In a recent SEC report, Pedro’s List, Inc. (Ticker: PDRO), a company focused on the acquisition and operation of various businesses, disclosed an impairment adjustment of $647,739 related to the goodwill allocated from the purchase of its subsidiary, Pedro’s List U.S. L.L.C.
The acquisition of Pedro’s List U.S. L.L.C. was completed on May 23, 2022, with the purchase price comprising the issuance of 20,000 shares of Pedro’s List, Inc.’s common stock at $27.50 per share and the assumption of net liabilities. One hundred percent of the purchase price was allocated to goodwill, which has now been impaired by $647,739 as of October 31, 2022.
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The Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) 360-10
addresses the accounting and reporting for impairment and disposal of long-lived assets, including intangible assets with finite lives. The Company does not amortize intangible assets with finite lives, and goodwill and intangible assets are reviewed for potential impairment whenever events or circumstances indicate that their carrying amounts may not be recoverable.
As a result of the impairment adjustment, the fair market value of the long-lived assets has been reduced, reflecting the extent to which the carrying amount of Pedro’s List, Inc.’s goodwill allocation has exceeded its fair market value. This adjustment is in line with FASB ASC 360-10, which requires impairment losses to be recorded on long-lived assets used in operations when indicators of impairment are present and the undiscounted cash flows estimated to be generated by those assets are less than their carrying amounts.
Pedro’s List, Inc. Financial Challenges
Pedro’s List, Inc. also revealed that it had a working capital deficit of $307,068 as of April 30, 2023, and an accumulated deficit of $2,078,083 from limited operations during the period from October 12, 2014 (date of inception) to April 30, 2023. These financial challenges raise doubts about the company’s ability to obtain necessary funding through debt and/or equity financings and achieve profitable operations in the future.
Management plans to address these concerns by raising additional operating funds through equity and/or debt offerings. However, the success of such efforts is uncertain, and there is no guarantee that additional financing will be available or, if so, on terms acceptable to the company. Pedro’s List, Inc. must ultimately achieve profitability to endure as a going concern.
Conclusion
Overall, the SEC report highlights the challenges and uncertainty faced by Pedro’s List, Inc. in its endeavor to achieve profitable operations. While the goodwill impairment adjustment is a significant financial event for the company, its impacts on the company’s long-term prospects remain uncertain. With an accumulated deficit and working capital deficit, the company must carefully navigate its financial future to ensure sustainability and success.
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