Healthier Choices Management Corp 8-K/A, filed Apr 21, 2022
Healthier Choices Management Corp. (HCMC)
8-K/A
2022-04-21
For: 2022-02-08
View Original
Added on
April 06, 2026
About this 8-K/A
Healthier Choices Management Corp filed this 8-K/A on April 21, 2022, reporting on events of February 8, 2022.
Items reported
- Item 9.01: Financial statements and exhibits
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): February 8, 2022
(Exact name of registrant as specified in its charter)
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(State or other jurisdiction
of incorporation) |
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(Commission
File Number) |
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(IRS Employer
Identification No.) |
(Address of principal executive offices, including zip code)
(305 ) 600-5004
(Registrant's telephone number, including area code)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following
provisions (see General Instruction A.2. below):
Securities registered pursuant to Section 12(b) of the Securities Exchange Act of 1934:
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Title of each class
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Trading Symbol(s)
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Name of each exchange on which registered
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Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act
of 1934 (§240.12b-2 of this chapter):
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards
provided pursuant to Section 13(a) of the Exchange Act. ☐
Explanatory Note
On February 8, 2022, Healthier Choices Management Corp. (“HCMC”), through its wholly owned subsidiary, Healthy Choice Markets 3, LLC
(the “Company”), completed its previously announced acquisition of the assets of Mother Earth’s Storehouse Inc. (“Mother Earth’s”), pursuant to the terms of an Asset Purchase Agreement. As the required financial statements of the business acquired
and pro forma financial information were not included in the Form 8-K filed on February 14, 2022, this Form 8-K/A amends and supplements the disclosure provided in Item 9.01 of such Form 8-K to provide additional financial statements for Mother
Earth’s and the pro forma financial information required by Item 9.01(b) of Form 8-K.
Item 9.01 Financial Statements and Exhibits.
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(a)
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Financial statements of businesses acquired.
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The audited balance sheets of Mother Earth’s Storehouse Inc. as of December 31, 2020 and 2021, and the related statements of income,
comprehensive income, changes in stockholders’ equity and cash flows for each of the two years in the period ended December 31, 2020 and 2021, and the related notes and report of independent auditors thereto, required by this item are included as
Exhibit 99.1 and incorporated by reference herein.
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(b)
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Pro forma financial information.
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The unaudited pro forma combined condensed consolidated balance sheet as of December 31, 2021, and the unaudited pro forma combined
condensed consolidated statements of income for the year ended December 31, 2021, required by this item are included as Exhibit 99.2 and incorporated by reference herein.
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(c)
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Exhibits.
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Exhibit
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Description |
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Audited Financial Statements of the Mother
Earth’s Storehouse Inc. as of December 31, 2020 and 2021.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by
the undersigned hereunto duly authorized.
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HEALTHIER CHOICES MANAGEMENT CORP.
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Date: April 21, 2022
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By:
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/s/ Jeffrey E. Holman
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Jeffrey E. Holman
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Chief Executive Officer
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Exhibit 99.1
MOTHER EARTH’S STOREHOUSE, INC.
AUDITED FINANCIAL STATEMENTS
As of and for the years ended December 31, 2021 and 2020
TABLE OF CONTENTS
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Page
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INDEPENDENT AUDITOR’S REPORT
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FINANCIAL STATEMENTS
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Balance Sheets
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Statements of Income
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Statements of Changes in Shareholders’ Equity
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Statements of Cash Flows
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Notes to the Financial Statements
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SUPPLEMENTAL INFORMATION
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Schedules of Store Operating Expenses, Employee Costs, and General and Administrative Expenses
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To the Shareholders of
Mother Earth’s Storehouse, Inc.
Report on the Audit of the Financial Statements
Opinion
We have audited the financial statements of Mother Earth's Storehouse, Inc. (an S-corporation) (the “Company”), which comprise the balance
sheets as of December 31, 2021 and 2020, and the related statements of income, changes in shareholders’ equity, and cash flows for the years then ended, and the related notes to the financial statements.
In our opinion, the accompanying financial statements present fairly, in all material respects, the financial position of Mother Earth's
Storehouse, Inc. as of December 31, 2021 and 2020, and the results of its operations and its cash flows for the years then ended in accordance with accounting principles generally accepted in the United States of America.
