v3.26.1
Business Combination
 6 Months Ended
Jun. 30, 2025
Business Combination [Abstract]  
Business Combination

Note 4 — Business Combination

 

Description of Transaction

 

On February 17, 2026 (the “Acquisition Date”), the Company completed its merger with Flash, pursuant to which a wholly-owned subsidiary of the Company merged with and into Flash, with Flash surviving as a wholly-owned subsidiary of the Company. Concurrently, Flash holds a 51% membership interest in IPG. The Merger has been accounted for as a business combination under ASC 805, Business Combinations, with the Company determined to be the accounting acquirer.

 

The Company was determined to be the accounting acquirer based on the following factors: (i) the Company’s pre-Merger stockholders retained voting control of the combined entity (the Series B Non-Voting Convertible Preferred Stock issued to Flash stockholders is non-voting and had not been converted at the acquisition date); (ii) the Company’s existing Board of Directors comprises a majority of the post-Merger Board; (iii) the Company’s pre-Merger Chief Executive Officer continues as the Chief Executive Officer of the combined entity; (iv) the Company initiated the transaction; and (v) the Company issued the equity consideration. The Nasdaq Stock Market issued a determination on February 24, 2026 confirming the two-step structure of the transaction and recognizing that the Change of Control under Listing Rule 5110(a) occurs only upon stockholder approval and conversion of the Series B Preferred Stock. Following stockholder approval obtained at the special meeting reconvened on June 12, 2026, 51,789 of the 54,509 shares of Series B Preferred Stock converted into 51,789,000 shares of common stock effective June 15, 2026, and 2,720 shares of Series B Preferred Stock remained outstanding at June 30, 2026. See Note 10 — Stockholders’ Equity for additional information.

 

Consideration Transferred

 

The total consideration transferred in the combined transaction consisted of two components:

 

    Amount  
Step 1 — Flash acquisition of 51% of IPG      
Cash (due to seller)   $ 5,000,000  
Contingent consideration     10,630,251  
Subtotal — Step 1     15,630,251  
         
Step 2 — UGRO acquisition of 100% of Flash        
Common stock     423,217  
Series B non-voting convertible preferred stock     176,076,783  
Subtotal — Step 2     176,500,000  
         
Total consideration transferred   $ 192,130,251  

 

Preliminary Allocation of Purchase Price

 

The following table summarizes the preliminary allocation of the purchase price to the estimated fair values of the assets acquired and liabilities assumed at the Acquisition Date:

 

    Amount  
Identifiable assets acquired:      
Cash and cash equivalents     144,231  
Accounts receivable     3,022,525  
Due from related party     -  
Loans, advances and other current assets     190,606  
Identifiable intangible assets     138,031,000  
Total identifiable assets acquired     141,388,362  
         
Liabilities assumed:        
Accounts payable     (2,235,394 )
Due to related party     (1,270,340 )
Deferred revenue and other current liabilities     (1,652,878 )
Total liabilities assumed     (5,158,612 )
         
Net identifiable assets acquired     136,229,750  
Noncontrolling interest in IPG (49% — proportionate share)     (66,877,521 )
Goodwill     122,778,022  
Total consideration transferred   $ 192,130,251  

 

Goodwill represents the excess of the consideration transferred over the fair value of the net identifiable assets acquired. Goodwill is primarily attributable to the assembled workforce of IPG, expected synergies from integrating IPG’s production capabilities with the Company’s public market platform, and growth opportunities in the global T20 cricket ecosystem. Goodwill has been assigned to the Company’s single reporting unit (sports, media, and experiential marketing). Goodwill is deductible for U.S. federal income tax purposes over 15 years pursuant to IRC §197.

 

Identifiable Intangible Assets

 

Intangible Asset   Fair Value     Useful Life  
LPL Event Rights   $ 108,689,000     10 years  
First right of refusal on remaining 49% of IPG     2,500,000     Until exercised  
Customer relationships     5,690,000     7 years  
Trade name     9,815,000     10 years  
Production technology     6,337,000     5 years  
Cricket league licenses (Malaysia, Singapore, Zimbabwe)     5,000,000     5 years  
Total identifiable intangible assets   $ 138,031,000        

 

The fair values of identifiable intangible assets were determined using a combination of valuation methodologies, including the multi-period excess earnings method (LPL Event Rights), Black-Scholes option pricing model (First Right of Refusal), with-and-without method (customer relationships), relief-from-royalty method (trade name), cost approach (production technology), and income approach (cricket league licenses). Significant assumptions include forecasted revenue growth, EBITDA margins, contributory asset charges, and discount rates ranging from 12% to 20%.

 

Contingent Consideration

 

In connection with the IPG acquisition, Flash agreed to pay contingent earn-out consideration of up to $24,000,000 in shares of common stock over three years (2025–2027), contingent on IPG achieving specified revenue and EBITDA targets. The fair value of the contingent consideration at the Acquisition Date is $10,630,251, determined using a probability-weighted expected value model and discounted at a credit-risk-adjusted rate of 12%. The contingent consideration is classified as a liability and is remeasured at fair value at each reporting date, with changes recognized in earnings.

 

First Right of Refusal

 

Flash holds a first right of refusal to acquire the remaining 49% membership interest in IPG within three years at a fixed price of $19,600,000 in shares of UGRO common stock, based on an agreed total IPG valuation of $40,000,000. The First Right of Refusal has been recognized as an identifiable intangible asset at its estimated fair value of $2,500,000, determined using the Black-Scholes option pricing model. The First Right of Refusal is not amortized; it will be tested for impairment if events or changes in circumstances indicate that its carrying value may not be recoverable, and it will be derecognized upon exercise or expiration.

 

Capital Contribution Commitment

 

Pursuant to the MIPA, Flash committed to fund $10,000,000 in working capital to IPG for league and business operations, payable in tranches over the twelve months following closing. This commitment is disclosed in Note 14 — Commitments and Contingencies and has not been recognized on the unaudited condensed consolidated balance sheet.

 

Pro Forma Information

 

The following unaudited pro forma financial information presents the combined results of operations as if the Merger had occurred on January 1, 2025. The unaudited pro forma information has been adjusted to reflect amortization of acquired intangibles and is not necessarily indicative of the results of operations that would have been achieved had the Merger occurred at the beginning of the periods presented or the future results of operations of the combined company.

 

    Three Months
Ended
June 30,
2026		     Three Months
Ended
June 30,
2025		     Six Months
Ended
June 30,
2026		     Six Months
Ended
June 30,
2025		  
Pro forma revenue   $ 44,000     $ 710,000     $ 543,000     $ 2,307,000  
Pro forma net loss   $ (8,043,000 )   $ (9,977,000 )   $ (13,619,000 )   $ (17,520,000 )
Pro forma net loss per share — basic and diluted   $ (0.92 )   $ (17.10 )   $ (2.86 )   $ (30.21 )

 

On an unaudited pro forma basis for the six months ended June 30, 2026, revenue would have been $543,000 and net loss would have been $13,619,000, or $(2.86) per basic and diluted share, compared with revenue of $2,307,000 and net loss of $17,520,000, or $(30.21) per basic and diluted share, for the six months ended June 30, 2025.

 

The measurement period for the Merger remains open through February 17, 2027. The Company expects to finalize the purchase price allocation as additional information becomes available.