 |
| - |
| - |
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| 3,655,625 | ||
| Inventory, net |
|
| 9,632,121 |
| 11,355,374 |
| - |
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|
| 20,987,495 | |
| Notes receivable, related party |
| - |
| 1,000,000 |
| - |
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| 1,000,000 | ||
| Prepaid expenses and other current assets |
| 1,272,760 |
| 1,797,276 |
| - |
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| 3,070,036 | ||
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| Total current assets |
| 32,976,648 |
| 18,391,626 |
| - |
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| 51,368,274 | |
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Investment in equity securities |
| 1,350,000 |
| - |
| - |
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| 1,350,000 | |||
Property and equipment, net |
| 27,320,596 |
| 502,202 |
| - |
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| 27,822,798 | |||
Intangible asset, net |
| 29,001,665 |
| - |
| 8,796,941 |
| (2a) |
| 37,798,606 | |||
Right of use assets, net |
| 347,712 |
| 1,243,971 |
| - |
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| 1,591,683 | |||
Goodwill |
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| 5,866,454 |
| - |
| - |
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| 5,866,454 | ||
Other non-current assets |
| 248,257 |
| 5,486 |
| - |
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| 253,743 | |||
| TOTAL ASSETS | $ | 97,111,332 | $ | 20,143,285 | $ | 8,796,941 |
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| $ | 126,051,558 | ||
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LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT) |
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CURRENT LIABILITIES: |
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| Accounts payable | $ | 5,653,158 | $ | 785,013 | $ | - |
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| $ | 6,438,171 | ||
| Accrued expenses |
| 4,253,987 |
| 858,616 |
| - |
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| 5,112,603 | ||
| Contract liabilities |
| 3,486,331 |
| 158,376 |
| - |
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| 3,644,707 | ||
| Notes payable, current portion |
| 5,811,241 |
| - |
| - |
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| 5,811,241 | ||
| Notes payable, related parties |
| 3,000 |
| - |
| - |
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| 3,000 | ||
| Lines of credit |
| 3,718,972 |
| - |
| - |
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| 3,718,972 | ||
| Convertible notes payable, current portion |
| 7,500 |
| - |
| - |
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| 7,500 | ||
| Financing lease obligation, current portion |
| 628,574 |
| - |
| - |
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| 628,574 | ||
| Operating lease obligation, current portion |
| 135,207 |
| 355,585 |
| - |
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| 490,792 | ||
| Other payable |
| - |
| 209,504 |
| - |
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| 209,504 | ||
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| Total current liabilities |
| 23,697,970 |
| 2,367,094 |
| - |
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| 26,065,064 | |
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Notes payable, net of current portion |
| 7,522,462 |
| - |
| 2,000,000 |
| (2c) |
| 9,522,462 | |||
Financing lease obligations, net of current portion |
| 15,489,693 |
| - |
| - |
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| 15,489,693 | |||
Operating lease obligations, net of current portion |
| 219,682 |
| 956,800 |
| - |
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| 1,176,482 | |||
Line of credit |
| - |
| 5,264,931 |
| - |
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| 5,264,931 | |||
Deferred tax liability |
| 428,199 |
| - |
| - |
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| 428.199 | |||
| TOTAL LIABILITIES |
| 47,358,006 |
| 8,588,825 |
| 2,000,000 |
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| 57,946,831 | ||
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STOCKHOLDERS’ EQUITY (DEFICIT): |
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| Series B preferred stock; $1.00 stated value; 100 shares authorized, 5 and 5 shares issued and outstanding at September 30, 2021 |
| 5 |
| - |
| - |
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| 5 | ||
| Series C preferred stock; $3.50 stated value; 2,028,572 shares authorized, 1,714,286 shares issued and outstanding at September 30, 2021 |
| 171 |
| - |
| - |
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| 171 | ||
| Series D preferred stock; $3.50 stated value; 1,628,572 shares authorized, 1,422,244 shares issued and outstanding at September 30, 2021 |
| 143 |
| - |
| - |
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| 143 | ||
| Class A Common stock, $0.0001 par value, 195,000,000 shares authorized, 146,214,650 shares issued and outstanding at September 30, 2021 |
| 14,624 |
| - |
| - |
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| 14.624 | ||
| Class B Common stock, $0.0001 par value, 10,000,000 shares authorized, 8,673,088 shares issued and outstanding at September 30, 2021 |
| 867 |
| - |
| - |
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| 867 | ||
| Class C Common stock, $0.0001 par value, 15,000,000 shares authorized, 12,500,200 shares issued and outstanding at September 30, 2021 |
| 1,250
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| - |
| - |
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| 1.250 | ||
| Additional paid-in capital |
| 96,306,820 |
| - |
| 18,351,401 |
| (2a) |
| 114,658,221 | ||
| Members’ equity |
| - |
| 3,162,846 |
| (3,162,846) |
| (2a) |
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| Non-controlling interest |
| - |
| 9,336,438 |
| (9,336,438) |
| (2a) |
| - | ||
| Retained earnings (deficit) |
| (46,570,554) |
| (944,824) |
| 944,824 |
| (2a) |
| (46,570,554) | ||
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| Total stockholders’ equity |
