Quarterly report pursuant to Section 13 or 15(d)

Acquisition of Simson-Maxwell

v3.22.2
Acquisition of Simson-Maxwell
6 Months Ended
Jun. 30, 2022
Acquisition of Simson-Maxwell  
Acquisition of Simson-Maxwell

Note 5. Acquisition of Simson-Maxwell

 

Effective August 6, 2021, Viking entered into a Share Purchase Agreement with Simmax Corp., (“Simmax”), Remora EQ LP, (“Remora”), and Simson-Maxwell Ltd., (“Simson”), pursuant to which Viking agreed to purchase 419 Class A Common Shares of Simson from Simmax and 555 Class A Common Shares of Simson from Remora for a total purchase price of CA$3,998,045 (approx. US$3,198,936) (the “Purchase Price”).

 

Simultaneously, effective August 6, 2021, Viking entered into a Subscription Agreement with Simson (the “Subscription Agreement”), pursuant to which Viking agreed to purchase from Simson 1,462 Class A Common Shares of Simson for a purchase price of CA$6,001,641.58 (approx. US $4,799,009. (the “Subscription Price”).

 

These acquisitions resulted in Viking owning a total of 2,436 Class A Common Shares of Simson, representing approximately 60.5% of the total issued and outstanding shares of Simson.

 

Also on August 6, 2021, Viking entered into a Unanimous Shareholders Agreement with Simmax, Remora and Simson regarding the ownership and governance of Simson, and pursuant to which Viking shall nominate two members of the Board of Directors of Simson, Simmax shall nominate one member of the Simson Board, Remora shall nominate one member of the Simson Board, and Viking, Remora and Simmax shall jointly nominate the fifth member of the Simson Board.

The August 6, 2021 amendment also contained certain provisions that required 2/3rds majority of the Board to vote for changes in the capital budget of the company, capital expenditures in excess of $250k and other provisions generally considered to be participatory rights, which would preclude Viking from consolidating Simson.

 

On October 18, 2021, the company amended the Unanimous Shareholders Agreement with Simmax, Remora and Simson to increase the number of board member to 5 with three board members nominated by Viking and to require two thirds approval of the board of directors only for matters affecting issuance of dilutive shares, dissolution of Simson and other matters that generally would protect non-controlling shareholders. The changes to the Unanimous Shareholders Agreement on October 18, 2021 rescinded the two thirds Board approval requirement for all matters except those that are protective in nature, at which point, Viking obtained control of Simson.

 

As a result, Simson-Maxwell is included in the accompanying consolidated financial statements under the equity method from August 6, 2021 to October 18, 2021 and is consolidated from the effective date (October 18, 2021) of the acquisition. The recorded cost of this acquisition was based upon the fair market value of the assets acquired based on an independent valuation.

 

The total value of the consideration given was determined as follows:

 

Cash consideration – August 6, 2021

 

$ 7,958,159

 

Equity in earnings (losses) through October 18, 2021

 

 

(178,942 )

 

 

 

 

 

Total value of consideration given – October 18, 2021

 

$ 7,779,217

 

 

The preliminary fair values of assets acquired and liabilities assumed in connection with this acquisition are as follows:

 

Total Purchase Price

 

$ 7,779,217

 

 

 

 

 

 

Fair Value of Assets and Liabilities including the recognition of a 39.5% noncontrolling interest

 

 

 

 

Cash

 

$ 5,668,384

 

Accounts receivable

 

 

7,559,748

 

Inventory

 

 

5,819,612

 

Prepaid expenses

 

 

288,032

 

Fixed assets

 

 

1,397,187

 

Identifiable intangible assets

 

 

3,908,126

 

Accounts payable

 

 

(5,475,967 )

Accrued expenses and other liabilities

 

 

(948,669 )

Bank credit facility

 

 

(4,007,971 )

Related party liabilities - net

 

 

(422,682 )

Promissory notes payable

 

 

(1,344,599 )

Noncontrolling interest recognized at fair value acquisition

 

 

(4,914,274 )

Total fair value of acquisition

 

 

7,526,927

 

 

 

 

 

 

Fair value of goodwill

 

$ 252,290

 

The Company is still in the process of determining fair value for certain assets and liabilities. All amounts are considered preliminary and subject to adjustment.

 

The Company has determined, on a provisional basis, a valuation of goodwill and noncontrolling interest, which approximate $252,290 and $4,914,275, respectively. Goodwill is driven by other intangible assets that do not qualify for separate recognition and is not deductible for tax purposes.

 

Proforma financial data is not presented as it was impractical to do so as Simson-Maxwell did not have quarterly information prepared utilizing an acceptable basis of accounting.