v3.26.1
Note 4 - Business Combination
 6 Months Ended
Jun. 30, 2026
Notes to Financial Statements  
Business Combination [Text Block]

NOTE 4: BUSINESS COMBINATION

 

On November 7, 2025, the Company completed the acquisition of DDC Group International, Inc. (“DDC”), the parent of Cineplex Digital Media Inc. and Cineplex Digital Media U.S. Inc. (collectively, “CDM”), from Cineplex Entertainment Limited Partnership for cash consideration of approximately CAD $60,263 (approximately USD $42,761). The acquisition was accounted for as a business combination under ASC 805, Business Combinations with November 7, 2025 as the acquisition date. The Company’s preliminary purchase price allocation, including the related deferred tax assets and liabilities, remains subject to change during the one-year measurement period in accordance with ASC 805-10-25-13 through 25-19, which extends through November 6, 2026. The initial accounting for the CDM acquisition is incomplete as of June 30, 2026 because the Company is continuing to obtain and evaluate information about facts and circumstances that existed as of the acquisition date. The items for which the initial accounting remains incomplete include the valuation of acquired identifiable intangible assets, the assessment of acquired deferred tax assets and liabilities, the resolution of post-closing working capital adjustments, and the resulting goodwill.

 

During the six months ended June 30, 2026, the Company recorded measurement period adjustments to the preliminary purchase price allocation related to the acquired net deferred tax liability. At the acquisition date, certain amounts in the preliminary purchase price allocation, including the acquired net deferred tax liability, were recorded on a provisional basis pending the receipt of additional information. During the six months ended June 30, 2026, the Company obtained additional information about facts and circumstances that existed as of the acquisition date, which resulted in a measurement period adjustment that decreased the acquired net deferred tax liability by $1,986, with a corresponding decrease to goodwill. After giving effect to this adjustment, the acquired net deferred tax liability and goodwill recognized in connection with the CDM acquisition were $229 and $24,027, respectively, as of June 30, 2026 (compared to $2,215 and $26,013, respectively, as initially reported as of the acquisition date). The following table summarizes the measurement period activity.

 

  

Purchase Price
Allocation
(Preliminary)

  

Measurement
Period
Adjustments

  

Purchase Price
Allocation
(As Revised)

 

Purchase Consideration:

            

Cash (net of cash acquired of $4,778)

 $37,983  $-  $37,983 

Less:

            

Technology platform

  6,656   -   6,656 

Customer relationships

  14,324   -   14,324 

Non-compete covenant

  21   -   21 

Unfavorable lease

  (41)  -   (41)

Operating lease right-of-use assets

  571   -   571 

Finance lease right-of-use assets

  23,309   -   23,309 

Operating lease liabilities

  (571)  -   (571)

Finance lease liabilities

  (23,309)  -   (23,309)

Property and equipment

  2,711   -   2,711 

Deferred tax liability

  (2,215)  1,986   (229)

Debt-free net working capital deficit

  (9,486)  -   (9,486)

Fair Value of Identified Net Assets

 $11,970  $1,986  $13,956 
             

Remaining Goodwill Value

 $26,013  $(1,986) $24,027 
             

Fair Value of Net Assets Acquired

 $37,983  $-  $37,983 

 

The measurement period adjustment recorded during the six months ended June 30, 2026 reflects new information obtained about facts and circumstances that existed as of the acquisition date and did not have a material impact on the Company’s results of operations in any prior period. The preliminary purchase price allocation, including the items identified above, remains subject to further adjustment during the remainder of the measurement period as additional information is obtained, and any such adjustments will be recognized in the reporting period in which they are determined.