Business Combination

3 Months Ended

Mar. 31, 2024

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

Business Combination

4) Business Combination

On January 9, 2024, the Company acquired the assets and assumed the liabilities of Uncle Buds. Under the provision of ASC 805 Business Combinations, the acquisition is considered an acquisition of a business since the Company is continuing the business of UB which has defined inputs and substantive processes that contribute to the ability to create outputs.

The Company believes that the purchase of the assets and assumption of liabilities of Uncle Bud’s will result in synergies from combining the existing commercial customers of the Company with the retire focus, and customer list of Uncle Bud’s, as the Company desires to use its existing products into the retail channel.

The business combination accounting is not yet complete and the amounts assigned to assets acquired and liabilities assumed are provisional. Therefore, this may result in future adjustments to the provisional amounts as new information is obtained about facts and circumstances that existed at the acquisition date.

The following are the unaudited pro forma results of operations for the three months ended March 31, 2024 and 2023, as if Uncle Bud’s had been acquired on January 1, 2023. The pro forma results include estimates and assumptions that management believes are reasonable. However, pro forma results are not necessarily indicative of the results that would have occurred if the business combination had been in effect on January 1, 2023.

	Unaudited
	Pro Forma combined financials PBI and UB
	For the Three Months ended March 31,
	2024			2023
Sales	$	362,073		$	1,258,365
Cost of goods sold	$	251,210		$	687,576
Operating expenses	$	1,645,636		$	4,274,709
Loss from operations	$	(1,534,773	)	$	(3,703,920	)
Loss per share	$	(0.04	)	$	(0.23	)

The purchase price is as follows:

Fair value of options issued to sellers of UB and finders (1)	$	2,210,060
Preferred shares DD issued	$	1,066,800
Cost of acquisition:
Fair value of options issued to finders (1) (2)	$	(210,060	)
Total consideration paid	$	3,066,800

Notes

(1) Options were owed as of March 31, 2024, but not yet issued. Therefore, the Company recognized the option fair value as a liability “Options Payable” as of March 31, 2024, for a total of $2,210,060. In computing fair value, a Black Scholes computation was performed with the following variables:

a. For options issued to the sellers of UB, valued at $2,000,000

i.	Expected time to maturity = 5 years
ii.	Annual risk free rate = 4.08%
iii.	Annualized volatility = 118%

b. For options issued as investment banker fees, valued at $210,060

i.	Expected time to maturity = 2.5 years
ii.	Annual risk free rate = 4.18%
iii.	Annualized volatility = 103%

(2) This amount was expensed in the statement of operations.

Upon analysis of Uncle Bud’s business combination, the Company has estimated the fair value of the assets and liabilities acquired as follows:

	Estimate of Fair Value
Assets Acquired
Accounts Receivable	$	5,123
Inventory		350,922
Customer list		664,237
Goodwill		4,727,976
Intangible assets		1,516
Total assets	$	5,749,774
Liabilities Assumed
Accounts payable	$	1,344,254
Accrued liabilities		522,145
Other current liabilities		14,360
Term loan liabilities		68,000
Line of credit		734,215
Total liabilities assumed		2,682,974
Total	$	3,066,800

The Uncle Bud’s transaction produced a goodwill of $4,727,976. The Company anticipates that there will be no material increase or decrease to its tax situation based on this goodwill.

On January 9, 2024, the Company and CBH International LLC, dba Uncle Bud’s, signed an Asset Purchase Agreement (the “Agreement”) for the Company to acquire all of Uncle Bud’s assets and assume selected liabilities, including a $734,000 long-term loan and all trade payables.

Uncle Bud’s stockholders received 127 shares in PBIO convertible Series DD Preferred Stock that converts into 2,540,000 common shares of PBIO. Such shares are subject to standard restrictions on resale. In addition, the parties agreed to an earnout for additional shares of PBIO Common Stock worth up to $4,000,000 based on the achievement of revenue and pre-tax income results in 2024, and subsequently entered into an amendment to terminate the contingent and earnout clause of the Agreement and issued 8,000,000 non-qualified stock options. All options had an exercise price of $0.30, (100% vest immediately), have a ten-year life as long as the Optionee remains affiliated with PBI (one-year life after loss of affiliation), and all other terms and conditions as specified in the 2024 plan.

Upon the closing, all employees of Uncle Bud’s have become employees of PBIO and Uncle Bud’s has become the Consumer Products Business Unit of the Company.

Goodwill considerations – ASC 350-20-35-34 states, “A component of an operating segment is a reporting unit if the component constitutes a business or a nonprofit activity for which discrete financial information is available and segment management, as that term is defined in paragraph 280-10-50-7, regularly reviews the operating results of that component.” In this case Uncle Bud’s is a reporting unit with discrete financial information should be shown in the Uncle Buds segment along with any impairment. All assessments of goodwill impairment are conducted at the segment reporting unit level.