v3.20.2

Acquisition of Cheshire Trafford (U.K.) Limited | 9 Months Ended
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Sep. 30, 2020
Business Combinations [Abstract] |
Acquisition of Cheshire Trafford (U.K.) Limited | Note 5 – Acquisition of Cheshire Trafford (U.K.) Limited On August 1, 2018, the Company completed the acquisition of Cheshire Trafford (UK) Limited (“Cheshire Trafford”) pursuant to a Share Purchase Agreement dated as of August 1, 2018 and acquired 100% of the ordinary shares of Cheshire Trafford. Cheshire Trafford acts as a broker for the sale of Lump Sum or Single Premium Insurance Policies and Regular Premium Investment or Insurance Policies that are issued by reputable third-party insurance companies. The purchase consideration for the acquisition of Cheshire Trafford is based on a formula of 2.7 times Cheshire Trafford’s projected annual recurring revenues for the calendar year ending December 31, 2018. We took the gross revenues of Cheshire Trafford for the five months ended May 31, 2018 and annualized those recurring revenues and multiplied those revenues by 2.7 times in arriving at the contractual purchase consideration of $516,795. The purchase consideration is payable in following three installments:
| ● | The first installment of $175,710 has been paid upon closing of the transaction.
| ● | The second installment of $170,542 was due 18 months after the acquisition date which was February 1, 2020. Management is still currently in negotiation with the seller about a possible reduction in the second instalment per the terms of the acquisition agreement.
| ● | The third installment of $170,542 is due 36 months after the acquisition date.
The second and third installments could be reduced (but not increased) in the event that Cheshire Trafford’s trailing or recurring revenues are less than agreed recurring income target of GBP 144,185 during the 12-month period commencing on the Acquisition date; hence these two installments were treated as contingent purchase consideration. Based on the historical data available regarding the recurring/trail revenues of Cheshire Trafford, Management believed that there was a 95% probability that Cheshire Trafford would achieve the recurring income target of GBP 144,185 during the 12-month period ending on July 31, 2019. Hence, the contingent purchase consideration was adjusted to consider this probability factor. (See below for update) To calculate the fair value of the contingent purchase consideration, our Management has discounted the remaining two installments of $341,084 to be paid, at a discount rate of 6% (our borrowing rate for the purpose of acquisitions) to arrive at the present value of $284,298 at the acquisition date. Total fair value of the purchase consideration is as follows:
|  | Fair Value |
Cash payment |  | $ | 175,710 |
Fair value of contingent consideration |  |  | 284,298 |
Total Fair Value of Purchase Consideration |  | $ | 460,008 |
Below table depicts the allocation of fair value of the purchase consideration to the fair value of the net assets of Cheshire Trafford at the acquisition date:
Assets acquired |  | Fair Value |
Cash |  | $ | 4,743 |
Accounts receivable – net |  |  | 6,555 |
Intangibles – customer list |  |  | 342,194 |
Goodwill |  |  | 142,924 |
Property and equipment, net |  |  | 614 |
|  |  | 497,030 |
Liabilities assumed |  |  |  |
Accounts payable and accrued liabilities |  |  | 4,012 |
Due to director of Cheshire Trafford |  |  | 33,010 |
|  |  | (37,022 | )
Purchase consideration allocated |  | $ | 460,008 |
This acquisition was accounted for under the acquisition method of accounting. Accordingly, the Company recognized amounts for identifiable assets acquired and liabilities assumed at their initial estimated acquisition date fair values. During the purchase price measurement period, which may be one year from the business acquisition date, the Company may record adjustments to the assets acquired and liabilities assumed based on completion of valuations. The excess of the purchase consideration over the fair value of assets acquired net of liabilities assumed was initially recognized as the fair value of customer list intangible asset totaling to $485,118. Upon finalizing the fair value of customer list intangible based on the Multi Period Excess Earnings Model, Management believed that fair value of the customer list intangible asset amounted to $342,194 and the remaining $142,924 is recognized as goodwill at December 31, 2018. This intangible asset is amortized on a straight-line basis over a life of 15 years which is the average service duration of a customer that has invested with Cheshire Trafford.
Estimated life of intangibles |  | 15 years |
Fair value of customer list intangible asset at date of acquisition |  | $ | 485,118 |
Fair value adjustment at December 31, 2018 |  |  | (142,924 | )
Adjusted fair value of customer list intangible asset at December 31, 2018 |  | $ | 342,194 |
Amortization charge for 5 months ended December 31, 2018 |  |  | (9,505 | )
Net Book Value at December 31, 2018 |  | $ | 332,689 |
Amortization charge for the period |  |  | (22,813 | )
Net Book Value at December 31, 2019 |  | $ | 309,876 |
Amortization charge for the period |  |  | (17,110 | )
Net Book Value at September 30, 2020 |  | $ | 292,766 |
As at December 31, 2019, the management recalculated the third installment of the purchase price consideration as the recurring income period of 12 months ended on July 31, 2019 based upon the terms of the purchase agreement. Accordingly, the fair value of contingent acquisition payable was reduced, and the Company recorded a gain on revaluation of payable for acquisition of $67,897 during the year ended December 31, 2019. The total amount owed under the purchase agreement was $233,423 as of September 30, 2020.

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- Definition The entire disclosure for a business combination (or series of individually immaterial business combinations) completed during the period, including background, timing, and recognized assets and liabilities. The disclosure may include leverage buyout transactions (as applicable). + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -URI http://asc.fasb.org/topic&trid=2303972 + Details
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