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3. ACQUISITIONS

6 Months Ended

Mar. 31, 2021

SOLAR WATT SOLUTIONS, INC

On February 23, 2021, the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”) with SWS (“SWS”) and its owners (the “Sellers”).

At the closing on February 24, 2021, SWS became a wholly owned subsidiary of the Company. In exchange, the Company issued (i) 477,703 shares of restricted common stock based on the average closing price of the Company’s common stock (as reflected on Nasdaq.com) for the five trading days including and immediately preceding the closing date of $32.74 per share to the sellers, of which (a) 167,685 shares would be fully earned on closing, and (b) an additional 310,018 shares were issued and held in escrow, subject to holdback pending Sellers’ satisfaction of certain future milestones with all such shares subject to a lock up of no less than 180 days and a leak out of no more than 10% of average daily trading value of the prior 30 days for a period of 36 months following the closing, and (ii) up to $3,850,000 in cash was remitted to the Sellers, of which: (c) $1,350,000 was remitted to Sellers on a pro rata basis at closing, less payment of $500,000 in Sellers’ debt at closing, (d) $200,000 in cash was held back by the Company for a period of nine months to satisfy potential damages from indemnification claims and any amounts owed pursuant to post-closing adjustments, (e) an additional $100,000 in cash was held back by the Company for a period of 90 days to satisfy any amounts owed pursuant to post-closing adjustments, and (f) up to $2,500,000 in cash was held back by the Company pending the Sellers’ satisfaction of certain future milestones.

The Company determined the fair value of the consideration given to the sellers of SWS in connection with the transaction in accordance with ASC 820 was as follows:

Consideration:	Fair Value
Cash	$	1,350,000
Contingent consideration		2,500,000
477,703 shares of common stock		13,246,704
Total Consideration	$	17,096,704

The total purchase price was allocated to identifiable assets deemed acquired, and liabilities assumed, based on their estimated fair values as indicated below. The business combination accounting is not yet final and the amounts assigned to the assets acquired and the liabilities assumed are provisional. Therefore, this may result in future adjustments to the provisional amounts as new information is obtained about the facts and circumstances that existed at the acquisition date.

Purchase Price Allocation:
Customer List	$	5,122,733
Goodwill	$	12,051,206
Other assets and liabilities assumed, net	$	(77,235)
Total	$	17,096,704

ATL DATA CENTERS, LLC

On December 9, 2020, the Company entered into an Agreement and Plan of Merger (the “Merger”) with ATL Data Centers LLC (“ATL”) and its members.

At the closing, ATL became a wholly owned subsidiary of the Company. In exchange, the Company issued 1,618,285 shares of restricted common stock based on the average closing price of the Company’s common stock (as reflected on Nasdaq.com) for the five trading days including and immediately preceding the closing date of $11.988 per share, to the selling members of ATL, of which: (i) 642,309 shares were fully earned on closing, and (ii) an additional 975,976 shares were issued and held in escrow, subject to holdback pending satisfaction of certain future milestones, with all such shares subject to a lock up of no less than 180 days and a leak out of no more than 10% of the average daily trading value of the prior 30 days.

The consideration remitted in connection with the Merger is subject to adjustment based on post-closing adjustments to closing cash, indebtedness, and transaction expenses of ATL within 90 days of closing. The Company also assumed approximately $6.9 million in debts of ATL at closing. As part of the transaction costs, the Company issued 41,708 shares of common stock for an aggregate value of $545,916 to the broker.

The Company accounted for the acquisition of ATL as an acquisition of a business under ASC 805.

The Company determined the fair value of the consideration given to the selling members of ATL in connection with the transaction in accordance with ASC 820 was as follows:

Consideration:	Fair Value
1,618,285 shares of common stock	$	21,183,351
Total Consideration	$	21,183,351

Purchase Price Allocation:
Strategic contract	$	7,457,970
Goodwill	$	14,079,712
Other assets and liabilities assumed, net	$	(354,331)
Total	$	21,183,351

The strategic contract relates to supply of a critical input to our digital currency mining business. The other assets and liabilities assumed includes $5.475 million in digital currency mining equipment and notes payable related to this equipment, which was settled by the Company during the six months ended March 31, 2021.

P2K LABS, INC

On January 31, 2020, the Company, entered into an Agreement with p2k, and its sole stockholder, Amer Tadayon (the “Seller”), whereby the Company purchased all of the issued and outstanding shares of p2k in exchange for an aggregate adjusted purchase price of cash and equity of $1,688,935. The transaction closed simultaneously upon the execution of the Agreement by the parties on January 31, 2020.

As a result of the transaction, p2k became a wholly owned subsidiary of the Company.

Pursuant to the terms of the Agreement, the purchase price was as follows:

	a)	$1,039,500 in cash was paid to the Seller;

	b)	31,183 restricted shares of the Company’s common stock, valued at $145,000, were issued to the Seller (the “Shares”). The Shares are subject to certain lock-up and leak-out provisions whereby the Seller may sell an amount of Shares equal to ten percent (10%) of the daily dollar trading volume of the Company’s common stock on its principal market for the prior 30 days (the “Leak-Out Terms”);

	c)	$115,500 in cash was paid to an independent third-party escrow where such cash is subject to offset for adjustments to the purchase price and indemnification purposes; and

	d)	64,516 restricted shares of the Company’s common stock, valued at $300,000, were issued to an independent third-party escrow agent (the “Holdback Shares”) and will be released to the Seller upon achievement of certain revenue milestones. As of March 31, 2021, based on actual revenue milestones achieved, 56,444 restricted shares of the Company’s common stock were released to the Seller and the balance of 8,072 shares of the Company’s common stock were returned and cancelled. The Holdback Shares are subject to the Leak-Out Terms. The Shares and Holdback Shares were deemed to have a fair market value of $4.65 per share which was the closing price of the Company’s common stock on January 31, 2020.

	e)	26,950 common stock options which were deemed to have a fair market value of $88,935 on the date of the closing of the transaction.

