EX-99.2 3 curr_ex992.htm UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS curr_ex992.htm

EXHIBIT 99.2

 

UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS 

 

The following unaudited pro forma condensed combined financial information and related notes present the historical condensed combined financial information of Cure Pharmaceutical Holding Corp (herein referred to as the “Company”, “we”, “our”, “us”, “CURE” and similar terms unless the context indicates otherwise) and The Sera Labs, Inc. (“Sera Labs”), after giving effect to the acquisition of Sera Labs that was completed effective October 2, 2020, (the “Acquisition”), pursuant to which, the Company entered into an agreement and plan of merger and reorganization. The Acquisition was accounted for as a business combination in accordance with the guidance contained in the Financial Accounting Standards Board’s Accounting Standards Codification Topic 805, Business Combinations (“ASC 805”). The unaudited pro forma condensed combined financial information gives effect to the acquisition of Sera Labs based on the assumptions and adjustments described in the accompanying notes to the unaudited pro forma condensed combined financial information.

 

The unaudited condensed combined pro forma balance sheet gives effect to the acquisition as if the transaction had taken place on September 30, 2020 and combines the Company’s unaudited condensed consolidated balance sheet as of September 30, 2020 with the Sera Lab’s unaudited condensed balance sheet as of September 30, 2020. The unaudited condensed combined pro forma statements of operations are presented combining the Company’s unaudited condensed statement of operations for the nine months ended September 30, 2020 and for the year ended December 31, 2019 and Sera Lab’s unaudited condensed statement of operations for the nine months ended September 30, 2020 and for the year ended December 31, 2019.

 

The unaudited pro forma condensed combined financial information was prepared in accordance with Article 11 of the U.S. Securities and Exchange Commission’s Regulation S-X. The unaudited pro forma adjustments reflecting the transaction have been prepared in accordance with the guidance for business combinations presented in ASC 805, and reflect the allocation of our purchase price to the assets acquired and liabilities assumed in the Acquisition based on their estimated fair values. The historical financial information has been adjusted in the unaudited pro forma condensed combined financial information to give effect to pro forma events that are: (i) directly attributable to the Acquisition; (ii) factually supportable; and (iii) with respect to the condensed combined statements of operations, expected to have a continuing impact on our combined results of operations.

 

The unaudited pro forma condensed combined financial information is for illustrative purposes only. These companies may have performed differently had they actually been combined for the periods presented. You should not rely on the pro forma condensed combined financial information as being indicative of the historical results that would have been achieved had the companies always been combined or the future results that the combined companies will experience after the merger. Unaudited pro forma financial information and the notes thereof should be read in conjunction with the accompanying historical financial statements of the Company and Sera Labs.

 

 
1

 

 

Cure Pharmaceutical Holding Corp

Unaudited Condensed Combined Pro forma Balance Sheet

September 30, 2020

(in thousands, except share amounts)

 

 

 

CURE
September 30,

2020

 

 

Sera Labs

September 30,

2020

 

 

Consolidated

 

 

Pro forma 

Adjustments

 

 

Reference

 

Consolidated
Pro Forma

 

Assets

Current assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash

 

 $ 1,102

 

 

 $ 1,357

 

 

 $ 2,459

 

 

 $

 

 

 

 

 $ 2,459

 

Accounts receivable, net

 

 

 46

 

 

 

 69

 

 

 

 115

 

 

 

 

 

 

 

 

 115

 

Note receivable, net

 

 

 550

 

 

 

 -

 

 

 

 550

 

 

 

 (550 )

 

(b)

 

 

 -

 

Inventory

 

 

 228

 

 

 

 440

 

 

 

 668

 

 

 

 

 

 

 

 

 

 668

 

Due from related party, net

 

 

 -

 

 

 

 8

 

 

 

 8

 

 

 

 

 

 

 

 

 

 8

 

Advances to suppliers

 

 

 -

 

 

 

 700

 

 

 

 700

 

 

 

 

 

 

 

 

 

 700

 

Prepaid expenses and other assets

 

 

 382

 

 

 

 223

 

 

 

 605

 

 

 

 (8 )

 

(b)

 

 

 597

 

Total current assets

 

 

 2,308

 

 

 

 2,797

 

 

 

 5,105

 

 

 

 (558 )

 

 

 

 

 4,547

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Property and equipment, net

 

 

 1,965

 

 

 

 6

 

 

 

 1,971

 

 

 

 

 

 

 

 

 

 1,971

 

Right of use asset

 

 

 55

 

 

 

 363

 

 

 

 418

 

 

 

 

 

 

 

