Acquisition

12 Months Ended

Dec. 31, 2020

Business Combinations [Abstract]

Acquisition

On May 20, 2019, ECHG, a wholly owned subsidiary of the Company, entered into an asset purchase agreement with each of Echo Environmental, LLC and its wholly owned subsidiary ITAD USA, LLC (collectively, the “Echo Legacy Entities”), pursuant to which the Echo Legacy Entities agreed to sell all of their assets and rights and interests thereto (the “Acquired Assets”) for $6,925,979 (the “Echo Transaction”). The Echo Legacy Entities were wholly owned subsidiaries of a former Related Party. John R. Loftus is the Company’s CEO, President and Chairman and owned approximately one-third of the equity interests of the former Related Party prior to the Echo Transaction. The Company also paid a closing fee of $85,756 that was not part of the purchase price allocation. The fee is included in selling, general and administrative expenses.

On the same day, Mr. Loftus became the largest beneficial owner of the Company’s stock by purchasing all of the Company’s stock beneficially owned by the former Related Party. As part of the transaction of acquiring the stock from the former Related Party, Mr. Loftus no longer owns an equity interest in that entity. As an interested party, Mr. Loftus was familiar with the operations of the Echo Legacy Entities.

In connection with the Echo Transaction, on May 20, 2019, ECHG executed and delivered to Mr. Loftus, a promissory note to which ECHG borrowed from Mr. Loftus $6,925,979, the proceeds of which were used to purchase the Acquired Assets.

As part of the Echo Transaction, goodwill was realized of $1,367,109, which is the purchase price less the fair value of the net assets purchased, as shown in the purchase price allocation in the following table. Goodwill is not amortized but evaluated for impairment on an annual basis during the fourth quarter of our fiscal year or earlier if events or circumstances indicate the carrying value may be impaired. The Company’s goodwill is related to ECHG only and not the whole Company. The Company has evaluated goodwill based on cash flows for the ECHG segment. For federal income tax purposes, goodwill is amortized and deductible over fifteen years.

The purchase price was allocated to the fair value of assets and liabilities acquired as of May 20, 2019:

Description	Amount
Assets
Cash	$	1,049,462
Account receivables		1,025,615
Inventories		1,209,203
Prepaids		88,367
Fixed assets		191,208
Right-of-use assets		2,350,781
Intangible Assets		3,356,000
Other assets		88,998
Liabilities
Account payables		(723,043	)
Accrued liabilities		(721,483	)
Operating lease liabilities		(2,350,781	)
Other long-term liabilities		(5,457	)
Net assets		5,558,870
Goodwill		1,367,109
Total Purchase Price	$	6,925,979

The following pro forma presents the Company's results of the Echo Entities and the Company's results of operations for the twelve months ended December 31, 2019 as if they were combined the entire twelve months: 

	Pro forma Combined
	For the Twelve Months Ended
	December 31, 2019
	(unaudited)
Revenue	$                                            87,921,642
Income (loss) from continuing operations	$                                              1,931,558
Net income	$                                              1,931,558
Basic net income per common share	$                                                       0.07
Diluted net income per common share	$                                                       0.07