Basis for Opinion
We conducted our audits in accordance with auditing standards generally accepted in the United States of America (GAAS). Our
responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Statements section of our report. We are required to be independent of Mother Earth's Storehouse, Inc. and to meet our other
ethical responsibilities, in accordance with the relevant ethical requirements relating to our audits. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Subsequent Event
As discussed in Note 1 to the financial statements, on February 8, 2022, the Company sold all of its operations. The sale represents a significant portion of
the Company’s total assets and all of the Company’s operations. Our opinion is not modified with respect to that matter.
Responsibilities of Management for the Financial Statements
Management is responsible for the preparation and fair presentation of the financial statements in accordance with accounting principles
generally accepted in the United States of America, and for the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of consolidated financial statements that are free from material misstatement,
whether due to fraud or error.
In preparing the financial statements, management is required to evaluate whether there are conditions or events, considered in the
aggregate, that raise substantial doubt about Mother Earth's Storehouse, Inc.’s ability to continue as a going concern for one year after the date the financial statements are available to be issued.
1
Auditor’s Responsibilities for the Audit of the Financial Statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement,
whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance but is not absolute assurance and therefore is not a guarantee that an audit conducted in accordance with GAAS
will always detect a material misstatement when it exists. The risk of not detecting a material misstatement resulting from fraud is higher than from one resulting from error, as fraud may involve collusion, forgery, intentional omissions,
misrepresentations, or the override of internal control. Misstatements are considered material if there is a substantial likelihood that, individually or in the aggregate, they would influence the judgment made by a reasonable user based on the
financial statements.
In performing an audit in accordance with GAAS, we:
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Exercise professional judgment and maintain professional skepticism throughout the audit.
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Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, and design
and perform audit procedures responsive to those risks. Such procedures include examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.
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Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in
the circumstances, but not for the purpose of expressing an opinion on the effectiveness of Mother Earth's Storehouse, Inc.’s internal control. Accordingly, no such opinion is expressed.
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Evaluate the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by
management, as well as evaluate the overall presentation of the financial statements.
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Conclude whether, in our judgment, there are conditions or events, considered in the aggregate, that raise substantial doubt
about Mother Earth's Storehouse, Inc.’s ability to continue as a going concern for a reasonable period of time.
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We are required to communicate with those charged with governance regarding, among other matters, the planned scope and timing of the
audit, significant audit findings, and certain internal control-related matters that we identified during the audit.
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Supplementary Information
Our audit was conducted for the purpose of forming an opinion on the financial statements as a whole. The Schedules of Store Operating Expenses, Employee
Costs, and General and Administrative Expenses are presented for purposes of additional analysis and are not a required part of the financial statements. Such information is the responsibility of management and was derived from and relates directly to
the underlying accounting and other records used to prepare the financial statements. The information has been subjected to the auditing procedures applied in the audit of the financial statements and certain additional procedures, including comparing
and reconciling such information directly to the underlying accounting and other records used to prepare the financial statements or to the financial statements themselves, and other additional procedures in accordance with auditing standards generally
accepted in the United States of America. In our opinion, the information is fairly stated in all material respects in relation to the financial statements as a whole.
Hudson, New York
April 8, 2022
April 8, 2022
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MOTHER EARTH’S STOREHOUSE, INC.
For the years ended December 31, 2021 and 2020
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For the years ended December 31, 2021 and 2020
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NOTE 1 – ORGANIZATION
Organization
Mother Earth’s Storehouse, Inc. (the “Company”) was founded in 1978 in Kingston, New York.
Mother Earths Storehouse, Inc. is a grocery store for organic and all-natural foods. The Company has two locations in Kingston and
Saugerties, New York. A third location, in Poughkeepsie, New York, operated until September 30, 2020, when it was sold (see Note 9). On February 8, 2022, the Company’s operations were purchased in the form of an asset sale by Healthy Choice Markets 3,
LLC.
Sale of Company Business
On February 8, 2022, the shareholders of the Company agreed to sell their business including the Kingston and Saugerties, New York store
locations to a third-party for $5,300,000 subject to certain closing adjustments. Existing store leases were assigned to the buyer.
The shareholders of the Company are prohibited from operating a similar competitive business as defined in the sale agreement for a period
of five years.
