Acquisition of Card Cash

9 Months Ended

Sep. 30, 2024

Business Combination, Asset Acquisition, and Joint Venture Formation [Abstract]

Acquisition of Card Cash

3. Acquisition of Card Cash

On December 29, 2023, the Company completed the acquisition of CardCash. The acquisition was made pursuant to an agreement and plan of merger dated August 18, 2023, between the Company and CardCash. The Company acquired all of the issued and outstanding equity of CardCash for $26,682,000, made up of the issuance of 6,108,007 shares of the Company’s common stock valued at $24,682,000, the issuance of a note payable for $1,500,000, and payment of $750,000 in cash.

The Company utilized the acquisition method of accounting for the acquisition in accordance with ASC 805, Business Combinations, and allocated the purchase price to CardCash’s tangible assets, identifiable intangible assets, and assumed liabilities at their estimated fair values as of the date of acquisition. The fair value assigned to the developed technology was determined using the relief from royalty method. The fair value assigned to trade name were determined using the relief from royalty method. The fair value of the customer relationships was determined using the multi-period excess earnings method, which estimates the direct cash flow expected to be generated from the existing customers acquired. The cash flows were based on estimates used to value the acquisition, and the discount rates applied were benchmarked with reference to the implied rate of return from the transaction model, as well as the weighted average cost of capital. The valuation assumptions took into consideration the Company’s estimates of customer attrition and revenue growth projections. The excess of the purchase price paid by the Company over the estimated fair value of identified tangible and intangible assets has been recorded as goodwill. Goodwill also represents the future benefits as a result of the acquisition that the Company believes will enhance the Company’s product offerings and lineup available to both new and existing customers and generate future synergies within the discount coupon and gift card business.

As of September 30, 2024, management has not yet finalized its valuation analysis. In accordance with ASC 805, the Company made an initial provisional allocation of the purchase price for CardCash based on the fair value of the assets acquired and liabilities assumed. The fair values of the assets acquired, as set forth below, are considered provisional and subject to adjustment as additional information is obtained through the purchase price measurement period (a period of up to one year from the closing date). Any prospective adjustments through the purchase price measurement period would change the fair value allocation as of the acquisition date. The Company is still in the process of reviewing underlying models, assumptions and discount rates used in the valuation of provisional goodwill and intangible assets.

The following table summarizes the allocation of the fair value of the purchase consideration to the fair value of tangible assets, identifiable intangible assets, and assumed liabilities of CardCash on the date of acquisition:

	Fair Value
Fair value of consideration:
Cash	$	750,000
Notes payable ($750,000 due December 30, 2024; $750,000 due December 30, 2025)		1,500,000
Common stock (6,108,007 shares of common stock at $4.00 per share)		24,432,000
Total purchase price	$	26,682,000
Allocation of the consideration to the fair value of assets acquired and liabilities assumed:
Cash	$	2,061,265
Accounts receivable		1,582,635
Inventories		4,152,273
Prepaids, deposits, and other		220,385
Property and equipment, net		2,563,312
Accounts payable and accrued liabilities		(2,068,154	)
Line of credit		(6,737,385	)
Deferred tax liability		(1,800,000	)
Net tangible assets		(25,669	)
Intangible assets:
Developed technology		2,600,000
Trade name		2,400,000
Customer relationships		1,700,000
Net identifiable intangible assets		6,700,000
Goodwill		20,007,669
Fair value of net asset acquired	$	26,682,000

The following unaudited pro forma statements of operations present the Company’s pro forma results of operations after giving effect to the purchase of CardCash based on the historical financial statements of the Company and CardCash. The unaudited pro forma statements of operations for the nine months ended September 30, 2023, give effect to the transaction as if it had occurred on January 1, 2023.

	Nine Months Ended September 30, 2023
	(Proforma, unaudited)
Sales	$	67,567,019
Net loss	$	(5,806,189	)
Net loss per share	$	(0.42	)