 

 

 418

 

Investment

 

 

 509

 

 

 

 -

 

 

 

 509

 

 

 

 

 

 

 

 

 

 509

 

Goodwill

 

 

 9,178

 

 

 

 -

 

 

 

 9,178

 

 

 

 3,441

 

 

(a)

 

 

 12,619

 

Intellectual property and patents, net

 

 

 1,728

 

 

 

 40

 

 

 

 1,768

 

 

 

 

 

 

 

 

 

 1,768

 

In-process research and development

 

 

 14,288

 

 

 

 -

 

 

 

 14,288

 

 

 

 

 

 

 

 

 

 14,288

 

Customer releationships

 

 

 -

 

 

 

 -

 

 

 

 -

 

 

 

 7,110

 

 

(a)

 

 

 7,110

 

Trade names

 

 

 -

 

 

 

 -

 

 

 

 -

 

 

 

 2,610

 

 

(a)

 

 

 2,610

 

Noncompete agreements

 

 

 -

 

 

 

 -

 

 

 

 -

 

 

 

 469

 

 

(a)

 

 

 469

 

Other assets

 

 

 35

 

 

 

 21

 

 

 

 56

 

 

 

 

 

 

 

 

 

 56

 

Total assets

 

 $ 30,066

 

 

 $ 3,227

 

 

 $ 33,293

 

 

 $ 13,072

 

 

 

 

 $ 46,365

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Liabilities and Stockholders' Equity (Deficit)

Current liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accounts payable

 

 $ 1,784

 

 

 $ 443

 

 

 $ 2,227

 

 

 $

 

 

 

 

 $ 2,227

 

Accrued expenses

 

 

 286

 

 

 

 620

 

 

 

 906

 

 

 

 (8 )

 

(b)

 

 

 898

 

Payables to related party

 

 

 -

 

 

 

 691

 

 

 

 691

 

 

 

 (550 )

 

(b)

 

 

 141

 

Finance lease payable - short term

 

 

 12

 

 

 

 -

 

 

 

 12

 

 

 

 

 

 

 

 

 

 12

 

Operating lease payable - short term

 

 

 -

 

 

 

 89

 

 

 

 89

 

 

 

 

 

 

 

 

 

 89

 

Payroll protection loan - short term

 

 

 -

 

 

 

 109

 

 

 

 109

 

 

 

 

 

 

 

 

 

 109

 

Notes payable, net

 

 

 2,366

 

 

 

 123

 

 

 

 2,489

 

 

 

 1,000

 

 

(a)

 

 

 3,489

 

Convertible promissory notes, net

 

 

 550

 

 

 

 -

 

 

 

 550

 

 

 

 

 

 

 

 

 

 550

 

Derivative liability

 

 

 3

 

 

 

 -

 

 

 

 3

 

 

 

 

 

 

 

 

 

 3

 

Contract liabilities

 

 

 316

 

 

 

 1,963

 

 

 

 2,279

 

 

 

 

 

 

 

 

 

 2,279

 

Total current liabilities

 

 

 5,317

 

 

 

 4,038

 

 

 

 9,355

 

 

 

 442

 

 

 

 

 

 9,797

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Contingent share consideration

 

 

 -

 

 

 

 -

 

 

 

 -

 

 

 

 3,095

 

 

(a)

 

 

 3,095

 

License fees

 

 

 82

 

 

 

 -

 

 

 

 82

 

 

 

 

 

 

 

 

 

 82

 

Payroll protection loan - logn term

 

 

 -

 

 

 

 97

 

 

 

 97

 

 

 

 

 

 

 

 

 

 97

 

Operating lease payable - long term

 

 

 -

 

 

 

 303

 

 

 

 303

 

 

 

 

 

 

 

 

 

 303

 

Finance lease payable - long term

 

 

 43

 

 

 

 -

 

 

 

 43

 

 

 

 

 

 

 

 

 

 43

 

Total liabilities

 

 

 5,442

 

 

 

 4,438

 

 

 

 9,880

 

 

 

 3,537

 

 

 

 

 

 13,417

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stockholders' Equity (Deficit):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common stock: $0.001 par value; authorized 150,000,000 shares;

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

51,219,519 shares issued and outstanding as of September 30, 2020

 

 

 51

 

 

 

 9

 

 

 

 60

 

 

 

 7

 

 

(a)

 

 

 67

 

Additional paid-in capital

 

 

 88,777

 

 

 

 2,795

 

 

 

 91,572

 

 

 

 9,528

 

 

(a)

 

 

 101,100

 

Stock payable

 

 

 572

 

 

