On May 17, 2021, the Company’s wholly owned subsidiary Arcadia Wellness, acquired the assets of Eko, Lief, and Zola. The acquisition included consumer brands of bath and body care products such as Soul Spring, the CBD-infused botanical therapy brand, Saavy Naturals, a line of natural body care products and Provault, a CBD-infused sports performance formula. Also included in the purchase was Zola, a coconut water sourced from Thailand.

The acquisition was recorded as a business combination, in accordance with ASC Topic 805. The purchase price consideration for the acquisition totaled an estimated $6.1 million, of which $4.0 million in cash and $2.1 million in the form of 20,686 shares of the Company’s common stock, was paid during the month of May 2021. The cash consideration paid for the acquisition was funded by cash on hand.

Acquisition costs are not included as components of consideration transferred and instead are accounted for as expenses in the period in which the costs are incurred. The Company incurred costs related to the Arcadia Wellness acquisition of approximately $850,000 included in selling, general and administrative expenses in the Company's consolidated statements of operations and comprehensive loss for the year ended December 31, 2021.


	Purchase Price Allocation
Inventory	$	840
Prepaid and other current assets		62
Fixed assets		308
Deposits		82
Customer list		360
Trade names and trademarks		2,900
Formulations		260
Goodwill		1,240
Total consideration allocated	$	6,052

The former shareholders of Eko, Lief, and Zola remain responsible for their pre-acquisition liabilities. In connection with the acquisition, the Company entered into a lease agreement for the use of offices, production equipment acquired, and storage warehouses. The lease was effective on May 17, 2021 and has a term of 3 years.

For the period from January 1, 2022 to December 31, 2022, the Company recognized approximately $6.5 million of revenue and $2.1 million of net loss relating to Arcadia Wellness, which included charges related to the Radiance Beauty licensing agreement discussed below, as well as the amortization of acquired intangible assets. For the period from May 17 to December 31, 2021, the Company recognized approximately $4.3 million of revenue and $7.5 million of net loss relating to Arcadia Wellness, which included charges for the amortization and impairment of acquired intangible assets and goodwill.

Acquired intangible assets of $3.5 million include trade names and trademarks of $2.9 million (indefinite useful life), customer list of $360,000 (fifteen-year useful life) and formulations of $260,000 (ten-year useful life).

The total weighted average amortization period for the acquired intangibles is 12.9 years.

The acquisition produced $1.2 million of goodwill. The goodwill is attributable to a combination of Arcadia Wellness’s expectation regarding a more meaningful engagement by the customers due to the scale of the combined Company, and other synergies. Goodwill will be tested for impairment at least annually (more frequently if certain indicators are present). Goodwill arising from the Arcadia Wellness acquisition is deductible for tax purposes.

On July 8, 2022, the Company entered into a licensing agreement with Radiance Beauty. Under the terms of the licensing agreement, Radiance Beauty was granted an exclusive, transferable, sublicensable, perpetual, worldwide license to use the Saavy Naturals™ mark and to modify, manufacture, distribute, market and sell related products. In addition, as part of the licensing agreement, Radiance Beauty received the remaining accounts receivables and inventory balances after July 31, 2022, certain equipment, as well as three months of salaries in the amount of $355,000 and rent, maintenance and utilities in the amount of $19,000. Radiance Beauty is subleasing space from the Company and will pay the Company a 4% royalty of gross sales of products beginning January 1, 2023. During the year ended December 31, 2022, accounts receivables and inventories of $21,000 and $394,000, respectively, were written down. In addition, property and equipment and intangible assets were written down by $320,000 and $72,000, respectively, during the year ended December 31, 2022.

The following unaudited pro-forma consolidated results of operations for the years ended December 31, 2022 and 2021, have been prepared as if the acquisition of Arcadia Wellness had occurred on January 1, 2021 and includes adjustments for amortization of intangibles, and the addition to basic and diluted weighted average number of shares outstanding.


	For the year ended December 31,
	2022 (Pro forma)			2021 (Pro forma)
Total revenues	$	9,956		$	9,062
Net loss		(15,605	)		(17,854	)
Net loss attributable to common stockholders	$	(15,376	)	$	(16,380	)
Weighted average shares - Basic and diluted		599,389			539,773
Net loss per share attributable to common stockholders:
Basic and diluted	$	(25.65	)	$	(30.35	)