Note 4. Business Combinations

The Company, through its wholly owned subsidiary, Uroplasty LTD, acquired 100% of the issued share capital in Genesis Medical Holdings LTD (“Genesis”) and its subsidiaries effective July 25, 2017 (the “Genesis acquisition”).

The Genesis acquisition has been accounted for in accordance with Accounting Standards Codification (ASC) Topic 805, "Business Combinations". The terms of the Genesis acquisition include an upfront payment equal to the estimated fair market value of the tangible net assets, approximately $280,000. The terms also include a purchase price for the ongoing business of approximately $556,000, payable at the rate of 5% of Genesis revenue on a monthly basis. In addition, if Genesis achieves revenue of approximately $4.7 million for the twelve months ended March 31, 2019, the Company will pay an additional amount of approximately $134,000. We have determined the likelihood of paying the $134,000 as probable. The note payable and the contingent consideration have been discounted to a net present value equal to approximately $618,000. All conversions between British Pounds and U.S. Dollars were computed using the July 25, 2017 exchange rate of $1.34 per £1.

Under the acquisition method of accounting, the total purchase price was allocated to the net tangible and intangible assets of Genesis based on their fair values at the effective date of the Acquisition. The final allocation is approximately as follows:

Cash and cash equivalents	$	104,373
Accounts receivable		811,034
Inventory		202,410
Property, plant and equipment		172,242
Customer relationships		268,000
Goodwill		400,870
Total assets acquired	$	1,958,929

Accounts payable	$	1,001,885
Deferred tax liability		50,920
Total liabilities assumed	$	1,052,805

Total Purchase Price	$	906,124

Cash paid to Genesis, net of cash acquired of $104,000, totaled approximately $181,000. The remaining purchase price was financed via a note payable and contingent consideration as described above.

Legal costs directly related to the acquisition of approximately $90,000 have been charged directly to operations and are included in general and administrative expense in our Consolidated Statements of Operations for the twelve months ended December 31, 2017.

The goodwill of $400,870 resulting from the acquisition is the excess if the purchase price over the fair value of the net assets acquired. The goodwill primarily reflects the value of enhancing our market opportunity and growth potential in the U.K. None of the goodwill recognized is deductible for income tax purposes as it was a stock acquisition and as such, no deferred taxes have been recorded to goodwill.

The allocation of the purchase price to the net assets acquired and liabilities assumed resulted in the recognition of the following identifiable intangible asset:

		Amount				Weighted Average Life-Years
Customer relationships		$	268,000				3