 

 -

 

 

 

 572

 

 

 

 

 

 

 

 

 

 572

 

Accumulated deficit

 

 

 (64,776 )

 

 

 (4,015 )

 

 

 (68,791 )

 

 

 

 

 

 

 

 

 (68,791 )

Total stockholders' equity (deficit)

 

 

 24,624

 

 

 

 (1,211 )

 

 

 23,413

 

 

 

 9,535

 

 

 

 

 

 32,948

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total liabilities and stockholders' equity (deficit)

 

 $ 30,066

 

 

 $ 3,227

 

 

 $ 33,293

 

 

 $ 13,072

 

 

 

 

 $ 46,365

 

 

 
2

 

 

Cure Pharmaceutical Holding Corp

Unaudited Condensed Combined Pro forma Statement of Operations

For the Nine Months Ended September 30, 2020

(in thousands, except share amounts)

  

 

 

CURE For the Nine Months Ended
September 30, 2020

 

 

Sera Labs for the Nine Months Ended September 30, 2020

 

 

Pro forma 

Adjustments

 

 

Reference

 

Consolidated
Pro Forma

 

Revenue:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net product sales

 

 $ 533

 

 

 $ 5,666

 

 

 $

 

 

 

 

 $ 6,199

 

Consulting research & development income

 

 

 169

 

 

 

 -

 

 

 

 

 

 

 

 

 169

 

Shipping and other sales

 

 

 39

 

 

 

 -

 

 

 

 

 

 

 

 

 39

 

Total revenues

 

 

 741

 

 

 

 5,666

 

 

 

 -

 

 

 

 

 

 6,407

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost of goods sold:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost of goods sold

 

 

 346

 

 

 

 2,797

 

 

 

 

 

 

 

 

 

 3,143

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross profit (loss)

 

 

 395

 

 

 

 2,869

 

 

 

 -

 

 

 

 

 

 3,264

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Research and development expenses

 

 

 2,284

 

 

 

 -

 

 

 

 

 

 

 

 

 

 2,284

 

Selling, general and administrative expenses

 

 

 6,711

 

 

 

 3,984

 

 

 

 

 

 

 

 

 

 10,695

 

Change in fair value of contingent stock consideration

 

 

 5,658

 

 

 

 -

 

 

 

 

 

 

 

 

 

 5,658

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total operating expenses

 

 

 14,653

 

 

 

 3,984

 

 

 

 -

 

 

 

 

 

 18,637

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Operating (loss) before other income (expense)

 

 

 (14,258 )

 

 

 (1,115 )

 

 

 -

 

 

 

 

 

 (15,373 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other income (expense):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest income

 

 

 32

 

 

 

 -

 

 

 (8 )

 

(b)

 

 

 24

 

Gain from settlement

 

 

 61

 

 

 

 -

 

 

 

 

 

 

 

 

 

 61

 

Change in fair value of derivative liability

 

 

 88

 

 

 

 -

 

 

 

 

 

 

 

 

 

 88

 

Financing costs

 

 

 -

 

 

 

 (60 )

 

 8

 

 

(b)

 

 

 (52 )

Loss on settlement

 

 

 -

 

 

 

 (151 )

 

 

 

 

 

 

 

 

 (151 )

Interest expense

 

 

 (67 )

 

 

 -

 

 

 

 

 

 

 

 

 

 (67 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other income (expense)

 

 

 114

 

 

 

 (211 )

 

 

 -

 

 

 

 

 

 (97 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss before income taxes

 

 

 (14,144 )

 

 

 (1,326 )

 

 

 -

 

 

 

 

 

 (15,470 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Provision for income taxes

 

 

 -

 

 

 

 -

 

 

 

 

 

 

 

 

 

 -

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

$ 

 (14,144 )

 

$ 

 (1,326 )

 

$ 

 -

 

 

 

 

$ 

 (15,470 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss per share

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic and Diluted

 

 $ (0.32 )

 

 $ (0.12 )

 

 

 

 

 

 

 

 $ (0.28 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average common shares outstanding

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic and Diluted

 

 

 43,647,388

 

 

 

 11,454,507

 

 

 

 

 

 

 

 

 

 55,101,894

 

  

 
3

 

 

Cure Pharmaceutical Holding Corp

Combined Pro forma Statement of Operations

For the Year Ended December 31, 2019

(in thousands, except share amounts)

 

 

 

CURE For the Year Ended
December 31, 2019

 

 

Sera Labs for the Year Ended December 31, 2019

 

 

Pro forma 

Adjustments

 

 

Reference

 

