Business Acquisitions

12 Months Ended

Jul. 31, 2019

Business Combinations [Abstract]

BUSINESS ACQUISITIONS

NOTE 14 – BUSINESS ACQUISITIONS

On December 1, 2017, Shift8 and Synergy Telecom, Inc., a Delaware corporation ("Synergy"), closed a transaction to acquire all the assets, assumed all customers, and critical vendor arrangements from Synergy. Shift8 acquired Synergy to increase its customer base and obtain higher efficiency of its existing infrastructure. Shift8 paid $125,000 upon execution of the agreement, issued 500,000 shares of common stock with a market value of $175,000, and entered into a promissory note for $125,000 with an effective annual interest rate of 6% with 5 quarterly payments and a maturity date of February 28, 2019. The note holder agreed to extend three of the quarterly payment until March 31, 2019. During the year ended July 31, 2018, the Company made a principal payment of $50,000. During the year ended July 31, 2019 the Company paid in full the outstanding principal balance of $75,000 and accrued interest of $3,105.

The total purchase price was $425,000, the acquisition was accounted for under the purchase method of accounting, with Digerati identified as the acquirer. Under the purchase method of accounting, the aggregate amount of consideration assumed by Digerati was allocated to customer contracts acquired, software licenses, and goodwill based on their fair values as of December 1, 2017.

The following information summarizes the allocation of the fair values assigned to the assets. The allocation of fair values is based on an extensive analysis and is subject to changes in the future during the measurement period.

	Synergy		Useful life (years)
Customer relationships	$	40,000	5
License - software		105,000	3
Goodwill		280,000	-
Total Purchase price	$	425,000

The Company incurred approximately $10,000 in costs associated with the acquisition. These included legal, and accounting. The Company expensed these costs during the year ended July 31, 2018.

Additionally, on May 2, 2018, the Company closed on the Merger Agreement with T3 Communications, Inc. to increase its customer base and obtain higher efficiency of its existing infrastructure.

The total purchase price was $3,211,945, paid in cash upon closing, the acquisition was accounted for under the purchase method of accounting, with the Company identified as the acquirer. Under the purchase method of accounting, the aggregate amount of consideration assumed by the Company was allocated to cash, customer contracts acquired, current assets, property plant and equipment and assumed payables based on their estimated fair values as of May 2, 2018. Allocation of the purchase price is preliminary and based on the best estimates of management.

The allocation of fair values is based on an extensive analysis and is subject to changes in the future during the measurement period.

	(in thousands)
	T3
Cash	$	250
Accounts receivable & other current assets		367
Intangible assets and Goodwill		2,835
Property and equipment, net		568
Other Assets		140
Total identifiable net assets	$	4,160
Less: liabilities assumed		(948	)
Total Purchase price	$	3,212

The following table summarizes the cost of amortizable intangible assets related to the acquisition:

	Cost (in thousands)		Useful life (years)
Customer relationships	$	1,480	7
Marketing & Non-compete		800	5
Goodwill		530	-
Total	$	2,810

The Company incurred approximately $160,000 in costs associated with the acquisition. These included legal, and accounting. The Company expensed these costs during the year ended July 31, 2018.

Proforma

The following is the unaudited proforma results of operations for both acquisitions for the years ended July 31, 2019 and 2018 as if the acquisition occurred on August 1, 2016. The proforma results of operations are presented for informational purposes only and are not indicative of the results of operations that would have been achieved if the acquisition had taken place on August 1, 2016, or of results that may occur in the future.

	For the years Ended
	July 31,
	2019			2018
Revenue	$	6,040		$	5,674
Loss from operations		(2,361	)		(8,705	)
Net Income (loss)		(4,648	)		(3,031	)
Earnings (loss) per common shares outstanding - Basic and Diluted	$	(0.27	)	$	(0.34	)