Quarterly report pursuant to Section 13 or 15(d)

Acquisitions

v3.23.3
Acquisitions
9 Months Ended
Sep. 30, 2023
Business Combinations [Abstract]  
Acquisitions

Note 4 – Acquisitions

Acquisition of MPX New Jersey LLC

On February 1, 2022, the Company’s wholly-owned subsidiary, INJ, closed on its acquisition of MPX New Jersey LLC (“MPX NJ”), a New Jersey-based entity with a New Jersey medical cannabis permit and, as of April 13, 2023, an expanded cannabis permit to allow for certain adult-use operations. The acquisition consisted of INJ exercising its right to convert the principal balance of a loan and accrued interest owed pursuant to its loan agreement of $4.6 million into a 99% equity interest in MPX NJ. In addition, pursuant to an option agreement, INJ exercised its option to acquire the remaining 1% of MPX NJ for nominal consideration. The transaction with MPX NJ is a related party transaction due to the fact that Elizabeth Stavola, a former officer and director of the Company, is a former officer, director and majority owner of MPX NJ.

This transaction was treated as an asset acquisition under U.S. GAAP as substantially all of the fair value of the gross assets acquired were deemed to be associated with the acquired cultivation, production and retail licenses recognized as intangible assets in the table below.

The following table summarizes the allocation of the purchase price to the fair values assigned to the assets acquired and liabilities assumed:

Consideration

 

 

 

   Cash

 

$

1

   Settlement of pre-existing relationships

 

 

19,193

Fair value of consideration

 

$

19,194

Assets acquired and liabilities assumed

 

 

 

   Cash

 

$

5

   Fixed assets

 

 

100

   Other non-current assets

 

15

   Intangible assets

 

 

19,100

   Accounts payable

 

 

(15)

   Accrued and other current liabilities

 

 

(11)

Net assets acquired

 

$

19,194

 

The Company has determined that this acquisition is an asset acquisition under ASC 805 Business Combinations whereby the total consideration is allocated to the acquired net tangible and intangible assets based on their estimated fair values as of the closing date. The Company determined the fair value of the net identifiable assets received from the asset acquisition was a more reliable

measurement of the assets exchanged as part of this asset acquisition. The Company concluded that the consideration included a nonmonetary component of $14.5 million as noncash consideration exchanged for the net identifiable assets received from MPX NJ. The related tax impact of $4.1 million was netted against this gain. As a result, the Company recorded a $10.5 million gain within other income on the unaudited interim condensed consolidated statements of operations for the nine months ended September 30, 2022.

Operating results have been included in these unaudited interim condensed consolidated financial statements from the date of the acquisition. Supplemental pro forma financial information has not been presented as the impact was not material to the Company’s unaudited interim condensed consolidated financial statements. The Company recorded acquisition costs of $Nil and $0.3 million within selling, general and administrative expenses on the unaudited interim condensed consolidated statements of operations for the nine months ended September 30, 2023 and 2022, respectively.