Note 18 - Acquisition of U-swirl, Inc.

12 Months Ended

Feb. 28, 2014

U-Swirl, Inc. [Member]

Note 18 - Acquisition of U-swirl, Inc. [Line Items]

Business Combination Disclosure [Text Block]

NOTE 18 – ACQUISITION OF U-SWIRL, INC.

On January 14, 2013 the Company entered into an agreement to acquire a controlling equity interest in U-Swirl, Inc., a publicly traded company (OTCQB: SWRL). U-Swirl, Inc. is a franchisor and operator of self-serve frozen yogurt locations. In exchange for our interest we contributed our recently acquired franchise rights in YHI, Inc. and Yogurtini International, LLC (collectively, “Yogurtini”) as well as the franchise rights for Aspen Leaf Yogurt, LLC. With the addition of Yogurtini and Aspen Leaf Yogurt the Company believes that U-Swirl, Inc. will have the “critical mass” necessary to achieve profitability.

The Company accounted for this business combination in accordance with ASC 805 – Business Combinations, which requires the acquiring entity in a business combination to recognize all the assets acquired and liabilities assumed in the transaction.

The purchase price was allocated as follows during the year ended February 28, 2013:

	2013
Assets acquired	$	1,763,110
Liabilities assumed		(746,585	)
Non-controlling interest		(664,612	)
Total purchase price	$	351,913

The consideration for the purchase price was made up of 40% of the following assets during the year ended February 28, 2013:

	2013
Yogurtini franchise rights	$	320,000
Cash		31,913
Total consideration paid	$	351,913

On the acquisition date, the fair value of the non-controlling interest was $664,612. The fair value of the non-controlling interest was based upon reference to quoted market valued of U-Swirl, Inc. stock plus bargain purchase adjustment of approximately $258,000 resulting from the allocation of the purchase price. Fair valuation methods used for the identifiable net assets acquired in the acquisition make use of quoted prices in active markets and discounted cash flows.

As a part of these transactions the Company recognized $635,168 as acquisition related costs in the line item “Restructuring charges” on the Income Statement. Included in our consolidated earnings are U-Swirl’s losses between January 14, 2013 and February 28, 2013 of $(320,446).

Cherryberry, Yogli Mogli, And Fuzzy Peach [Member]

Note 18 - Acquisition of U-swirl, Inc. [Line Items]

Business Combination Disclosure [Text Block]

NOTE 19 – ACQUISITION OF CHERRYBERRY, YOGLI MOGLI AND FUZZY PEACH

On January 17, 2014, U-Swirl entered into an Asset Purchase Agreement with CherryBerry, which was the franchisor of self-serve frozen yogurt cafés branded as “CherryBerry.” Pursuant to the CherryBerry Purchase Agreement, U-Swirl purchased certain assets of CherryBerry used in its business of franchising frozen yogurt cafés, including all of its franchise rights and one company-owned café. The assets were acquired for approximately $4.25 million in cash and 4 million shares of U-Swirl common stock. U-Swirl also entered into an Asset Purchase Agreement with Yogli Mogli LLC, which was the franchisor of self-serve frozen yogurt cafés branded as “Yogli Mogli”. Pursuant to the Yogli Mogli Purchase Agreement, U-Swirl purchased certain assets of Yogli Mogli used in its business of franchising frozen yogurt cafés, including all of its franchise rights and four company-owned cafés. The assets were acquired for approximately $2.15 million in cash and $200,000 in shares of U-Swirl common stock. The Yogli Mogli Purchase Agreement contains customary representations and warranties, covenants and indemnification obligations.

On February 20, 2014 U-Swirl entered into an Asset Purchase Agreement to acquire the business assets of Fuzzy Peach Franchising, LLC. The acquisition of all intellectual property and worldwide franchise and license rights includes the rights associated with 17 Fuzzy Peach Frozen Yogurt stores. U-Swirl purchased the Fuzzy Peach Franchising, LLC assets for $481,000 in cash paid at the time of closing, plus an earn-out that could increase the purchase price by up to another $349,000 based upon royalty income generated by Fuzzy Peach stores over the next twelve months.

The Company completed these acquisitions because the self-serve frozen yogurt market is extremely fragmented, and the Company believes successful consolidators will dominate the industry within a few years. The Company believes the self-serve frozen yogurt industry offers the potential for above-average investment returns, and the Company’s investment in U-Swirl is predicated upon working closely with management to identify attractive growth opportunities that are compatible with the geographical and operational requirements for long-term success.