| 49,753,326 |
| 11,554,460 |
| 6,796,941 |
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| 68,104,727 | |
| TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | $ |
97,111,332 | $ | 20,143,285 | $ | 8,796,941 |
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| $ |
126,051,558 |
F-1
ALPINE 4 HOLDINGS, INC. AND DTI SERVICES LIMITED LIABILITY COMPANY AND AFFILIATES | |||||||||||||
UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS | |||||||||||||
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2021 | |||||||||||||
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| Alpine 4 Holdings, Inc. |
| DTI Services Limited Liability Company |
| Pro Forma Adjustments |
|
Notes |
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Pro Forma Consolidated |
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Revenue, net |
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| $ | 39,938,585 | $ | 28,497,132 | $ | - |
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| $ | 68,435,717 | |
Cost of goods sold |
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| 30,771,770 |
| 19,539,179 |
| - |
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| 50,310,949 | |
Gross profit |
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| 9,166,815 |
| 8,957,953 |
| - |
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| 18,124,768 | |
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Operating expenses: |
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| General and administrative expenses |
| 17,719,228 |
| 5,491,423 |
| 439,847 |
| (2b) |
| 23,650,498 | ||
| Research and development |
| 1,096,333 |
| - |
| - |
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| 1,096,333 | ||
| Total operating expenses |
| 18,815,561 |
| 5,491,523 |
| 439,847 |
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| 24,746,831 | ||
Income (loss) from operations |
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| (9,648,746) |
| 3,466,530 |
| (439,847) |
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| (6,622,063) | ||
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Other income (expenses) |
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| Interest expense, net |
|
| (3,226,192) |
| (79,492) |
| (56,250) |
| (2c) |
| (3,361,934) | |
| Gain on forgiveness of debt |
| 4,896,573 |
| 618,700 |
| - |
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| 5,515,273 | ||
| Gain on extinguishment of debt |
| 803,079 |
| - |
| - |
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|
| 803,079 | ||
| Other income |
| 454,191 |
| - |
| - |
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| 454,191 | ||
| Total other income |
| 2,927,651 |
| 539,208 |
| (56,250) |
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| 3,410,609 | ||
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Income (loss) before income tax |
| (6,721,095) |
| 4,005,738 |
| (496,097) |
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| (3,211,454) | |||
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Income tax |
|
| 54,058 |
| - |
| - |
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| 54,058 | ||
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Net income (loss) |
| $ | (6,775,153) | $ | 4,005,738 | $ | (496,097) |
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| $ | (3,265,512) | ||
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Weighted average shares outstanding: |
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| Basic |
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| 161,118,324 |
| - |
| 1,587,301 |
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| 162,705,625 |
| Diluted |
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| 161,118,324 |
| - |
| 1,587,301 |
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| 162,705,625 |
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Basic net loss per share | $ | (0.04) |
| - | $ | (0.31) |
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| $ | (0.02) | |||
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Diluted net loss per share | $ | (0.04) |
| - | $ | (0.31) |
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| $ | (0.02) |
F-2
ALPINE 4 HOLDINGS, INC. AND DTI SERVICES LIMITED LIABILITY COMPANY AND AFFILIATES | ||||||||||||||
UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS | ||||||||||||||
FOR THE YEAR ENDED DECEMBER 31, 2020 | ||||||||||||||
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| Alpine 4 |
| DTI Services |
| Pro Forma Adjustments |
|
Notes |
| Pro Forma Consolidated | |
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Revenue, net |
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| $ | 33,454,349 | $ | 37,366,818 | $ | - |
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| $ | 70,821,167 | ||
Cost of goods sold |
|
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| 28,090,722 |
| 27,101,644 |
| - |
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| 55,192,366 | ||
Gross Profit |
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| 5,363,627 |
| 10,265,174 |
| - |
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| 15,628,801 | ||
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Operating expenses: |
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| General and administrative expenses |
| 9,695,891 |
| 7,682,215 |
| 586,463 |
| (2b) |
| 17,964,569 | |||
| Impairment loss of intangible asset and goodwill |
|
1,561,600 |
| - |
| - |
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| 1,561,600 | |||
| Total operating expenses |
| 11,257,491 |
| 7,682,215 |
| 586,463 |
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| 19,526,169 | |||
Income (loss) from operations |
|
| (5,893,864) |
| 2,582,959 |
| (586,463) |
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| (3,897,368) | |||
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Other income (expenses) |
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| Interest expense, net |
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| (5,463,597) |
| (128,852) |
