Quarterly report [Sections 13 or 15(d)]

Note 10 - Business Combinations

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Note 10 - Business Combinations
 3 Months Ended
Mar. 31, 2025
Notes to Financial Statements  
Business Combination [Text Block]

NOTE 10 – BUSINESS COMBINATIONS

 

Safe Accessible Solutions, Inc.

 

On May 1, 2024, the Company executed an amended and restated binding letter of intent (the “Amended LOI”) with Safe Accessible Solutions, Inc. ("SAS") wherein the Company, a newly formed wholly-owned subsidiary of the Company (“Blum Acquisition”), and the stockholders of SAS shall enter into a Stock Sale and Purchase Agreement in which Blum Acquisition will acquire 100% of the Common Stock of SAS. The Company paid an aggregate consideration of $1,671,451 as follows: (i) a secured promissory note in the aggregate principal amount of $1,000,071 to be paid in monthly installments of approximately $23,811 per month over 42 months; and (ii) the issuance of 945,605 shares of Common Stock of the Company valued at $671,380 based on the closing share price, of which 196,507 shares of the Company's Common Stock shall be issued and transferred no later than 12 months from closing date. The Company issued and transferred 749,097 shares of Common Stock on May 1, 2024. On the date which is 24 months subsequent to the closing date, the previous stockholders of SAS shall have the option, but not the obligation, to exchange shares of the Company's Common Stock received as part of the purchase price for a promissory note (the "Put Option"). The Put Option is exercisable for a period of 90 days thereafter. Refer to "Note 14 - Derivative Liabilities" for the Put Option. The Note may be converted into Common Stock of the Company at the transaction valuation, on terms to be agreed upon. The Stock Sale and Purchase Agreement is subject to close upon regulatory approval.
 
On May 1, 2024, the Company, through its wholly-owned subsidiary Blum Management, executed a management services agreement with SAS (the "Management Services Agreement") pursuant to which the Company shall manage the operations of SAS. SAS operates a retail dispensary located in Sacramento, California. As consideration for such services, the Company shall receive a management fee of 100% of the economic benefit of SAS. The term of the MSA is indefinite and may only be terminated by the Company or upon the closing of the Stock Sale and Purchase Agreement. The fair value of non-controlling interest related to SAS was nil as of May 1, 2024 as a result of the management fee.

 

Coastal Pine Holdings, Inc.

 

On May 1, 2024, the Company, through its wholly-owned subsidiary Blum Management, executed an advisory and consulting engagement letter (the "Agreement") with Coastal Pine Holdings, Inc. ("Coastal") pursuant to which Blum Management shall provide advisory and consulting services and related business support to Coastal. Coastal is a holding company involved in the management of retail dispensaries throughout Northern California. As compensation for such services, the Company shall receive a monthly fee of $75,000. The term of the Agreement is indefinite and may only be terminated by the Company. The Agreement includes an option by Blum Management to purchase all of the outstanding equity of Coastal in exchange for (i) a promissory note in the amount of $940,974 payable to the shareholders of Coastal and (ii) the issuance of 889,725 shares of the Company's Common Stock, of which 496,712 shares of the Company’s Common Stock were issued and transferred on May 1, 2024 and 393,013 shares of the Company’s Common Stock shall be issued and transferred on the 12-month anniversary of the date of the Agreement. On the date which is 24 months subsequent to the closing date, the previous stockholders of Coastal shall have the option, but not the obligation, to exchange shares of the Company's Common Stock received as part of the purchase price for a promissory note, which is exercisable for a period of 90 days thereafter. Refer to "Note 14 - Derivative Liabilities" for the Put Option. The sale of the equity of Costal is subject to close upon regulatory approval.
 
The transactions are intended to expand the Company's retail footprint in Northern California and to achieve synergies with the Company's existing retail operations in Northern California. Transaction-related costs and issuance costs related to the business combination were nil. As a result of the agreements entered into on May 1, 2024, the Company determined these entities are variable interest entities under ASC 810, “Consolidation” (“ASC 810”) of which the Company is a primary beneficiary. The entities are under common control and accounted for as a single transaction under Coastal Pines Group (“CPG”) for presentation purposes. Refer to "Note 15 – Stockholders' Deficit" for variable interest entities.

 

The table below summarizes the allocation of the purchase price based on fair value of net assets acquired:

 

    (in thousands)  

Equity Consideration - Common Stock

   $ 1,264  

Put Option

     3,480  

Note Payable

     1,874  

Total Consideration

   $ 6,618  
         

Assets Acquired:

        

Cash

     959  

Accounts Receivable

     85  

Inventory

     524  

Prepaid Expenses & Other Assets

     112  

Property, Equipment and Leasehold Improvements

     470  

Right-of-Use Asset - Operating Leases

     1,694  

Intangible Assets

     3,100  

Total Assets Acquired

     6,944  
         

Liabilities Assumed:

        

Accounts Payable & Accrued Liabilities

     3,877  

Operating Lease Liabilities

     2,077  

Notes Payable

     307  

Income Taxes Payable

     9,632  

Deferred Tax Liabilities

     1,549  

Total Liabilities Assumed

     17,442  
         

Fair Value of Net Assets Acquired

     (10,498 )
         

Goodwill

   $ 17,116  

 

CPG contributed revenue of $2.17 million and net loss of $0.74 million for the three months ended March 31, 2025.