Consolidated
Pro Forma

 

Revenue:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net product sales

 

 $ 361

 

 

 $ 3,621

 

 

 $

 

 

 

 

 $ 3,982

 

Consulting research & development income

 

 

 247

 

 

 

 -

 

 

 

 

 

 

 

 

 247

 

Shipping and other sales

 

 

 15

 

 

 

 -

 

 

 

 

 

 

 

 

 15

 

Total revenues

 

 

 623

 

 

 

 3,621

 

 

 

 -

 

 

 

 

 

 4,244

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost of goods sold:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost of goods sold

 

 

 231

 

 

 

 1,150

 

 

 

 

 

 

 

 

 

 1,381

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross profit (loss)

 

 

 392

 

 

 

 2,471

 

 

 

 -

 

 

 

 

 

 2,863

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Research and development expenses

 

 

 2,308

 

 

 

 -

 

 

 

 

 

 

 

 

 

 2,308

 

Selling, general and administrative expenses

 

 

 10,119

 

 

 

 5,084

 

 

 

 

 

 

 

 

 

 15,203

 

Change in fair value of contingent stock consideration

 

 

 1,657

 

 

 

 -

 

 

 

 

 

 

 

 

 

 1,657

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total operating expenses

 

 

 14,084

 

 

 

 5,084

 

 

 

 -

 

 

 

 

 

 19,168

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Operating (loss) before other income (expense)

 

 

 (13,692 )

 

 

 (2,613 )

 

 

 -

 

 

 

 

 

 (16,305 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other income (expense):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest income

 

 

 57

 

 

 

 -

 

 

 

 

 

 

 

 

 

 57

 

Other income

 

 

 15

 

 

 

 -

 

 

 

 

 

 

 

 

 

 

 

Gain on deconsolidation

 

 

 81

 

 

 

 -

 

 

 

 

 

 

 

 

 

 81

 

Change in fair value of derivative liability

 

 

 527

 

 

 

 -

 

 

 

 

 

 

 

 

 

 527

 

Financing costs

 

 

 -

 

 

 

 (8 )

 

 

 

 

 

 

 

 

 (8 )

Other expense

 

 

 (590 )

 

 

 -

 

 

 

 

 

 

 

 

 

 

 

Interest expense

 

 

 (4,111 )

 

 

 -

 

 

 

 

 

 

 

 

 

 (4,111 )

Loss on conversion of convertible promissory notes

 

 

 (3,660 )

 

 

 -

 

 

 

 

 

 

 

 

 

 (3,660 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other income (expense)

 

 

 (7,681 )

 

 

 (8 )

 

 

 -

 

 

 

 

 

 (7,114 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss before income taxes

 

 

 (21,373 )

 

 

 (2,621 )

 

 

 -

 

 

 

 

 

 (23,419 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Provision for income taxes

 

 

 -

 

 

 

 -

 

 

 

 

 

 

 

 

 

 -

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

$ 

 (21,373 )

 

$ 

 (2,621 )

 

$ 

 -

 

 

 

 

$ 

 (23,419 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss per share

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic and Diluted

 

 $ (0.52 )

 

 $ (0.22 )

 

 

 

 

 

 

 

 $ (0.50 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average common shares outstanding

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic and Diluted

 

 

 41,344,256

 

 

 

 12,010,570

 

 

 

 

 

 

 

 

 

 46,551,031

 

  

 
4

 

 

CURE PHARMACEUTICAL HOLDINGCORP.

NOTES TO COMBINED PRO FORMA UNAUDITED FINANCIAL STATEMENTS

 

Unaudited Pro Forma Combined Financial Information

 

On October 2, 2020 (the “Effective Time”), the Company completed its acquisition of Sera Labs, a Delaware corporation pursuant to an Agreement and Plan of Merger and Reorganization, dated as of September 23, 2020 (the “Merger Agreement”), by and among the Company, Cure Labs, Inc., a Delaware corporation and a wholly owned subsidiary of the Company (“Merger Sub”), Sera Labs and Nancy Duitch, in her capacity as the security holders representative (“Ms. Duitch”; collectively with the Company, Sera Labs and Merger Sub, the “Parties”), as previously announced on Form 8-K filed by the Company with the Securities and Exchange Commission (the “SEC”) on September 29, 2020. The Merger Agreement provides for the acquisition of Sera Labs by the Company through the merger of Merger Sub with and into Sera Labs, with Sera Labs surviving as a wholly owned subsidiary of the Company (the “Merger”).

