Acquisition and Pro Forma Financial Information for Open Locker, Inc.

12 Months Ended

Jul. 31, 2022

Business Combination and Asset Acquisition [Abstract]

Acquisition and Pro Forma Financial Information for Open Locker, Inc.

Note 6 – Acquisition and Pro Forma Financial Information for Open Locker, Inc.

OpenLocker, Inc. (“OL”)

On May 31, 2022, the Company entered into a share exchange agreement with OL and issued 12,500,002 shares of common stock, having a fair value of $5,142,001 ($0.41/share), based upon recent cash offering prices in third party sales, to purchase 100% of OL’s, outstanding stock in a transaction treated as a business combination.

The cash price paid by third parties was the best evidence of fair value given the Company is thinly traded on OTC markets and had more sales of stock sold for cash than stock traded on the open market at the time of the transaction.

We made an initial allocation of the purchase price at the date of acquisition based on our understanding of the fair value of assets acquired and liabilities assumed. The allocation of the purchase price consideration is considered preliminary as of July 31, 2022, with the excess purchase price allocated to an intangible asset, which consisted of intellectual property and goodwill and is subject to change. We expect to finalize the allocation of purchase price as soon as possible, but no later than one year from the acquisition date.

The acquisition of OL was reflected in the accompanying consolidated financial statements at July 31, 2022, the results of operations and cash flows are included in the consolidated financial statements as of and from the acquisition date.

DESCRYPTO HOLDINGS, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

JULY 31, 2022 AND 2021

In addition, the Company agreed to the following pursuant to the terms of the Share Exchange Agreement:

1.	Following the Closing, the Company will reserve 750,000 shares of Company common stock for issuance to OpenLocker employees as options, restricted stock or similar incentive compensation, on terms to be determined by the Company’s Board of Directors (the “Board”);
2.	At the Closing, the Company will contribute $300,000 to the operations of OpenLocker, which funds will generally be used for working capital uses and for the payment of OpenLocker payables and costs and expenses incurred by OpenLocker in connection with the Exchange and related transactions, and not for executive salaries, cash bonuses, etc.;
3.	Following the Closing and prior to September 1, 2022, the Company will fund at least an additional $250,000 to the operations of OpenLocker, which will generally be used for working capital uses and not for executive salaries, cash bonuses, etc.;
4.	At the Closing, Mr. Klatsky will be named as a member of the Board; and
5.	At the Closing, American Capital Ventures, Inc. (“ACV”), Leone Capital Group LLC (“Leone”) and Mr. Klatsky will enter into a voting agreement pursuant to which, subject to the terms and conditions therein, Leone and ACV will agree to vote for Mr. Klatsky as a director of the Company

Both ACV and Leone are significant stockholders of the Company. Howard Gostfrand, the Company’s Chief Executive Officer, Principal Financial Officer and a member of the Board, is the sole owner of ACV. Laura Anthony, the Company’s President and a member of the Board, is the sole owner of Leone.

It is expected that the business of OpenLocker will become one of the core businesses of the Company following the Closing. OpenLocker is a leading innovator in utilizing blockchain technology to provide digital ownership of NFTs for college athletes and thoroughbred racing stars.

The Share Exchange Agreement includes customary representations, warranties, and covenants by the respective parties and closing conditions, including that all SAFEs shall have been converted or exercised. Consummation of the transactions contemplated under the Share Exchange Agreement is not subject to a financing condition.

See Form 8-K filed with the U.S. Securities and Exchange Commission on June 6, 2022 for a complete discussion of the transaction.

DESCRYPTO HOLDINGS, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

JULY 31, 2022 AND 2021

The table below summarizes preliminary estimated fair value of the assets acquired and the liabilities assumed at the effective acquisition date.

Consideration
Common stock (12,500,002 shares of common stock ($0.41/share)) (1)	$	5,142,001
Fair value of consideration transferred		5,142,001
Recognized amounts of identifiable assets acquired and liabilities assumed:
Cash		13,328
Total assets acquired		13,328
Accounts payable and accrued expenses		114,725
Total liabilities assumed		114,725
Total identifiable net liabilities		(101,397	)
Amount to allocate to intangible asset and goodwill		5,243,398
Less: allocation for identifiable intangible asset (intellectual property)		2,299,524
Less: allocation for goodwill		2,943,874
	$	-

(1) Fair value of common stock issued was determined based upon recent cash offerings with third parties.

In connection with the purchase of OL, there were no additional transaction costs incurred.

The goodwill of $2,943,874 is primarily related to factors such as synergies and market share.

Goodwill is not deductible for tax purposes.

DESCRYPTO HOLDINGS, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

JULY 31, 2022 AND 2021

Supplemental Pro Forma Information (Unaudited)

The unaudited pro forma information for the periods set forth below gives effect to the acquisition as if the transaction had occurred on August 1, 2021 and 2020, respectively. However, OL was incorporated in August 2021, therefore there were no pro forma operations for OL for the period ended July 31, 2021.

For purposes of presenting the pro forma information for the period ended July 31, 2021, the data consists solely of the Company, while giving effect to the issuance of the 12,500,002 shares of common stock as if this occurred on August 1, 2021.

This proforma information is presented for informational purposes only and is not necessarily indicative of the results of operations that actually would have been achieved had the transactions been consummated as of that time:

	Nine Months Ended			Period Ended
	April 30, 2022			July 31, 2021
Revenues	$	23,162		$	-
Net loss	$	(1,929,883	)	$	(121,231	)
Loss per share - basic	$	(0.01	)	$	(0.00	)
Loss per share - diluted	$	(0.01	)	$	(0.00	)
Weighted average number of shares - basic		153,889,891			271,876,622
Weighted average number of shares - diluted		153,889,891			271,876,622

DESCRYPTO HOLDINGS, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

JULY 31, 2022 AND 2021