Acquisitions

12 Months Ended

Dec. 31, 2021

Business Combination and Asset Acquisition [Abstract]

Pacific Cup, Inc.

On March 1, 2021, Lollicup entered into an asset purchase agreement (“the Pacific Cup Agreement”) with Pacific Cup, Inc. (“Pacific Cup”), a manufacturer and distributor of disposable products operating in Kapolei, Hawaii. Pursuant to the Pacific Cup Agreement, Lollicup paid cash consideration of $1,000,000 to acquire certain assets of Pacific Cup. Acquisition-related costs were immaterial. The amounts of revenue and earnings of the acquiree since the acquisition date is included in the consolidated statement of income for the reporting period, which is not significant from March 1, 2021 through December 31, 2021.

The goodwill recognized in this transaction was derived from expected opportunities to leverage Pacific Cup’s customer base, manufacturing facility, and sales force to expand the Company’s footprint. Goodwill recognized as a result of this acquisition is deductible for income tax purposes, and subject to annual impairment testing, which may give rise to deferred taxes in future periods.

The following table summarizes the final valuation of assets acquired as a result of this acquisition:


	(in thousands)
Inventories	$153
Property and equipment	50
Customer relationships	400
Goodwill	397
Total assets acquired	$	1,000

Lollicup Franchising, LLC

On September 1, 2020, Lollicup entered into a membership interest purchase agreement (the Agreement) with Lollicup Franchising, LLC (Lollicup Franchising), a provider of specialty tea and coffee to consumers through operating retail stores within the United States. Pursuant to the Agreement, Lollicup paid cash consideration of $900,000 for the 100% membership interest of Lollicup Franchising. Prior to closing of the Agreement, the majority shareholders of the Company were also the majority shareholders of Lollicup Franchising. Acquisition-related costs were insignificant.

The goodwill recognized in this transaction was derived from expected benefits from new management strategy and cost synergies. Goodwill recognized as a result of this acquisition is deductible for income tax purposes, and subject to annual impairment testing, which may give rise to deferred taxes in future periods.

The following table summarizes the assets acquired and liabilities assumed as a result of this acquisition:


	(in thousands)
Cash	$	7
Accounts receivable	103
Inventories	21
Property and equipment	257
Goodwill	3,113
Accounts payable	(42)
Accrued expenses	(104)
Related party payable	(2,455)
Total assets acquired and liabilities assumed	$	900
Less: cash acquired	(7)
Total purchase consideration, net of cash acquired	$	893

The results of operations of this acquisition have been included in the Company’s consolidated financial statements beginning on the acquisition date. All intercompany transactions were eliminated upon consolidation. The amounts of revenue and earnings of the acquiree since the acquisition date is included in the consolidated statements of income for the reporting period, which is not significant from September 1, 2020 through December 31, 2021.