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Business acquisitions

9 Months Ended

Sep. 30, 2022

Note 5 Business acquisitions

EV Group Holdings LLC

The Company entered into an agreement and plan of merger, dated January 14, 2022, with the shareholders of EV Group Holdings LLC (“EV Depot”) pursuant to which the Company agreed to purchase all the issued and outstanding shares of EV Depot for an aggregate purchase price of $18,787,105. $17,530,278 of the aggregate purchase price payable to the shareholders of EV Depot will be payable through the issuance of 5,201,863 shares of common stock. The agreement includes a clause protecting the sellers whereby if the average price of Charge’s common stock for the month ending December 31, 2022 is less than the per share price of Charge’s common stock determined at closing, the Company will increase the number of shares of common stock issued. The Company recorded this as a contingent consideration liability of $3,513,132 as of September 30, 2022. The agreement also included a clause for gross margin protection to the Company should the 2022 gross margin of EV Depot fall below target levels, the Company will reduce the number of shares of common stock to be issued to EV Depot. The Company recorded this as a contingent consideration asset of $753,540 as of September 30, 2022. These contingent consideration clauses will be settled in the first quarter of 2023. The acquisition closed on January 14, 2022. This acquisition has been accounted for using the acquisition method of accounting, which requires, among other things, that assets acquired and liabilities assumed be recognized at fair value as of the acquisition date. The final determination of the fair value of certain assets and liabilities will be completed within the one-year measurement period from the date of acquisition as required by ASC 805, Business Combinations. This will allow us time to adequately analyze all the factors used in establishing the asset and liability fair values as of the acquisition date. Any potential adjustments could be material in relation to the preliminary values presented below.

The following tables summarize the total consideration as well as the preliminary fair values of the net assets acquired and liabilities assumed as of the January 14, 2022 acquisition date.

Cash	$	1,231,250
Accrued expenses		18,750
Contingent consideration liability, net of $72,748 contingent consideration asset		6,827
Common stock (5,201,863 shares)		17,530,278
Total consideration	$	18,787,105

Fair values of identifiable net assets and liabilities:
Assets:
Cash	$	104,485
Deposits, prepaids and other current assets, net		5,500
Non-current assets		390,625
Operating lease right-of-use asset		2,016,700
Total assets		2,517,310
Liabilities:
Accrued liabilities		44,074
Deferred revenue		166,984
Operating lease liability		2,016,700
Total liabilities		2,227,758
Total fair value of identifiable net assets and liabilities		289,552
Goodwill (consideration given minus fair value of identifiable net assets and liabilities)	$	18,497,553

As of September 30, 2022, the valuation studies necessary to determine the fair market value of identifiable net assets and liabilities are preliminary, primarily with regards to the determination of the fair value of the identified intangible assets.

Goodwill recognized for the EV Depot acquisition is the excess of consideration transferred over the net assets recognized and represents the future economic benefits arising from other assets which cannot be individually identified and separately recognized. The recorded goodwill is not deductible for income tax purposes.

The inclusion of the EV Depot acquisition in our consolidated financial statements is not deemed material with respect to the requirement to provide pro-forma results of operations. As such, pro-forma information is not presented.

B W Electrical Services LLC

Our wholly owned subsidiary, Charge Infrastructure, Inc., entered into a securities purchase agreement, dated December 22, 2021, with the shareholders of B W Electrical Services LLC (“BW”) pursuant to which we agreed to purchase all the issued and outstanding shares of BW for an aggregate purchase price of $18,038,570. $4,538,570 of the aggregate purchase price payable to the shareholders of BW was payable through the issuance of 1,285,714 shares of common stock. The acquisition closed on December 27, 2021.

We continue to finalize the preliminary fair values of the net assets acquired and liabilities assumed as of the December 27, 2021 acquisition date. During the period ended September 30, 2022, we reimbursed the shareholders of BW $1,991,338 for a loan from the Small Business Administration (see “Note 11 Notes payable” for additional information) with no impact to goodwill. We will continue to monitor for additional potential adjustments, primarily relating to the determination of and valuation of identifiable assets within the one-year period of acquisition. Any additional potential adjustments could be material in relation to the preliminary values presented below.

We continue to finalize the preliminary fair values of the net assets acquired and liabilities assumed as of December 27, 2021 acquisition date.

The Company analyzed the acquisition under applicable guidance and determined that the acquisition should be accounted for as a business combination. The acquisition resulted in goodwill which was recorded to each reporting unit. The recorded goodwill is not deductible for income tax purposes.

ANS

The Company entered into a securities purchase agreement, dated May 7, 2021, with the shareholders of Nextridge, Inc. and its wholly owned subsidiary, Advanced Network Solutions (collectively “ANS”) pursuant to which we agreed to purchase all the issued and outstanding shares of ANS for an aggregate purchase price of $19,798,324. $6,850,000 of the aggregate purchase price payable to the shareholders of ANS was payable through the issuance of 2,395,105 shares of our Series B preferred stock. The acquisition closed on May 21, 2021.

The Company analyzed the acquisition under applicable guidance and determined that the acquisition should be accounted for as a business combination. The acquisition resulted in goodwill which was recorded on the reporting unit’s books. The recorded goodwill is not deductible for income tax purposes.

The following table summarizes the estimated fair values of the assets acquired and liabilities assumed at the date of acquisition:

	Preliminary Estimate		Measurement Period Adjustments ⁽¹⁾			Final
Identifiable intangible asset	$	-	$	11,924,617		$	11,924,617
Tangible assets acquired (net of tangible liabilities assumed)		6,380,152		(134,377	)		6,245,775
Goodwill		13,418,172		(8,400,490	)		5,017,682
Deferred tax for identifiable intangible asset		-		(3,026,788	)		(3,026,788	)
Total	$	19,798,324	$	362,962		$	20,161,286

⁽¹⁾Within one year of acquisition, the Company recorded measurement period adjustments primarily relating to the establishment of a customer relationship intangible asset of $11,924,617 and related deferred tax liability of $3,026,788. See “Note 6 Intangible assets.”