The Company accounted for the acquisition of p2k as an acquisition of a business under ASC 805.

The Company determined the fair value of the consideration given to the Seller in connection with the Transaction in accordance with ASC 820 was as follows:

Consideration:	Fair Value
Cash	$	1,155,000
95,699 shares of common stock	$	445,000
26,950 common stock options	$	88,935
Total Consideration	$	1,688,935

The total purchase price of the Company’s acquisition of p2k was allocated to identifiable assets deemed acquired, and liabilities assumed, based on their estimated fair values as indicated below.

Purchase Price Allocation:
Customer list	$	730,000
Design and other assets	$	123,000
Goodwill	$	957,388
Other assets and liabilities assumed, net	$	(121,453)
Total	$	1,688,935

GRIDFABRIC, LLC

On August 31, 2020, the Company entered into a Membership Interest Purchase Agreement (the “Agreement”) with GridFabric, and its sole member, Dupont Hale Holdings, LLC (the “Seller”), whereby the Company purchased all of the issued and outstanding membership units of GridFabric from the Seller (the “Transaction”) in exchange for an aggregate purchase price of cash and stock of up to $1,400,000 (the “Purchase Price”). The Transaction closed simultaneously with execution on August 31, 2020. As a result of the Transaction, GridFabric, became a wholly owned subsidiary of the Company.

Pursuant to the terms of the Agreement, the Purchase Price was as follows:

	a)	$360,000 in cash was paid to the Seller at closing;
	b)	$400,000 in cash was delivered to an independent third-party escrow agent where such cash is subject to offset for adjustments to the Purchase Price and indemnification purposes for a period of 12 months;

c) 26,427 restricted shares of the Company’s common stock, valued at $250,000, were issued to the Seller (the “Shares”). The Shares are subject to certain leak-out provisions whereby the Seller may sell an amount of Shares equal to no more than ten percent (10%) of the daily dollar trading volume of the Company’s common stock on its principal market for the prior 30 days (the “Leak-Out Terms”); and

d) additional shares of the Company’s common stock, valued at up to $750,000, will be issuable to Seller if GridFabric achieves certain revenue and product release milestones related to the future performance of GridFabric (the “Earn-out Shares”). The Earn-Out Shares are also subject to the Leak-Out Terms.

The Shares were issued at a fair market value of $9.46 per share. The Earn-Out Shares are accounted for as contingent consideration and the number of shares to be issued will be determined based on the closing price of the Company’s common stock on the date such milestone event occurs.

The Agreement contains standard representations, warranties, covenants, indemnification and other terms customary in similar transactions.

In connection with the transaction, the Company also entered into employment relationships and non-compete agreements with GridFabric’s key employees for a period of 36 months and plans to issue future equity compensation to said employees, subject to approval of the Company’s board of directors.

The Company accounted for the acquisition of GridFabric as an acquisition of a business under ASC 805.

The Company determined the fair value of the consideration given to the Seller in connection with the Transaction in accordance with ASC 820 was as follows:

Consideration:	Fair Value
Cash	$	400,000
26,427 shares of common stock	$	250,000
Contingent consideration - common stock issuable upon achievement of milestone(s)	$	750,000
Total Consideration	$	1,400,000

The total purchase price of the Company’s acquisition of GridFabric was allocated to identifiable assets deemed acquired, and liabilities assumed, based on their estimated fair values as indicated below.

Purchase Price Allocation:
Software	$	1,120,000
Customer list	$	60,000
Non-compete	$	190,000
Goodwill	$	26,395
Net Assets	$	3,605
Total	$	1,400,000

The following is the unaudited pro forma information assuming the acquisition of GridFabric, p2k Labs, ATL, and SWS occurred on October 1, 2019:


	For the Three Months Ended					For the Six Months Ended
	March 31, 2021		March 31, 2020			March 31, 2021			March 31, 2020
Net sales	$	8,907,200	$	4,928,256		$	12,967,229		$	6,736,346

Net income/ (loss)	$	7,208,568	$	(5,531,940	)	$	(551,184	)	$	(7,962,293)

Earnings/(loss) per common share - basic	$	0.27	$	(0.97	)	$	(0.02	)	$	(1.43)

Weighted average common shares outstanding - basic		26,402,962		5,727,560			26,121,545			5,549,249

Earnings/(loss) per common share - diluted	$	0.22	$	(0.97	)	$	(0.02	)	$	(1.43)

Weighted average common shares outstanding - diluted		33,175,566		5,727,560			26,121,545			5,549,249

The unaudited pro forma consolidated financial results have been prepared for illustrative purposes only and do not purport to be indicative of the results of operations that actually would have resulted had the acquisition occurred on the first day of the earliest period presented, or of future results of the consolidated entities. The unaudited pro forma consolidated financial information does not reflect any operating efficiencies and cost savings that may be realized from the integration of the acquisition. All transitions that would be considered inter-company transactions for proforma purposes have been eliminated.