BUSINESS ACQUISITIONS

12 Months Ended

Dec. 31, 2013

Business Acquisitions

BUSINESS ACQUISITIONS

The Company did not engage in any business combination activity during the year ended December 31, 2013. During the year ended December 31, 2012, the Company completed two business combinations accounted for under the acquisition (purchase) method pursuant to ASC 805.

GT Beverage Company, LLC

On March 31, 2012, the Company completed the acquisition of GT Beverage by issuing 292,690 shares of Common Stock in exchange for all of the outstanding membership interests of GT Beverage.  The primary purpose of the acquisition was to take advantage of GT Beverages’ patented spherical bottle for use in the Company's product AquaBall™ Naturally Flavored Water.  These 292,690 shares of Common Stock were exchanged for 292,690 shares of the Company Series A Preferred Stock in connection with the Merger.  GT Beverage had no sales or significant operations from January 1, 2012 through March 31, 2012, and, accordingly, as a predecessor entity, GT Beverage has not provided audited financial statements for the three-months ended March 31, 2012.  

The acquisition date fair value was $2,926,900 for the purchase of GT Beverage’s outstanding member interests.  The $2,926,900 consisted of 292,690 shares of the Company’s Common Stock with an estimated fair value of $2,926,900.  The acquisition of GT Beverage has been accounted for using the acquisition method.  Assets acquired and liabilities assumed were recorded at their estimated fair values as of the acquisition date.  The fair values of identifiable intangible assets were based on valuations using the income approach and estimates provided by management.  The excess of the purchase price over the tangible assets, identifiable intangible assets and assumed liabilities was recorded as goodwill.  The allocation of the purchase price is based upon a valuation of certain assets acquired and liabilities assumed.  The purchase price allocation was as follows:

	Amount
Property and equipment	$	26,396
Patent for spherical bottle (useful life of 11.3 years)		1,600,000
Goodwill		2,414,642
Total assets acquired		4,041,038
Accounts payable, accrued expenses and other current liabilities		(1,114,138	)
Total liabilities assumed		(1,114,138	)
Total allocation of purchase price consideration	$	2,926,900

    The useful life of the intangible asset was based upon the patterns in which the economic benefits related to the patent are expected to be realized, and the patent will be amortized on a basis reflecting those economic patterns.

    The Company incurred $107,000 of legal costs related to this transaction, which has been recorded as general and administrative expense during the year ended December 31, 2012.

    As noted above, there were no significant operations of GT Beverage from January 1, 2012 through March 31, 2012 and, accordingly, the pro forma financial information required by ASC 805 is not applicable.

Bazi International, Inc.

On October 15, 2012, the Company completed the acquisition of 100% of Bazi Intl., by exchanging shares of Company Common Stock for Bazi Intl. shares of voting convertible preferred stock.  Bazi Intl.’s results of operations are reflected in the Company’s consolidated statements of operations from the acquisition date of October 15, 2012 through December 31, 2012.

The Company is considered the accounting acquiror due to its majority ownership, control of the board of directors, and officer positions held post acquisition.  Accordingly, the acquisition has been accounted for as a public company reverse merger.  Bazi Intl. was not a public company shell, as defined by the SEC, therefore the acquisition (purchase) method of accounting under ASC 805 has been used and the Company's capital structure has been restated to reflect the capital structure of Bazi Intl at the acquisition date.

The acquisition date estimated fair value was $727,805, consisting of 1,192,335 shares of the Company’s Common Stock with an estimated fair value of $727,805.  The acquisition of Bazi Intl. has been accounted for using the acquisition method.  Assets acquired and liabilities assumed were recorded at their estimated fair values as of the acquisition date.  The fair values of identifiable intangible assets were based on valuations using the income approach and estimates provided by management.  The excess of the purchase price over the tangible assets, identifiable intangible assets and assumed liabilities was recorded as goodwill.  The allocation of the purchase price is based upon a valuation of certain assets acquired and liabilities assumed.  The purchase price allocation was as follows:

	Amount
Cash	$	5,646
Inventory		47,000
Customer List (useful life of 2 years)		100,000
Goodwill		1,059,860
Total assets acquired		1,212,506
Accounts payable, accrued expenses and other current liabilities		(484,701	)
Total liabilities assumed		(484,701	)
Total allocation of purchase price consideration	$	727,805

The useful life of the intangible asset (customer list) was based upon the patterns in which the economic benefits related to the customer list are expected to be realized, and the customer list will be amortized on a basis reflecting those economic patterns.

The Company incurred $138,000 of legal costs related to this transaction, which has been recorded as general and administrative expense during the year ended December 31, 2012.

The unaudited pro forma information presented in the following table summarizes the Company’s consolidated results of operations for the year ended December 31, 2012, as if the acquisition of Bazi Intl. had occurred on January 1, 2012.  The pro forma financial information is presented for comparative purposes only and is not necessarily indicative of the results of operations that actually would have been achieved if the acquisition had taken place at the beginning of 2012, nor is it intended to be a projection of future results.

Pro Forma (Unaudited)
Year Ended December 31, 2012
Revenues	$	1,488,515
Net loss	$	(5,001,653	)
Basic net loss per share	$	(0.22	)