| (75,000) |
| (2c) |
| (5,667,449) | ||
| Change in value of derivative liability |
| 2,298,609 |
| - |
| - |
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| 2,298,609 | |||
| Gain on extinguishment of debt |
| 344,704 |
| - |
| - |
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| 344,704 | |||
| Change in fair value of contingent consideration |
|
500,000 |
| - |
| - |
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| 500,000 | |||
| Other income |
| 71,224 |
| - |
| - |
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| 71,224 | |||
| Total other expenses |
| (2,249,060) |
| (128,852) |
| (75,000) |
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| (2,452,912) | |||
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Income (loss) before income tax |
| (8,142,924) |
| 2,454,107 |
| (661,463) |
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| (6,350,280) | ||||
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Income tax (benefit) |
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| (93,051) |
| - |
| - |
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| (93,051) | |||
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Net income (loss) |
| $ | (8,049,873) | $ | 2,454,107 | $ | (661,463) |
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| $ | (6,257,229) | |||
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Weighted average shares outstanding: |
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| Basic |
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| 132,987,390 |
| - |
| 1,587,301 |
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| 134,574,691 | |
| Diluted |
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| 139,611,790 |
| - |
| 1,587,301 |
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| 141,199,091 | |
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Basic net loss per share | $ | (0.06) |
| - | $ | (0.42) |
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| $ | (0.05) | ||||
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Diluted net loss per share | $ | (0.06) |
| - | $ | (0.42) |
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| $ | (0.04) | ||||
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F-3
Note 1 – Basis of Presentation
The unaudited pro forma consolidated balance sheet has been prepared by applying pro forma adjustments to Alpine 4 Holdings, Inc. (“the Company”) and DTI Services Limited Liability Company and its affiliates (doing business as RCA Commercial Electronics) (“DTI”) unaudited consolidated balance sheets as of September 30, 2021.
The unaudited pro forma consolidated statement of operations for the nine months ended September 30, 2021, has been prepared from the Company’s and DTI’s consolidated statements of operations for the nine months ended September 30, 2021.
The Company’s audited consolidated financial statements and DTI’s audited financial statements have been used in the preparation of the unaudited pro forma consolidated statement of operations for the year ended December 31, 2020.
Note 2 – Business Acquisition
On December 9, 2021, the Company entered into a Membership Interest Purchase Agreement with DTI. wherein the Company acquired all membership interests in DTI for a total consideration of $21 million consisting of cash of $14 million, $2 million promissory notes issued to the sellers, 1,587,301 shares of the Company's common stock with a fair value of $3,682,538 million and common stock warrants with an exercise price of $2.52 and a term of three years with a fair value of $668,863. The notes issued to sellers are subject to annual interest of 3.75% and have a term of 10 years.
Recognized Amount of Identifiable Assets Acquired and Liabilities Assumed
The Company has performed a preliminary valuation analysis of the fair market value of the Company’s assets to be acquired and liabilities to be assumed. Using the total consideration for the acquisition, the Company has estimated the allocations to such assets and liabilities. The following table summarizes the allocation of the preliminary purchase price as if the acquisition closed on September 30, 2021:
Identifiable Assets:
Inventory | $11,355,374 |
Accounts Receivable | 4,220,518 |
Property and Equipment | 502,202 |
Intangible Asset | 8,796,941 |
Other | 4,065,191 |
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Total Identifiable Assets Acquired | 28,940,226 |
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Liabilities Assumed: |
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Accrued Expenses | 858,616 |
Accounts Payable | 785,013 |
Notes Payable | 5,264,931 |
Other | 1,680,265 |
|
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Total Liabilities Assumed | 8,588,825 |
|
|
Total Identifiable Net Assets | $20,351,401 |
This preliminary purchase price allocation has been used to prepare pro forma adjustments, (2a), in the pro forma consolidated balance sheet and pro forma consolidated statements of operations. The final purchase price allocation will be determined when the Company has completed the detailed valuations and necessary calculations. The final allocation could differ materially from the preliminary allocation used in the pro forma adjustments. The final allocation may include (1) changes in fair values of property and equipment, (2) changes in allocations to intangible assets such as permits, noncompetition agreements, and customer relationships as well as goodwill and (3) other changes to assets and liabilities.
F-4
Depreciation and amortization, (2b), have been provided for property and equipment and finite intangible assets based on the preliminary purchase price allocation. Property and equipment have been depreciated on a straight-line basis over their estimated useful lives ranging from of five to fifteen years. Intangible assets having a finite life have been amortized on a straight-line basis over their estimated useful lives ranging from ten to twenty years. Interest expense (2c) have been provided for notes issued to sellers.
All significant intercompany balances have been eliminated in consolidation.
F-5