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Business acquisition
9 Months Ended
Sep. 30, 2021
Business acquisition  
Business acquisition

Note 4 – Business acquisition

On July 9, 2021 (the “Recargo Acquisition Date”), the Company entered into a Stock Purchase Agreement (the “Recargo Agreement”) to acquire 100% of the outstanding common stock of Recargo Inc. (“Recargo”). Recargo operates as a cloud-based data solutions provider in the electric vehicle sector and generates revenue through a variety of services that leverage its user base and its generated data. The Company believes that the acquisition of Recargo will allow it to expand its revenue base and will result in certain synergies within its operations.

The Company accounted for the acquisition of Recargo as a business combination under ASC 805, Business Combinations (“ASC 805”). Pursuant to ASC 805, the purchase price is allocated to the identifiable assets acquired and liabilities assumed based on their estimated fair values at the date of acquisition. Any excess of the amount paid over the estimated fair values of the identifiable net assets acquired is allocated to goodwill. The total purchase price was approximately $25.0 million, as defined in the Recargo Agreement, none of which are contingent upon future financial results.

The table below summarizes the preliminary allocation of the estimated fair value of the assets acquired and liabilities assumed by the Company on the Recargo Acquisition Date, including resulting goodwill. This allocation may be adjusted as the Company finalizes fair value estimates and such adjustments may be material. Goodwill of approximately $8.9 million was recorded as a result of the Recargo acquisition and reflects assets not separately identifiable under ASC 805. Goodwill is expected to be amortizable for U.S. federal income tax purposes.

The Company determined the fair values of the assets acquired and liabilities assumed with the assistance of a third-party valuation firm. Intangible assets recorded on the Recargo Acquisition Date include user base, trade name and technology of $11.0 million, $1.1 million, and $2.2 million, respectively. The fair values of the intangible assets were determined based on a discounted cash flow model using the with-or-without method for user base, and the relief-from-royalty method for trade name and technology. Each of these methods is a form of the income approach. These methods incorporate various estimates and assumptions, such as projected revenue growth rates, profit margins and forecasted cash flows based on discount rates and terminal growth rates. The fair values of the property, plant and equipment were determined using the cost approach. This approach involves adjusting the historical cost basis of the assets in the fixed asset register for inflation, and then deducting for various forms of obsolescence.

For the remaining assets and liabilities, the cost method was used to determine their respective fair values. The fair value of accounts receivable, consisting of customer receivables, approximated the carrying value, which was equal to the gross contractual amounts receivable because no portion of such contractual amounts was expected to be uncollectible.

The following table summarizes the preliminary fair values of the assets acquired and liabilities assumed at the Recargo Acquisition Date:

Acquisition Date

(in thousands)

    

Fair Value

Assets

Current assets

 

  

Cash

$

1,943

Accounts receivable

 

605

Prepaid expenses and other current assets

 

76

Total current assets

 

2,624

Long-term assets

 

  

Restricted cash

300

Property and equipment

 

678

Intangible assets

 

14,300

Other assets

 

70

Total assets

17,972

Liabilities

Current liabilities

 

  

Accounts payable

 

84

Accrued expenses

 

769

Deferred revenue, current

 

543

Total current liabilities

 

1,396

Long-term liabilities

 

  

Capital-build liability

 

479

Asset retirement obligations

 

31

Total liabilities

 

1,908

Net assets acquired

16,064

Consideration paid

25,005

Goodwill recognized

$

8,941

The following unaudited pro forma financial information presents consolidated revenue and net income (loss) for the periods indicated as if the Recargo acquisition had occurred on January 1, 2020:

Successor

Predecessor

Three

Three

Nine

January 16,  

January 1,  

Months Ended

Months Ended

Months Ended

2020 through 

2020 through 

September 30, 

September 30, 

September 30, 

September 30, 

January 15, 

(in thousands)

2021

    

2020

    

2021

    

2020

  

  

2020

Pro forma revenue

$

6,322

$

3,786

$

16,031

$

9,364

 

 

$

1,552

Pro forma net income (loss)

$

23,738

$

(9,013)

$

(14,488)

$

(36,986)

$

(715)

The above unaudited pro forma results have been calculated by combining the historical results of the Company and Recargo, as if the acquisition had occurred as of the beginning of the earliest period presented in the Company’s consolidated financial statements, and exclude the impact of acquisition-related expenses. The pro forma table above also includes estimates for additional depreciation, amortization and accretion related to the fair values of property, plant and equipment, intangible assets, capital build liability, and asset retirement obligations that were included as the basis of those assets acquired and liabilities assumed in the business acquisition. Pro forma earnings for the three and nine months ended September 30, 2021 were adjusted to exclude acquisition-related costs incurred in those periods. No other material pro forma adjustments were deemed necessary. The pro forma information is not necessarily indicative of the results that would have been achieved had the transactions occurred on the date indicated or that may be achieved in the future.

For the period from the Recargo Acquisition Date of July 9, 2021 through September 30, 2021, revenue from Recargo totaling approximately $0.6 million and net loss from Recargo of $1.4 million are included in the consolidated

statements of operations for the three and nine months ended September 30, 2021. The condensed consolidated statements of operations for the three and nine months ended September 30, 2021 include approximately $0.5 million and $0.7 million of acquisition-related expenses in general and administrative expense, respectively.