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Accounting
The financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United
States of America (U.S. GAAP).
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America
requires management to make estimates and assumptions that affect certain reported amounts of assets and liabilities and disclosures.
Cash and Cash Equivalents
For the purposes of the statement of cash flows, the Company considers all short-term investment securities purchased with a maturity of
three months or less to be cash equivalents.
Revenue Recognition
The Company recognizes revenue at the point of sale.
Unredeemed Gift Cards
The Company sells gift cards with no expiration dates to customers. The Company records revenue at the point of sale and does not expect
future gift card obligations to be material.
Sales returns and allowances
The Company does not expect future returns to be material, and consequently does not maintain an allowance for merchandise returns.
Income Taxes
Mother Earth’s Storehouse, Inc. has elected to be treated as an S Corporation for federal income tax purposes. No provision has been made
for federal income taxes since S Corporations are not taxable entities. Individual partners/shareholders report their share of taxable income or loss in their personal tax returns.
The Company has evaluated any uncertain tax positions and related income tax contingencies and determined uncertain positions, if any, are
not material to the financial statements, according to FASB ASC 740. Penalties and interest assessed by income taxing authorities are included in operating expenses, if incurred. None of the Company’s current returns are under examination.
Under New York State S Corporation tax law, the Corporation is subject to an annual franchise tax.
Beginning in the year ended December 31, 2021, the Company elected to be subject to the New York State Pass-Through Entity Tax (the “PTET”). The Company must
elect each year by March 15th if it chooses to be subject to the PTET for the given year. The PTET will grant each shareholder a tax credit on their respective individual NYS income tax returns. Any PTET owed is a joint liability of the
Company and the controlling shareholder. Since the individual shareholders receive the benefit of a tax credit, the Company has treated the PTET as a distribution to the shareholders in the Statements of Changes in Shareholders’ Equity. PTET paid on
behalf of shareholders for the years ended December 31, 2021 and 2020, was $102,750 and $0, respectively.
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Inventories
Inventories are valued at the lower of cost (average cost method) or net realizable value. Inventories are comprised of perishable and
non-perishable food items available for sale.
Property, Plant and Equipment
Property, plant and equipment is stated at cost. Depreciation is recorded using the straight-line method over the estimated useful lives
of the related assets. Expenditures for maintenance and repairs and minor renewals are charged to expense; betterments and major renewals are capitalized. Leasehold improvements are amortized over the lesser of the lease terms or the assets’ useful
lives. Upon retirement or sale of assets, the cost of the assets disposed of and the related accumulated depreciation are removed from the accounts, and any resulting gain or loss is credited or charged to income.
Advertising Costs
The Company expenses advertising costs as they are incurred. They are presented as a component of store operating expenses. Advertising
costs were $76,379 and $86,071 for the years ended December 31, 2021 and 2020, respectively.
Retirement Plan
The Company maintains a 401(k) plan. Under the terms of the 401(k) Plan, the employer makes up to 4% matching contributions. The plan will
follow the Safe Harbor CODA in which a minimum contribution plan of 4% of salaries must be made by the Company each pay period. Plan contributions were $140,859 and $144,110 for the years ended December 31, 2021 and 2020, respectively.
Presentation of Sales Tax
The State of New York imposes sales taxes on all of the Company’s sales to nonexempt customers. The Company collects sales taxes from
customers and remits the amounts to the state. The Company’s accounting policy is to exclude the tax collected and remitted to the State from revenues and expenses with the exception of excise taxes paid on purchases.
Subsequent Events
Subsequent events have been evaluated through April 8, 2022, which is the date the financial statements were available to be issued.
NOTE 3 – CONCENTRATION OF CREDIT AND MARKET RISK
Financial instruments that potentially expose the Company to concentration of credit and market risk consist primarily of cash equivalents and a note
receivable. Cash is maintained at Federal Deposit Insurance Corporation insured financial institutions and credit exposure is limited to any one institution. As of December 31, 2021, cash and cash equivalents were in excess of FDIC insurance coverage
by approximately $2,210,000.
The Company has a concentration with two of its vendors related to the purchase of inventory. Approximately 29% and 21% of purchases were made with these
vendors during the year ended December 31, 2021. Approximately 31% and 21% of purchases were made with these vendors during the year ended December 31, 2020.