 

At the Effective Time of the Merger, all issued and outstanding shares of the capital stock of Sera Labs were converted into the right to receive, subject to customary adjustments, an aggregate of approximately (i) $1.0 million in cash (the "Upfront Payment”) and (ii) up to 6,909,091 shares of the Company’s common stock. On October 1, 2020, the Parties entered into a Waiver of Closing Condition, pursuant to which the Company’s obligation to pay the Upfront Payment at the Effective Time was extended to October 13, 2020. As of the filing date of this report, the Company has paid $250,000 of the Upfront Payment. Both the Company and Sera Labs have agreed there are no penalties or defaults resulting from the delinquency of the remaining Upfront Payment. The Company and Sera Labs are currently negotiating the remaining balance due of $750,000 as to the timing and structure of this payment.

 

Pursuant to the Merger Agreement, Sera Labs security holders are also entitled to receive up to 5,988,024 shares of the Company’s common stock (the “Clawback Shares”) based on the achievement of certain sales milestones up to an aggregate maximum amount of $20 million as set forth in the Merger Agreement. Subsequent to the Effective Time and for a period of two years, the Company agreed to make available to Sera Labs $4.0 million for working capital, less the outstanding amount of the Secured Promissory Note previously issued by the Company to Sera Labs as previously disclosed by the Company on Form 8-K filed with the SEC on July 28, 2020.

 

The preliminary allocation of the purchase price used in the unaudited pro forma condensed combined financial statements is based upon preliminary estimates. The preliminary estimated fair values of certain assets and liabilities have been determined with the assistance of a third-party valuation firm and such firm’s preliminary work. Our estimates and assumptions are subject to change during the measurement period (up to one year from the acquisition date) as the Company finalizes the valuations of certain tangible and intangible assets acquired and liabilities assumed in connection with the Acquisition. The primary areas of the purchase price allocation which are not yet finalized relate to identifiable intangible assets and goodwill.

 

The pro forma condensed combined balance sheet has been adjusted to reflect the preliminary allocation by the Company’s management of the Sera Labs purchase price to identifiable tangible and intangible net assets acquired and the excess purchase price to goodwill. The preliminary purchase price allocation is based upon an estimated total purchase price of approximately $14.2 million. The preliminary total purchase price was determined based on the following: i) $1 million in cash for the Upfront Payment, ii) 6,909,091 shares of the Company’s common stock at a price of $1.38, the closing price of the Company’s common stock on October 2, 2020; iii) the estimated fair value using the Monte-Carlo simulation of stock price correlation, and other variables over 12 month and 24 month performance periods applied to the total number of Clawback Shares, and iv) liabilities of Sera Labs that were assumed by the Company.

 

The preliminary estimated total purchase price of the acquisition is as follows (in thousands):

 

Upfront cash consideration

 

 $ 1,000

 

Fair value of closing merger consideration shares

 

 

 9,534

 

Fair value of earnout payment shares (Clawback Shares)

 

 

 3,095

 

Liabilities assumed

 

 

 550

 

Total preliminary estimated purchase price

 

 $ 14,179

 

 

Under the acquisition method of accounting, the total estimated purchase price is allocated to Sera Lab’s net tangible and intangible assets based on their estimated fair values at the date of the completion of the acquisition. The following table summarizes the preliminary allocation of the purchase price for Sera Labs and the estimated useful lives for the acquired intangible assets (in thousands):

 

Net tangible assets assumed

 

 $ 549

 

Acquired intangibles

 

 

 

 

Customer relationships (direct to consumer and wholesale)

 

 

 7,110

 

Trade name

 

 

 2,610

 

Noncompete agreements

 

 

 469

 

Goodwill

 

 

 3,441

 

Total preliminary estimated purchase price

 

 $ 14,179

 

 

Upon completion of the fair value assessment, the Company anticipates that the final purchase price allocation will differ from the preliminary assessment provided above. Any changes to the initial estimates of the fair value of the assets and liabilities will be recorded as adjustments to those assets and liabilities and the residual amounts will be allocated as an increase or decrease to goodwill.

 

Pro Forma Adjustments

 

The following pro forma adjustments are incorporated into the pro forma condensed combined balance sheet as of September 30, 2020 and the pro forma condensed combined statements of operations for the nine months ended September 30, 2020 and for the year ended December 31, 2019.

 

(a) To record the fair value of the assets and liabilities acquired from the acquisition of Sera Labs on October 2, 2020.

 

(b) To eliminate inter-company transactions between the Company and Sera Labs relating to promissory notes offered by the Company and purchased by Sera Labs as well as interest accrued relating to the promissory notes during the nine months ended September 30, 2020.

    

      

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