The Company preliminarily estimated the fair value consideration paid, contingent consideration, the assets acquired and liabilities assumed and allocated a portion of the total purchase consideration to tangible and identifiable intangible assets acquired and liabilities assumed based on their respective estimated fair values at the acquisition date. The excess of the total purchase consideration over the aggregate estimated fair values was recorded as goodwill. Goodwill represents the synergies that the Company believes will arise from the acquisition transactions. All of the goodwill generated in this acquisition is deductible for tax purposes. The following table summarizes the preliminary allocation of the purchase price to the fair value of the assets acquired and liabilities assumed:

	CherryBerry		Yogli Mogli			Fuzzy Peach		Total
Assets acquired	$	7,310,000	$	2,420,500		$	481,000	$	10,211,000
Lease liabilities assumed		-		(58,000	)		-		(58,000	)
Total purchase price	$	7,310,000	$	2,362,500		$	481,000	$	10,153,500

Included in the preliminary purchase price allocation is a provisional amount related to the fair value of the U-Swirl common stock issued as consideration for the acquisitions and a preliminary valuation of the contingent consideration of the $0.50 guaranteed value of the U-Swirl common stock. The preliminary fair value of the securities was based on the trading market value of the stock; however, the trading market price may not be indicative of the fair value of our common stock because the stock has a low level of trading activity. As such, we will perform additional valuation procedures to determine if the trading market value of the U-Swirl common stock is representative of its fair value on the acquisition date. U-Swirl is in the process of completing procedures to determine the fair value of the common stock issued and the contingent consideration, which may result in adjustments to goodwill. The Company expects to finalize the purchase price allocation during fiscal 2015.

The assets acquired were made up of the following during the years ended February 28, 2014:

	CherryBerry		Yogli Mogli		Fuzzy Peach		Total
Café store assets	$	261,000	$	1,003,000	$	-	$	1,264,000
Trademarks		405,000		156,000		-		561,000
Franchise rights		3,615,000		1,201,000		481,000		5,297,000
Non-competition agreements		23,000		6,000		-		29,000
Goodwill		3,006,000		54,500		-		3,060,500
Total assets acquired	$	7,310,000	$	2,420,500	$	481,000	$	10,211,000

The consideration for the purchase price was made up the following assets during the year ended February 28, 2014:

	CherryBerry		Yogli Mogli		Fuzzy Peach		Total
Common stock – U-Swirl, Inc.	$	3,060,000	$	212,500	$	-	$	3,272,500
Cash		4,250,000		2,150,000		481,000		6,881,000
Total consideration paid	$	7,310,000	$	2,362,500	$	481,000	$	10,153,500

As a part of these transactions the Company recognized $786,475 as acquisition related costs in the line item “Restructuring and acquisition related charges” on the Income Statement. The value of U-Swirl, Inc. common stock was $0.765 and was determined by averaging the high and the low trading price on the date of the transactions.

Since the date of acquisition, revenue and net income included in our operating results from the acquired companies were as follows:

	CherryBerry		Yogli Mogli
Revenues	$	130,505	$	140,571
Net Income (loss)		54,321		(3,008	)

Supplemental Pro Forma Data (Unaudited)

U-Swirl used the acquisition method of accounting to account for these acquisitions and, accordingly, the results of CherryBerry and Yogli Mogli are included in U-Swirl’s consolidated financial statements for the period subsequent to the date of acquisition. The unaudited supplemental pro forma financial data presented below for the year ended February 28, 2014 and 2013 gives effect to these acquisitions as if they had occurred on March 1, 2012. The supplemental data includes amortization expense related to the acquired intangible assets and transaction costs, such as legal fees, directly associated with the acquisition.

This unaudited supplemental pro forma financial data is presented for informational purposes only and does not purport to be indicative of the results of future operations or the results that would have occurred had the Company completed the acquisition at the beginning of fiscal 2013.

	Year ended February 28, 2014			Year ended February 28, 2013
Pro forma net revenues		10,860,186			10,394,477
Pro forma loss from continuing operations		(747,711	)		(1,715,486	)
Pro forma loss from continuing operations per share (basic)		(0.12	)		(0.28	)