Accounts payable consists of balances due to vendors for inventory the Company sells in its stores as well as services rendered to the Company on or before the
year-end which have not been paid as of the year-end. At December 31, 2021 and 2020, one vendor represented 58% and 50% of accounts payable, respectively.
As mentioned in Note 1, the Company has 2 store locations in Kingston and Saugerties, New York. Because of this, there is a concentration of market risk as the
Company is reliant upon the continued support of customers in the Kingston and Saugerties, New York communities and surrounding areas.
The Company’s note receivable is due from one entity and is uncollateralized. The Company expects to collect this note in full during 2022.
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NOTE 4 – NET SALES
Sales are net of returns and allowances and discounts. For the years ended December 31, sales were as follows:
NOTE 5 – PROPERTY, PLANT, AND EQUIPMENT
The Company provides for depreciation on a straight-line basis. Property, plant and equipment is comprised of the
following at December 31, and estimated useful lives of the related assets are as follows:
Depreciation expense amounted to $146,437 and $199,896 for the years ended December 31, 2021 and 2020, respectively.
NOTE 6 – NOTE RECEIVABLE
As part of the sale of the Poughkeepsie store location in 2020 (see Note 9), the purchaser entered into a note for the remaining $175,000 of the purchase price
payable to the Company. The note is receivable in monthly installments of $3,294, including principal and interest at a fixed rate of 5.00% through maturity of November 1, 2022, at which time a balloon payment is due. Upon maturity of the note, the
remaining balance of unpaid principal and interest is due, payable in full. The balance of this note was $130,305 and $169,828 at December 31, 2021 and 2020, respectively.
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NOTE 7 – DEBT
In April 2020, the Company applied for and received a loan from its bank in the amount of $669,500 through the Small Business Administration’s (“SBA”) Paycheck
Protection Program (“PPP”). In July 2021, the loan, including principal and interest was forgiven and considered repaid in full. The balance has been recorded as forgiveness of paycheck protection program loan for the year ended December 31, 2021 and a
current liability as of December 31, 2020.
According to the rules of the SBA, the Company is required to retain PPP loan documentation for six years after the date the loan is forgiven or repaid in
full, and permit authorized representatives of the SBA, including representatives of its Office of Inspector General, to access such files upon request. Should the SBA conduct such a review and reject all or some of the Company’s judgements pertaining
to satisfying PPP loan eligibility or forgiveness conditions, the Company may be required to adjust previously reported amounts and disclosures in the financial statements.
NOTE 8 – LEASES
The Company leased store space under an operating lease at 1955 South Road in Poughkeepsie, NY. The lease was on a month-to-month basis at $14,709 per month
and transferred to the assignee when the location was sold (see Note 9). The Company leased a second store space under an operating lease at 1200 Ulster Avenue, Route 9W, Kingston, NY. The lease called for an annual increase of 2% in monthly rental
expense on the anniversary date in September.
Beginning September 1, 2021, monthly lease payments were $15,923. The lease term expires on August 31, 2029 with the option to extend an additional ten years.
Subsequent to the year ended December 31, 2021, the lease was assigned to the buyers when the Company was sold.
Lease expense was $188,582 and $251,074 for the years ended December 31, 2021 and 2020, respectively.
NOTE 9 – SALE OF STORE LOCATION
On September 30, 2020, the Company sold its Poughkeepsie store location for $225,000. This amount includes a $175,000 note receivable (see Note 6). The
calculation of the related gain from the sale was as follows:
NOTE 10 – SETTLEMENT
During the year ended December 31, 2020, the Company settled a litigation claim brought against it for $83,839, which was recorded as a settlement in general
and administrative expenses.
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SUPPLEMENTAL INFORMATION
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MOTHER EARTH’S STOREHOUSE, INC.
For the years ended December 31, 2021 and 2020
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Exhibit 99.2
HEALTHIER CHOICES MANAGEMENT CORP. (“HCMC”)
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION
The accompanying unaudited pro forma condensed combined financial statements give effect to events that are (1) directly attributable to the following
acquisition: (2) factually supportable, and with respect to the pro forma condensed combined statements of operations, (3) expected to have a continuing impact on the combined results following the business acquisition. The unaudited pro forma
financial information considers the aggregation of financial statement impacts for the following transactions, referred to in this document as "the acquisition transaction".
