Quarterly report [Sections 13 or 15(d)]

Acquisitions

v3.26.1
Acquisitions
 3 Months Ended
Mar. 31, 2026
Business Combination [Abstract]  
Acquisitions

Note 4 - Acquisitions

Cheetah Acquisition

On December 30, 2024 (the "Acquisition Date"), the Company entered into an Asset Purchase Agreement (the "Cheetah Purchase Agreement") with Cheetah Enterprises, Inc. (the "Cheetah Seller"), pursuant to which, the Company acquired substantially all the assets related to the Cheetah Seller's wholesale business, including the manufacture, marketing, and sale of cannabis distillate vaporize products in the states of Illinois and Pennsylvania under the "Cheetah" brand (the "Brand"), but excluding certain excluded assets (the "Cheetah Purchased Assets") together with certain assumed liabilities related to the Cheetah Purchased Assets (the "Cheetah Acquisition"). The purchase price (the "Purchase Price") for the Cheetah Purchased Assets was approximately $3.5 million, and included (i) common shares at an aggregate deemed value of approximately $1.5 million, which the Company recorded at a fair value on acquisition of $1.2 million, to be issued in three (3) tranches; (ii) upon the completion of certain performance benchmarks (if the Brand does not meet the performance benchmark by the payment date, such payment date will be delayed until the later of (x) thirty (30) days or (y) until such time the Brand achieves the applicable performance benchmark; provided, the full cash consideration shall not be delayed more than twenty-four (24) months after closing); and (iii) additional consideration based on EBITDA generated by the Brand (the "Earn-Out") over the next three years which is payable annually in cash, with the final payment due on or before April 1, 2028.

On December 17, 2025, the Company entered into an amendment to the Cheetah Purchase Agreement with the Cheetah Seller, pursuant to which: (i) the payment schedule for the 2025 fiscal year Earn-Out (the "2025 Earn-Out") was amended and deferred as follows: (x) 20% of the 2025 Earn-Out was paid on April 15, 2026, (y) 40% of the 2025 Earn-Out is payable on October 15, 2026, and (z) 40% of the 2025 Earn-Out is payable on December 15, 2026 (collectively, the "Deferred Earn-Out Payments"); (ii) the Company agreed to pay the Cheetah Seller interest on the Deferred Earn-Out Payments at a rate of 6% per annum, which interest was paid in

advance on April 15, 2026; and (iii) the Company agreed to pay additional consideration based on EBITDA generated by the Brand during the first quarter of 2028, which will be payable on June 15, 2028.

The Company has determined that the Cheetah Acquisition is a business combination under ASC 805 whereby the total consideration is recorded by allocating the purchase consideration to the net assets and liabilities acquired based on their estimated fair values at the acquisition date.

The following table summarizes the final allocation of the purchase consideration to the assets acquired and liabilities assumed from the Cheetah Acquisition as of December 31, 2025:

Consideration:

 

 

 

Cash consideration - paid

 

$

2,000

Common stock - issued

 

 

1,167

Additional earn-out consideration

 

 

3,127

Fair value of consideration

 

$

6,294

 

 

 

 

Estimated fair values of net assets acquired and liabilities assumed:

 

 

 

Cash

 

$

45

Receivables and prepaid assets

 

 

340

Inventory

 

 

6

Operating lease right-of-use assets, net

 

 

42

Accounts payable

 

 

(301)

Accrued and other current liabilities

 

 

(86)

Intangible assets

 

 

4,690

Net assets acquired

 

$

4,736

 

 

 

Goodwill

 

$

1,558

The following table summarizes the final adjustments made to the provisional purchase price allocation:

 

 

Preliminary allocation at acquisition

 

Adjustments

 

As adjusted

Cash consideration - paid

 

$

675

 

$

1,325

 

$

2,000

Cash consideration - accrued

 

 

1,325

 

 

(1,325)

 

 

—

Common stock - issued

 

 

—

 

 

1,167

 

 

1,167

Common stock - issuable

 

 

1,167

 

 

(1,167)

 

 

—

Inventory

 

 

106

 

 

(100)

 

 

6

Intangible assets

 

 

—

 

 

4,690

 

 

4,690

Goodwill

 

 

6,148

 

 

(4,590)

 

 

1,558

The intangible assets recognized from the Cheetah Acquisition relate to trade names and other intellectual property and recipes used under the Brand. The goodwill recognized from the Cheetah Acquisition is attributable to the assembled workforce and synergies expected from integrating the Brand into the Company’s existing business. The goodwill acquired is not deductible for tax purposes.

Total purchase consideration transferred on the Acquisition Date also included additional Earn-Out that had a fair value of $3.1 million as of the Acquisition Date. The Acquisition Date fair value of the Earn-Out was determined based on the Company’s assessment of the probability of achieving the performance targets that ultimately obligate the Company to transfer additional consideration to the Cheetah Seller. The Earn-Out is comprised of certain EBITDA targets to be achieved by the Brand and is paid annually in cash. Subsequent remeasurement of the Earn-Out will be remeasured at the end of each reporting period with any gains or losses recognized in interest and other income and expenses within the consolidated statement of operations. Refer to Note 9 for further discussion on contingent consideration.

Acquisition-related costs are recorded within selling, general and administrative expenses on the unaudited interim condensed consolidated statement of operations. The Company recorded no acquisition-related costs during the three months ended March 31, 2026 and 2025.

Pro forma financial information is not disclosed as the results are not material to the Company’s consolidated financial statements.