Quarterly report pursuant to Section 13 or 15(d)

Acquisition

v3.21.2
Acquisition
9 Months Ended
Sep. 30, 2021
Acquisition  
Acquisition

4.     Acquisition

On May 29, 2020, the Company entered into a Membership Interest Purchase Agreement (the "Purchase Agreement") whereby the Company purchased all of the outstanding equity securities of Sport Defense LLC, a Delaware limited liability company ("Sports Defense"), from the members of Sport Defense (the "Sellers"). Subsequent to the Closing Date, Sport Defense is a wholly-owned subsidiary of the Company.

Sport Defense is a marketing and distribution company that leverages the unique benefits of ultra-gentle, high-water content hydrogels, manufactured by the Company, to build brands that treat various ailments of the skin caused by athletic training, such as blisters, turf burns, scrapes and skin irritations.

Under the terms of the Purchase Agreement, the purchase price paid to the Sellers was an aggregate of $375 thousand (the "Purchase Price") which was paid by the Company through the issuance of an aggregate of 9,375,000 shares of the Company's common stock, par value $0.001 (the "Shares"), which equates to a per share purchase price of $0.04. The Shares are "restricted securities" as such term is defined by Rule 144 promulgated under the Securities Act of 1933, as amended.

Adam Levy, the Company's Chief Executive Officer, and Nachum Stein, a member of the Company's Board of Directors (the "Board"), were each members of Sport Defense and part of the Sellers. Mr. Levy received 1,546,875 of the Shares and Mr. Stein received 3,187,500 of the Shares. Due to the potential conflict of interest that existed because of Messrs. Levy and Stein's partial ownership of Sport Defense, the Board obtained an independent investment bank to prepare a valuation report with respect to Sport Defense. This valuation report supported the Purchase Price. Also, Mr. Stein recused himself from the vote of the Board regarding the approval to purchase Sport Defense.

The fair value of the purchase consideration issued to the Seller was allocated to the net tangible assets acquired. The Company accounted for the Sports Defense acquisition as the purchase of a business under GAAP under the acquisition method of accounting, and the assets and liabilities acquired were recorded as of the acquisition date, at their respective fair values and consolidated with those of the Company. The fair value of the net assets acquired was approximately $375,000. The excess of the aggregate fair value of the net tangible assets has been allocated to goodwill.

The Company is currently in the process of completing the preliminary purchase price allocation as an acquisition of certain assets. The final purchase price allocation for Sports Defense's will be included in the Company's financial statements in future periods. The table below shows analysis for the Sports Defense acquisition ($in thousands):

Provisional Purchase Consideration at preliminary fair value:

    

  

Purchase price

$

375

Amount of consideration

$

375

Assets acquired and liabilities assumed at preliminary fair value

 

  

Inventories

 

21

Product/Technology related intangibles

31

Marketing related intangibles

8

Customer related intangibles

17

Accounts payable and accrued expenses

 

(13)

Other liabilities

 

Net tangible assets acquired

$

64

Total net assets acquired

$

64

Consideration paid

 

375

Goodwill

$

311

The unaudited pro-forma results of operations are presented for information purposes only. The unaudited pro-forma results of operations are not intended to present actual results that would have been attained had the Sports Defense acquisition been completed as of January 1, 2019 or to project potential operating results as of any future date or for any future periods.

    

For the Nine Months Ended

September 30,

    

2021

    

2020

Revenues, net

$

1,018

$

590

Net loss allocable to common shareholders

$

(2,672)

$

(1,535)

Net loss per share

$

(0.03)

$

(0.02)

Weighted average number of shares outstanding

 

102,971,994

 

83,799,778