BONK, INC. Goodwill & Intangibles Disclosure

Note 8 - Intangible Assets

 

SRM Entertainment

 

Effective August 14, 2023 the Company spun-off 52% of SRM Ltd, formerly a wholly-owned subsidiary, into a public company in exchange for shares of SRM Inc. common stock. The fair value of the 4,609,166 shares of common stock SRM Inc. received (net of dividend shares to the Company’s shareholders) was $1,521,025. As a result, the Company will no longer consolidate SRM Ltd in its financial statements and the intangible assets have been de-consolidated. The deconsolidation produced a loss to the Company of $409,549. At December 31, 2023, the Company owned 48% of SRM Inc. (see Note 6 above) and used the equity method of accounting for its ownership in SRM Inc. The Company recorded $864,418 as its share of SRM losses from the date of separation to December 31, 2023. During the quarter ended March 31, 2024, the Company sold 350,000 shares of SRM with a cost basis of % 57,452 and recognized SRM losses of $599,155, which reduced the carrying value of SRM to $0.00.

 Schedule of Deconsolidation and Equity

Summary of deconsolidation loss:
Goodwill and Intangibles		$	1,042,151
Net assets of SRM Ltd at deconsolidation			189,866
Equity of SRM Ltd			698,557
Effect of deconsolidation			1,930,574
Fair value of Consideration			(1,521,025	)
Loss on deconsolidation		$	(409,549	)

 

Summary of Changes to Equity Method Investment

Summary of Changes to Equity Method Investment
Fair value of Consideration		$	1,521,025
Equity in SRM losses			(864,418	)
Balance, December 31, 2023		$	657,183
Sale of shares of SRM common stock			(57,452	)
Equity in SRM losses			(599,155	)
Balance, December 31, 2024		$	-0-

  

  

Safety Shot Acquisition

 

On July 10, 2023, the Company entered into an Asset Purchase Agreement (the “APA”) with GBB Drink Lab, Inc. (“GBB”) under the terms of which the Company acquired certain assets of GBB (the “Purchased Assets”) which included the patents for a blood alcohol detox drink Safety Shot, an over-the- counter drink that can lower blood alcohol content to allow recovery from the effects of alcohol at a rate faster than would occur normally. The purchase price was 5,000,000 shares of the Company’s restricted common stock, valued at $2,468,500, plus $200,000 in cash and additional amounts based upon achieving certain benchmarks. At the time of purchase GBB had no employees, no revenues and no operations and reported its only asset was intellectual property. Using guidance provided under the FASB Accounting Standards Update No. 2017-01, Clarifying the Definition of a business, the transaction was accounted for as a single asset purchase and the entire purchase price of $2,668,500 was allocated to the patents. The APA also contains two earn-out provisions that entitle GBB to additional consideration for the Purchased Assets in the maximum amount of $5,500,000 as follows: (i) in the event that during the Earn-Out Period, the Company receives cash proceeds of at least $11,000,000 from exercises of the Company’s $1.00 Warrants at an exercise price of $1.00 per Common Share (“Milestone 1”), the Company shall pay to the Seller $2,500,000 payable in cash; and (ii) in the event that during the Earn-Out Period, the Company receives cash proceeds of at least $14,000,000 from exercises of the Company’s outstanding July 2021 Warrants at an exercise price of $1.40 per Common Share (“Milestone 2” and collectively with Milestone 1, the “Earn-Out Milestones” and individually, an “Earn-Out Milestone”), the Company shall pay to the Seller an additional $3,000,000 in cash. In December 2023, the Company paid an additional $2,000,000 under the earn-our provisions which was allocated to the patents. As of December 31,2024, GBB is entitled to an additional payment of $175,000 under Milestone (i).

 

The patents will be amortized over twelve years (the remaining 12-year life of the patents). During the years ended December 31, 2024 and 2023, the Company recognized $407,400 and $157,443 of amortization expense.

 

Summary of transaction and carrying value:

 

Purchase price:						Allocation of Purchase price:
Cash		$	2,460,664			Patents		$	4,929,164
Fair value of stock issued			2,468,500			Accumulated Amortization			(564,843	)
		$	4,929,164			Balance		$	4,367,321