On February 8, 2022, HCMC through its wholly owned subsidiary, Healthy Choice Markets 3, LLC, entered into an Asset Purchase Agreement (the “Purchase
Agreement”) with Mother Earth’s Storehouse Inc. (“HCM3”) and its shareholders. (See Note 2 - Acquisition of Mother Earth’s Storehouse Inc.)
The business combinations of Healthier Choices Management Corp and of Mother Earth’s Storehouse Inc were accounted for under the acquisition method of
accounting in accordance with ASC Topic 805, Business Combinations. As the acquirer for accounting purposes, HCMC estimated the fair value of Mother
Earth’s Storehouse Inc assets acquired and liabilities assumed and conformed the accounting policies to its own accounting policies.
The unaudited pro forma condensed combined balance sheet as of December 31, 2021, gives effect only to the acquisition of certain net business assets of
Mother Earth’s Storehouse Inc and is included in HCMC’s consolidated Balance Sheet as of that date. The unaudited pro forma condensed combined statements of operations for the year-ended December 31, 2021give effect to the acquisition of certain net
business assets of Mother Earth’s Storehouse Inc.
The unaudited pro forma condensed combined financial statements do not necessarily reflect what the combined company’s financial condition or results of
operations would have been had the acquisitions occurred on the dates indicated. They also do not reflect the realization of any expected cost savings from the acquisition transactions or planned cost savings initiatives following the completion of the
transaction and may not be useful in predicting the future financial condition and results of operations of the combined company. The actual financial position and results of operations may differ significantly from the pro forma amounts reflected
herein due to a variety of factors.
HEALTHIER CHOICES MANAGEMENT CORP.
PROFORMA CONDENSED COMBINED BALANCE SHEET
DECEMBER 31, 2021
(UNAUDITED)
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31-Dec-21
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Pro-Forma
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Pro-Forma
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HCMC
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MES *
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Adjustments
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HCMC
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TOTAL CURRENT ASSETS
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$
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28,773,539
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$
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3,426,768
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$
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2,576,415
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$
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34,776,722
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TOTAL ASSETS
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34,443,487
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4,341,726
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8,249,722
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47,034,935
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0
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TOTAL CURRENT LIABILITIES
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2,523,994
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507,052
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899
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3,031,945
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0
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TOTAL LIABILITIES
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5,209,830
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507,052
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1,659,019
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7,375,901
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Stockholder's Equity
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29,233,657
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3,834,674
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6,590,703
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39,659,034
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TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY
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$
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34,443,487
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$
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4,341,726
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$
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8,249,722
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$
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47,034,935
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* Mother Earth’s Storehouse Inc.
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HEALTHIER CHOICES MANAGEMENT CORP.
PROFORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2021
(UNAUDITED)
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HCMC
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MES *
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Proforma
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SALES:
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Vapor sales, net
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$
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2,084,813
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$
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-
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$
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2,084,813
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Grocery sales, net
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11,235,041
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14,292,166
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25,527,207
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Total Sales
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13,319,854
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14,292,166
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27,612,020
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Cost of sales vapor
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839,599
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-
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839,599
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Cost of sales grocery
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7,187,701
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9,389,790
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16,577,491
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GROSS PROFIT
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5,292,554
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4,902,376
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10,194,930
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EXPENSES:
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Selling, general and administrative
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10,033,048
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4,042,520
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14,075,568
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Total operating expenses
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10,033,048
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4,042,520
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14,075,568
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Operating loss
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(4,740,494)
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859,856
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(3,880,638)
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OTHER INCOME (EXPENSES):
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Gain on debt settlements
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767,930
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-
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767,930
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Other expenses, net
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(26)
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678,514
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678,488
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Interest expense, net
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(65,281)
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-
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(65,281)
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Gain (loss) on investment
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412
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-
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412
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Total other income (expense), net
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703,035
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678,514
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1,381,549
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NET LOSS
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$
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(4,037,459)
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$
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1,538,370
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$
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(2,499,089)
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* Mother Earth’s Storehouse Inc.
