Reverse Acquisition
On February 12, 2020 (“merger date”), PGXH and Sinacori entered into a Purchase and Sale Agreement for PGXH to acquire all of the outstanding membership interests of Sinacori. Pursuant to the purchase and sale agreement, PGXH issued the member of Sinacori 300,000,000 common shares and a convertible promissory note payable in the amount of $3,950,000. Sinacori Builder LLC became a wholly-owned subsidiary of PGXH and the former member of Sinacori beneficially owned greater than 50% of the voting control on a fully diluted basis. Upon the closing of the Purchase and Sale Agreement, the former Sinacori member was nominated and elected to the Board of directors, with the option to nominate another director.
NOTE 4 RECAPITALIZATION TRANSACTION
On February 12, 2020, PGXH entered into the Purchase and Sale Agreement (“the agreement”) with Sinacori’s former member to acquire all of the membership interest in Sinacori for $4,700,000. The purchase price was paid through the issuance of 150,000,000 shares of PGXH common stock, a $3,950,000 convertible note, and the obligation to deliver an additional 150,000,000 shares of PGXH common stock with a per share value equal to $0.005 within four months of the execution of the agreement. The conversion rights under the convertible note provided the seller with the option to receive the scheduled note payments in cash or in common stock at a conversion price of $0.005 per share. In addition to the consideration, the seller obtained two director seats on PGXH’s Board of Directors.
The Company evaluated the control provisions in ASC 805-10-55 and determined that Sinacori Builders, LLC was the accounting acquirer in the transaction due to (1) Sinacori’s ownership having the ability to control the majority of voting rights in the combined entity with the shares that were issued to the seller in the transaction along with the shares that would be issued at the option of the seller to convert the convertible note into PGXH common stock, (2) the seller obtaining two Board of Director seats in the transaction, (3) the relative size of Sinacori to PGXH and (4) PGXH being a public shell company. As part of management’s evaluation of the transaction, it determined PGXH to be a public shell company, based on PGXH having nominal operations since its divestiture of its operational assets in 2016 and having assets consisting of solely cash and nominal other assets.
For accounting and financial reporting purposes, the transaction was accounted for as a reverse recapitalization. Reverse recapitalization accounting applies when a non-operating public shell company acquires a private operating company and the owners and management of the private operating company have actual or effective voting and operating control of the combined company. A reverse recapitalization is equivalent to the issuance of stock by the private operating company for the net monetary assets of the public shell company accompanied by a recapitalization with the accounting similar to that resulting from a reverse acquisition, except that no goodwill or other intangible assets are recorded. The reverse capitalization resulted in a decrease of $3,950,000 to additional paid-in capital as of the recapitalization date.
During October 2021, the Company and the holder of the Sinacori acquisition convertible note, Sinacori Holdings, LLC, a related party by virtue of common controlling ownership with the Company, entered into an amendment to the agreement. The amendment effectively reduced the convertible note payable by $1,000,000 and removed the requirement for the Company to make monthly installment payments. For that amendment, the Company issued Sinacori Holdings, LLC an additional 125,000,000 shares of common stock and 2,750,000 shares of Series B preferred stock. The Company determined that this conversion was a capital transaction ad did not recognize any gain or loss on extinguishment of the debt.
