ACQUISITIONS

12 Months Ended

Dec. 31, 2022

ACQUISITIONS

ACQUISITIONS

NOTE 5 — ACQUISITIONS

On June 9, 2021, ECHG, entered into the CExchange Transaction, pursuant to which the seller agreed to sell the assets and certain liabilities of CExchange for ECHG’s cancellation and forgiveness of $1,500,000 of the outstanding principal amount under the loan agreement between ECHG and CExchange originally dated February 15, 2020 and accrued and unpaid interest thereunder of $55,892. The remaining $900,000, which represents two notes of $600,000 and $300,000, principal owed to ECHG by CExchange is not a part of the purchase price listed below and was expected to be repaid with any accrued and unpaid interest during the third or fourth fiscal quarters of 2021. We subsequently performed impairment evaluations on the remaining $900,000 principal owed after management learned that it is more likely than not that the $900,000 may not be recoverable. Management concluded that ECHG should reserve the full amount of the outstanding and unpaid notes receivable of $900,000 and wrote-off the outstanding and unpaid accrued interest associated with the notes receivable totaling $49,174. Subsequent to the reserve established for the notes receivable, the Company received $61,353 as partial payment against the notes receivable. This payment was used to reduce the notes receivable reserved amount to $838,647. Management still believed that it was more likely than not that the remaining balance was uncollectable. The remaining notes receivable of $838,647 and $49,174 of accrued interest receivable were charged to other expense during Fiscal 2021. On October 25, 2022, ECHG received $260,397 of the reserved $838,647 notes receivable. Upon receipt of the partial payment, management believed the remaining and unpaid notes receivable of $578,250 would probably be received in full. The reserve was reduced to $0, recording $838,647 as other income, thereby restoring the balance of the notes receivable, net to $578,250, as of December 31, 2022. The full payment of the remaining $578,250 was received on January 17, 2023. Interest receivable was written off against the reserve in Fiscal 2021. See Note 18 – Subsequent Events for interest received.

As part of the CExchange Transaction, goodwill was originally recorded as $1,891,477, which is the purchase price less the approximate fair value of the net assets and liabilities purchased. Adjustments were made to the acquiring assets and liabilities of the CExchange Transaction through management evaluation and a third-party valuation. The Company’s goodwill is related to the ECHG segment. ECHG has its own separate financial information to perform goodwill impairment testing. The Company will evaluate goodwill based on cash flows for the ECHG segment. For tax purposes, goodwill is amortized and deductible over fifteen (15) years.

The purchase price allocation of the CExchange Transaction is as follows:

Description	Amount
Assets
Cash	$	13,136
Account receivables		93,970
Prepaids		2,594
Deposits		21,419
Intangible assets, trademarks/tradenames		114,000
Intangible assets, customer relationships		345,000
Fixed assets - net		30,697
Liabilities
Account payables		(345,057	)
Accrued liabilities		(1,939	)
Net assets		273,820
Goodwill		1,282,072
Total Purchase Price	$	1,555,892

On October 29, 2021, ECHG entered into the Avail Transaction to purchase all of the assets, liabilities and rights and interests for $4,500,000. The purchase was facilitated by an initial payment of $2,500,000 at closing, with the remaining $2,000,000 represented by the installment note (the “Avail Installment Note”) made by ECHG to the seller to be paid out by 12 quarterly payments starting April 1, 2022, of $166,667 each. See Note 9 to our consolidated financial statements for more information on this loan. The Avail Installment Note for the Avail transaction does not bear interest, but imputed interest rate was determined to be 3.1%.

As part of the Avail Transaction, goodwill was preliminarily recorded as $3,491,284, which was the purchase price less the approximate fair value of the net assets and liabilities purchased. On May 31, 2022, an additional cash payment of $216,988 was made due to certain conditions being met concerning the cash balance upon a certain date. The additional cash payment was not part of the Avail Installment Note of $2,000,000 from the initial closing of the Avail Transaction. The additional cash payment increased goodwill and the purchase price amount by $216,988, thereby increasing goodwill for the Avail Transaction to $3,708,273. On September 30, 2022, management identified $2,736,000 of intangibles as part of the Avail Transaction not initially included in the fair value of Avail’s net assets. The intangibles identified of $2,736,000, decreases goodwill by $2,736,000 to $972,272, as shown in the purchase price allocation table below. The Avail Transaction was initially recorded as preliminary, but with the third-party valuation complete, the purchase price allocation below is considered final. The Company’s goodwill is related to the ECHG segment. ECHG has its own separate financial information to perform goodwill impairment testing. The Company will evaluate goodwill based on cash flows for the ECHG segment. For tax purposes, goodwill is amortized and deductible over 15 years. The purchase price allocation of the Avail Transaction is as follows:

	Initial			Final
Description	Allocation			Allocation
Assets
Cash	$	988,870		$	988,870
Account receivables		395,144			395,144
Inventories		486,736			486,736
Prepaid expenses		93,727			93,727
Intangible assets - Trademarks/Tradenames		-			1,272,000
Intangible assets - Customer Relationships		-			1,464,000
Fixed assets - net		247,038			247,038
Right-of-use assets		609,511			609,511
Other assets		13,268			13,268
Liabilities
Account payables		(562,778	)		(562,778	)
Accrued liabilities		(653,289	)		(653,289	)
Operating lease liabilities		(609,511	)		(609,511	)
Net assets		1,008,716			3,744,716
Goodwill		3,491,284			972,272
Total Purchase Price	$	4,500,000		$	4,716,988