| Acquisitions | Maverick Brands, LLC. On March 31, 2017, the Company acquired all
of the assets of Maverick Brands, LLC or Maverick. Maverick is engaged in the manufacturing and sale of coconut water and other
beverages. The acquisition helped the Company expand its capabilities and product offering. The operating results of Maverick have
been consolidated with those of the Company beginning April 1, 2017. Total purchase consideration paid was $11,086,000, which consisted
of $2,000,000 of cash and 2,200,000 shares of common stock valued at $9,086,000. The common stock issued was valued at $4.13 per
share, which was the closing price of the Company’s stock on the date of the acquisition. The acquisition was subject to
customary closing conditions. All of the goodwill was assigned to the Company’s Brands segment. All of the goodwill and intangible
assets recognized is expected to be deductible for income tax purposes. The fair value of the customer list was valued using the
income approach, as the Company obtained an independent third-party valuation. In addition, the market approach was utilized to
determine the fair value of the trade name and recipes. The purchase price was allocated to the net
assets acquired based on their estimated fair values as follows:
Cash $ 2,000,000
Stock 9,086,000
Purchase
price $ 11,086,000
Accounts
receivable $ 245,426
Inventories 1,523,413
Prepaid
expenses and other current assets 211,213
Property
and equipment, net 68,282
Other
intangible assets acquired (trade names, recipes and customer lists) 6,660,441
Accounts
payable and accrued expenses (1,345,155 )
Assumption
of note payable (1,427,051 )
5,936,569
Goodwill 5,149,431
$ 11,086,000 Goodwill
is the excess of the purchase price over the preliminary fair value of the underlying net tangible and identifiable intangible
assets. In accordance with applicable accounting standards, goodwill is not amortized but instead is tested for impairment at
least annually or more frequently if certain indicators are present. In
connection with the acquisition of Maverick, the Company incurred transactional costs totaling $231,925, which has been recognized
as expense as of March 31, 2017. These costs have been reflected in other expenses. PMC
Holdings, Inc. On May 18, 2017, the Company entered into an
Asset Purchase Agreement whereby the Company acquired substantially all of the operating assets of Premier Micronutrient Corporation,
a subsidiary of PMC Holdings, Inc. or PMC, which is a company engaged in the business of developing, manufacturing, selling and
marketing micronutrient products and formulations . On May 23, 2017, the parties executed the Bill of Sale and Assignment and Assumption
Agreement for the Acquisition. Upon the closing of the acquisition, the Company
received substantially all of the operating assets of PMC, consisting of fixed assets and intellectual property in exchange for
a purchase price of 1,200,000 shares of the Company’s common stock. The shares were fair valued at $4.58 per share. The
Company also agreed to assume various accounts payable and accrued liabilities of PMC. The shares of Common Stock to be issued
pursuant to the Acquisition will be restricted under Rule 144. The Acquisition was subject to customary closing conditions. All
of the goodwill was assigned to the Company’s Brands segment. All of the goodwill and intangible assets recognized is expected
to be deductible for income tax purposes. The fair value of the patents were valued using the market approach, as the Company
obtained an independent third-party valuation. The
purchase price was allocated to the net assets acquired based on their estimated fair values as follows:
Stock $ 5,496,000
Purchase
price $ 5,496,000
Prepaid
expenses and other current assets 2,256
Property
and equipment, net 55,023
Patents
4,100,000
Accounts
payable (27,772 )
Assumption
of notes payable (401,095 )
3,728,412
Goodwill 1,767,588
$ 5,496,000 Marley
Beverage Company, LLC On
March 23, 2017, the Company entered into an asset purchase agreement whereby the Company agreed to acquire substantially all of
the operating assets of Marley Beverage Company, LLC or Marley, which is a company engaged in the development, manufacturing,
selling and marketing of nonalcoholic relaxation teas and sparkling waters, and ready to drink coffee drinks. The consideration
for the acquisition was amended pursuant to an amendment to the asset purchase agreement on June 9, 2017. The acquisition closed
on June 13, 2017. At
closing, the Company received substantially all of the operating assets of Marley, consisting of inventory, accounts receivable,
fixed assets and intellectual property in exchange for a purchase price of 3,000,000 shares of the Company’s common stock.
The Company agreed to an earn out payment of $1,250,000 in cash if the gross revenues of the Marley business during any trailing
twelve calendar month period after the closing are equal to or greater than $15,000,000. The earnout, if applicable, will be paid
as $625,000 on or before the 15th day after the end of the first trailing twelve calendar month period in which the earnout condition
is satisfied, $312,500 not later than the first anniversary of the initial earnout payment, and $312,500 not later than the second
anniversary of the initial earnout payment. The fair value of the earnout was valued using the weighted average return on asset.
The shares of common stock issued pursuant to the acquisition have not been registered, but the holders were granted piggyback
registration rights, as well as demand registration rights, with the demand registration rights beginning twelve months from the
Closing Date. The acquisition was subject to customary closing conditions. The shares were fair valued at $6.20 per share. All
of the goodwill was assigned to the Company’s Brands segment. All of the goodwill and intangible assets recognized is expected
to be deductible for income tax purposes. The fair value of the customer list was valued using the cost approach, as the Company
obtained an independent third-party valuation. In addition, the market approach was utilized to determine the fair value of the
trade name and recipes. The
purchase price was allocated to the net assets acquired based on their estimated fair values as follows:
Stock $ 18,600,000
Contingent
consideration 800,000
Purchase
price $ 19,400,000
Accounts
receivable $ 186,658
Inventories 798,098
Prepaid
expenses and other current assets 198,882
Property
and equipment, net 22,191
Other
intangible assets acquired (trade names, recipes and customer lists) 9,281,365
Accounts
payable and accrued expenses (505,146 )
9,982,048
Goodwill 9,417,952
$ 19,400,000 The following unaudited pro forma financial
results reflects the historical operating results of the Company for the three-months ended March 31, 2017 and includes the pro
forma results of operations as if Maverick, PMC and Marley were acquired on January 1, 2017. The unaudited pro forma financial
information includes an adjustment to remove $231,925 of one-time transactional costs related to the Maverick acquisition that
were expensed during the three months ended March 31, 2017. These one-time costs were removed for pro forma purposes as the costs
were non-recurring. No adjustments have been made for synergies that may result from the acquisition. These combined results are
not necessarily indicative of the results that may have been achieved had the companies been combined as of such dates or periods,
or of the Company’s future operating results.
Three
Months Ended March
31, 2017
(unaudited)
Revenues $ 13,998,793
Net
loss from continuing operations (4,668,825)
Net
loss per share – Basic and diluted $ (0.16 )
Weighted
average number of common shares outstanding – Basic and Dilutive 28,454,868 Adjustments
to the fair values of the assets acquired, which are subject to change, could have a material impact on these pro forma combined
results. |
