Quarterly report pursuant to Section 13 or 15(d)

Asset Purchase Agreement

v3.20.2
Asset Purchase Agreement
6 Months Ended
Jun. 30, 2020
Business Combinations [Abstract]  
Asset Purchase Agreement
4 ASSET PURCHASE AGREEMENT

 

On September 30, 2019, the Company entered into the Purchase Agreement with GBT.

 

Under the Purchase Agreement, the Company has purchased substantially all of the assets, and specified liabilities, of GBT’s ECS Prepaid business, Electronic Check Services business, and the Central State Legal Services business. The Purchase Agreement provides that the Company assumed GBT’s liabilities incurred after the effective date of the Purchase Agreement, but only to the extent such obligations and liabilities were not caused by or related to any action or inaction by GBT prior to the effective date of the Purchase Agreement. The Purchase Agreement provides, among other things, that on the terms and subject to the conditions set forth therein, the Company acquired substantially all of the assets related to the ECS Business for total consideration of five million dollars ($5,000,000). The Purchase Agreement provides that the consideration is to be paid by the Company through the issuance of a convertible promissory note in the amount of four million dollars ($4,000,000) to GBT, and through the issuance of three million three hundred thirty-three thousand three hundred thirty-three (3,333,333) restricted shares of the Company’s Common Stock to GBT. As of the date of this report, the purchase price allocation has yet to be valued. GBT may not convert the Note to the extent that such conversion would result in beneficial ownership by GBT and/or its affiliates of more than 4.99% of the issued and outstanding Common Stock of the Company.

 

The Note has an effective date of September 27, 2019 and has a term of eighteen (18) months until the maturity date. The Note shall not bear interest and shall be convertible at the option of GBT starting from the sixth month anniversary of the effective date. The conversion price of the Note shall equal the volume weighted average price of the Company’s Common Stock on the trading market which the common stock is then trading over the previous twenty (20) days prior to the conversion date, provided that the conversion price shall never be lower than $0.10 or higher than $0.70. The Note provides that the Company retains the right to prepay all or any portion of the principal without any prepayment penalty. In addition, in connection with the issuance of the Note, GBT agreed that, for the eighteen (18) months following the effective date, GBT will not dispose of the Shares or shares issued as a result of the conversion of the Note, in an amount greater than seven and one-half percent (7.5%) of the trading volume of the Company’s shares of Common Stock during the previous month.

 

Following the closing of the merger transaction, the Company’s investment in ECS consisted of the following:

 

Purchase Price        
Convertible note   $ 4,000,000  
Common stock     1,000,000  
Total purchase price   $ 5,000,000  
         
Allocation of purchase price        
Cash   $ 210,348  
Equipment     63,289  
Intangibles     4,903,876  
Accounts payable and accrued expenses     (177,513 )
Total allocation of purchase price   $ 5,000,000  

 

  (1) The 3,333,333 restricted shares of the Company’s Common Stock issued at closing of the merger transaction had a closing price of approximately $0.30 per share on the date of the transaction.

 

Following the closing of the merger transaction, ECS’s financial statements as of the closing were consolidated with the consolidated financial statements of the Company.

 

The following presents the unaudited pro-forma combined results of operations of the Company with the ECS Business as if the entities were combined on January 1, 2019.

 

    Six Months Ended  
    June 30, 2019  
Revenues   $ 30,204,408  
Net loss   $ (4,591,108 )
Net loss per share   $ (0.05 )
Weighted average number of shares outstanding     92,066,948