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NOTES TO PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION
1. Basis of Presentation
The following is a brief description of the amounts presented in each of the column headings for each of the unaudited pro forma condensed combined balance
sheets and statements of operations, which should be read in conjunction with the Healthier Choices Management Corp. historical consolidated financial statements and accompanying notes included in HCMC's Annual Report on Form 10-K for the year ended
December 31, 2021.
Healthier Choices Management Corp.
The columns reflect the audited balance sheet of HCMC as of December 31, 2021, and historical audited operating results of HCMC. for the year ended December
31, 2021.
Mother Earth’s Storehouse Inc. Acquisition
The columns reflect the audited balance sheet of Mother Earth’s Storehouse Inc. as of December 31, 2021, and historical audited operating results of Mother
Earth’s Storehouse Inc. for the pre-acquisition periods January 1, 2021, to December 31, 2021, which were derived from the audited financial statements of Mother Earth’s Storehouse Inc. presented in Exhibit 99.1.
Pro Forma Adjustments
This column on the pro forma statements of operations reflects an estimate of the incremental impact for the year ended December 31, 2021.
The pro forma adjustments column on the combined balance sheet as of December 31, 2021, include the estimated fair values of the assets acquired and
liabilities assumed from Mother Earth’s Storehouse Inc. as of the date of the acquisition.
2. Acquisition of Mother Earth’s Storehouse Inc
On February 8, 2022, the Company through its wholly owned subsidiary, Healthy Choice Markets 3, LLC, entered into an Asset Purchase Agreement with Mother
Earth’s Storehouse Inc. (“HCM3”) and its shareholders. Pursuant to the Purchase Agreement, HCM3 acquired certain assets and assume certain liabilities related to Mother Earth’s grocery stores in Kingston and Saugerties, New York. The Company intends to
continue to operate the grocery stores under their existing name. The cash purchase price under the Asset Purchase Agreement is approximately $4.5 million, with an additional $677,500 paid for inventory at closing. In addition, the Company assumed a
lease obligation for the Kingston, NY store and entered into an employment agreement with the store manager.
The acquisition of Mother Earth’s Storehouse Inc is a considered significant as defined under Rule 3-05 of Regulation S-X. The audited financial statements
of Mother Earth’s Storehouse Inc for the years ended December 31, 2021, and 2020 are included in this Amended Form 8-K.
The purchase consideration paid to the Seller was allocated to the preliminary fair value of the net tangible assets acquired, with the remainder recorded as
goodwill on a preliminary basis. Goodwill recognized from the transaction mainly represented the expected operational synergies upon acquisition of the combined entity and intangibles not qualifying for separate recognition. Goodwill is not expected to
be deductible for income tax purposes in the tax jurisdiction of the acquired business. The preliminary purchase price allocation was based, in part, on management’s knowledge of Mother Earth’s Storehouse Inc. business and the results of a third-party
appraisal commissioned by management. The Company also incurred approximately $70,000 of transaction costs because of the Mother Earth’s Storehouse Inc, which are not presented in the accompanying audited condensed combined financial statements as
these costs do not have a continuing impact on the Company’s operating results.
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Purchase Consideration
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Cash Consideration paid
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$
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5,278,000
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Purchase price allocation
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Inventory
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805,000
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||
|
Property and equipment
|
3,001,000
|
||
|
Intangible assets
|
1,755,000
|
||
|
Other liabilities
|
(283,000)
|
||
|
Long term debt
|
(1,883,000)
|
||
|
Net assets acquired
|
3,395,000
|
||
|
Goodwill
|
1,883,000
|
||
|
Total Consideration
|
5,278,000
|
||
|
Finite-lived intangible assets
|
|||
|
Trade Names/Trademarks
|
640,000
|
||
|
Customer Relationships
|
714,000
|
||
|
Non-Compete Agreement
|
401,000
|
||
|
Other liabilities
|
$
|
1,755,000
|
This preliminary purchase price allocation has been used to prepare pro forma adjustments in the accompanying pro forma balance sheets and statements of
operations. The final purchase price allocation will be determined when the Company has completed the detailed valuations and necessary calculations. The final allocation could differ materially from the preliminary allocation used in the pro forma
adjustments. The final allocation may include (1) changes in fair values of long-lived assets, (2) changes in the allocation of purchase consideration in excess of fair value to separately identifiable intangible assets and (3) other changes to
assets and liabilities.