Ample Hills Business Acquisition

9 Months Ended

Feb. 28, 2021

Business Combination, Step Acquisition [Abstract]

Ample Hills Business Acquisition

As described in Note 1, the Company closed on the Ample Hills acquisition on July 9, 2020. The Company paid the sellers $1.0 million dollars for assets of Ample Hills. Additionally, the Company paid approximately $0.7 million dollars to certain landlords and vendors of the sellers in exchange for the right to assume the associated leases with such landlords and $125,167 in transaction costs.

In accordance with ASC 805 - Business Combinations, the Company has recognized the assets and liabilities of Ample Hills at fair value with the excess of such values over the fair value of consideration transferred to the seller presented as a bargain purchase gain recognized on the accompanying condensed consolidated statement of operations during the nine months ended February 28, 2021. The foregoing amounts reflect our current estimates of fair value as of the July 9, 2020 acquisition date.

The following table summarizes the Company's preliminary fair value of the assets acquired, and liabilities assumed, as of July 9, 2020, for the Company's acquisition of Ample Hills.

Purchase Price
Cash paid to sellers	$	1,000,000
Cash paid for cure costs		713,404
Total Purchase Price	$	1,713,404
Purchase Price Allocation
Assets Acquired
Right-of-use operating lease assets		10,645,098
Website		26,601
Tradename and trademarks		938,863
Proprietary Recipes		152,006
Security deposits		225,180
Machinery and equipment		581,616
Leasehold improvements		852,848
Inventory		632,100
Total Assets Acquired	$	14,054,312
Liabilities Assumed
Right-of-use operating lease liabilities		10,645,098
Deferred Tax Liability		453,238
Customer Deposits		20,204
Gift card liabilities		35,133
Total Liabilities Assumed	$	11,153,673
Net Assets Acquired		2,900,639
Gain on bargain purchase	$	1,187,235

As a result of additional information obtained during the measurement period about the facts and circumstances that existed as of the acquisition date, the Company recorded a measurement period adjustment during the three months ended November 30, 2020 in the amount of $2,277, which resulted in a reduction in the bargain purchase gain for the nine months ended February 28, 2021 to $1,187,235. The purchase price allocation will be finalized as soon as practicable within the measurement period, but no later than one year following the acquisition date.

Ample Hills was a privately held company that was acquired out of bankruptcy. Management has performed a thorough evaluation of the pre-bankruptcy books and found the records to not be auditable. Therefore, management has engaged a third party consultant to assist in evaluating alternative means by which to provide historic financial data in future periods.

Further, please reference Note 9 for further details regarding the results of the Ice Cream segment.