Annual report pursuant to Section 13 and 15(d)

Acquisitions

v3.19.1
Acquisitions
 12 Months Ended
Dec. 31, 2018
Business Combinations [Abstract]  
ACQUISITIONS

14. ACQUISITIONS

 

The Company accounts for acquisitions in accordance with ASC 805 “Business Combinations.” Assets acquired and liabilities assumed are recorded in the accompanying consolidated balance sheets at their estimated fair values, as of the acquisition date. Results of operations are included in the Company’s financial statements from the date of acquisition. For the acquisitions noted below, the Company used the income approach to determine the fair value of the customer relationships, the relief from royalty method to determine the fair value of trademarks and the comparison of economic income using the with/without approach to determine the fair value of non-compete agreements. The Company used Level 3 inputs to determine the fair value of all these intangible assets.

 

    East Coast
Hydro		     Humboldt
Depot		     Superior
Growers
Supply		     Central
Coast
Garden		     Santa Rosa
Hydro		     Heavy
Gardens		     Total  
Inventory   $ 1,002,300     $ 389,800     $ 517,950     $ 254,900     $ 1,500,000     $ -     $ 3,664,950  
Prepaids and other current assets     30,200       6,800       -       -       -       -       37,000  
Furniture and equipment     45,600       30,000       50,000       4,600       100,000       -       230,200  
Goodwill     1,341,400       654,000       540,250       136,400       4,884,500       433,000       7,989,550  
Total   $ 2,419,500     $ 1,080,600     $ 1,108,200     $ 395,900     $ 6,484,500     $ 433,000     $ 11,921,700  

 

The table below represents the consideration paid for the net assets acquired in business combinations.

 

    East Coast
Hydro		     Humboldt
Depot		     Superior
Growers
Supply		     Central
Coast
Garden		     Santa Rosa
Hydro		     Heavy
Gardens		     Total  
Cash   $ 1,201,200     $ 896,600     $ 817,950     $ 257,000     $ 2,425,000     $ 150,000     $ 5,747,750  
Assumption of payables     66,300       -       -       -       -       -       66,300  
Seller financing     600,000       -       -       -       415,000       72,000       1,087,000  
Common stock     552,000       184,000       290,250       138,900       3,644,500       211,000       5,020,650  
Total   $ 2,419,500     $ 1,080,600     $ 1,108,200     $ 395,900     $ 6,484,500     $ 433,000     $ 11,921,700  

  

The following table discloses the date of the acquisitions noted above and the revenue and earnings included in the consolidated income statement from the date of acquisition to the period ended September 30, 2018

 

    East Coast
Hydro		     Humboldt
Depot		     Superior
Growers
Supply		     Central
Coast
Garden		     Santa Rosa
Hydro		     Heavy
Gardens		     Total  
Acquisition date     1/23/2018       1/30/2018       4/12/2018       6/8/2018       7/13/2018       9/14/2018          
Revenue   $ 3,450,600     $ 2,030,200     $ 1,926,400     $ 498,000     $ 1,594,900     $ 121,500     $ 9,621,600  
Earnings   $ 613,000     $ 147,600     $ 178,200     $ 56,000     $ 165,300     $ 5,800     $ 1,165,900  

 

The following represents the proforma consolidated income statement as if the acquisitions had been included in the consolidated results of the Company for the entire period for the year ended December 31, 2017.

 

Pro forma consolidated income statement

 

    December 31,
2017		  
Revenue   $ 40,887,900  
Earnings   $ (1,547,300 )