Business Acquisitions

6 Months Ended

Jun. 30, 2019

Business Combinations [Abstract]

Business Acquisitions

4. Business Acquisitions

During the fiscal year 2019, the Company completed the following acquisition:

Craft Canning + Bottling

On January 11, 2019, the Company completed the acquisition of Craft Canning + Bottling, LLC (“Craft Canning”), a Portland, Oregon-based provider of bottling and canning services. The Company’s condensed consolidated financial statements for the six months ended June 30, 2019 include Craft Canning’s results of operations. For the six months ended June 30, 2019, Craft Canning’s results of operations are included from the acquisition date of January 11, 2019 through June 30, 2019. The Company’s condensed consolidated financial statements reflect the final purchase accounting adjustments in accordance with ASC 805 “Business Combinations”, whereby the purchase price was allocated to the assets acquired and liabilities assumed based upon their estimated fair values on the acquisition date.

The following allocation of the purchase price is as follows:

Consideration given:
338,212 shares of common stock valued at $6.10 per share	$	2,080,004
Cash		2,003,200
Notes payable		761,678
Total value of acquisition	$	4,844,882
Assets and liabilities acquired:
Cash	$	553,283
Trade receivables, net		625,717
Inventories, net		154,824
Prepaid expenses and current assets		250
Property and equipment, net		1,839,486
Right-of-use assets		232,884
Intangible assets - customer list		2,895,318
Other assets		26,600
Accounts payable		(231,613	)
Accrued liabilities		(74,389	)
Deferred revenue		(52,000	)
Lease liabilities		(256,375	)
Notes payable		(869,103	)
Total	$	4,844,882

Intangible assets are recorded at estimated fair value, as determined by management based on available information. The fair value assigned to the customer list intangible asset was determined through the use of the income approach, specifically the relief from royalty and the multi-period excess earning methods. The major assumptions used in arriving at the estimated identifiable intangible asset value included management’s estimates of future cash flows, discounted at an appropriate rate of return which is based on the weighted average cost of capital for both the Company and other market participants, projected customer attrition rates, as well as applicable royalty rates for comparable assets. The useful lives for intangible assets were determined based upon the remaining useful economic lives of the tangible assets that are expected to contribute directly or indirectly to future cash flows. The customer relationships estimated useful life is seven years.

The Company incurred acquisitions costs of $81,811 during the six months ended June 30, 2019 that have been recorded in general and administrative expenses on the consolidated statement of operations. The results of the Craft Canning acquisition are included in our consolidated financial statements from the date of acquisition through June 30, 2019. The sales and net income (including transaction costs) of Craft Canning operations included in our consolidated statements of operations were $3,766,714 and $526,282, for the period from January 11, 2019 through June 30, 2019.

Pro Forma Financial Information

The following unaudited pro forma consolidated results of operations for the six months ended June 30, 2019 and 2018 assume the acquisition was completed on January 1, 2018:

	Three Months Ended						Six Months Ended
	June 30, 2019			June 30, 2018			June 30, 2019			June 30, 2018
Pro forma sales	$	4,252,415		$	3,177,976		$	8,150,393		$	5,625,456
Pro forma net loss		(2,946,701	)		(2,905,564	)		(5,870,909	)		(1,592,532	)
Pro forma basic and diluted net loss per share	$	(0.32	)	$	(0.54	)	$	(0.64	)	$	(0.29	)

Pro forma data does not purport to be indicative of the results that would have been obtained had these events actually occurred at the beginning of the periods presented and is not intended to be a projection of future results. The share and per share data have been retroactively reflected for the acquisition.