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Summary of Significant Accounting Policies | 12 Months Ended
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Dec. 31, 2020
Summary of Significant Accounting Policies |
Summary of Significant Accounting Policies | Note 2 – Summary of Significant Accounting Policies Basis of Presentation These consolidated financial statements have been prepared by the Company in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and include the accounts of the Company and its consolidated subsidiaries which are directly or indirectly owned by the Company. As a result of the Business Combination, the Company is the acquirer for accounting purposes and ANC Green Solutions I is the acquiree and accounting predecessor. The Company’s financial statement presentation distinguishes the Company’s financial performance into two distinct periods, the period up to the closing date of the Business Combination (labeled “Predecessor”) and the period including and after that date (labeled “Successor”). The Business Combination was accounted for as a business combination using the acquisition method of accounting, and the Successor financial statements reflect a new basis of accounting that is based on the fair value of the net assets acquired. Determining the fair value of the assets acquired and liabilities assumed is judgmental in nature and often involves the use of significant estimates and assumptions. See Note 4 – Business Combinations for a discussion of the estimated fair values of assets and liabilities recorded in connection with the Company’s acquisition of ANC Green Solutions I. As a result of the application of the acquisition method of accounting as of the closing date of the Business Combination, the accompanying consolidated financial statements include a black line division which indicates that the Predecessor and Successor reporting entities shown are presented on a different basis and are therefore, not comparable. The historical financial information of Andover prior to the Business Combination has not been reflected in the Predecessor financial statements as these historical amounts have been determined to be not useful information to a reader of the financial statements. The operations of Andover, until the closing of a business combination, other than income from investments and general and administrative expenses, were nominal. Accordingly, no other activity in the Company was reported for periods prior to October 4, 2019 besides ANC Green Solutions I's operations as Predecessor. Use of Estimates The preparation of the consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosure of contingent liabilities at the date of the financial statements and the reported amounts of expenses during the reporting period. Actual results could differ from those estimates. Management makes estimates that affect certain accounts including deferred income tax assets, accrued expenses, fair value of equity instruments and reserves for any other commitments or contingencies. Any adjustments applied to estimates are recognized in the period in which such adjustments are determined. Principles of Consolidation The Company’s policy is to consolidate all entities in which it has a controlling financial interest. For consolidated entities that are less than wholly owned, the third party’s holding of equity interest is presented as noncontrolling interests in the Company’s consolidated balance sheets and consolidated statement of equity and noncontrolling interest. The portion of net income (loss) attributable to the noncontrolling interests is presented as net income (loss) attributable to noncontrolling interests in the Company’s consolidated statement of operations. The accompanying Successor consolidated financial statements include the accounts of Andover National Corporation and its consolidated subsidiary, ANC Green Solutions I, ANC Potter’s and ANC Smith’s. The accompanying Predecessor consolidated financial statements include the accounts of ANC Green Solutions I and its consolidated subsidiaries, Legg Lawncare, Inc. and Legg SMS Franchising, Inc. All material inter-company balances and transactions have been eliminated. Redeemable Noncontrolling Interest The Company classifies noncontrolling interests that contain an option of the noncontrolling shareholders to require the Company to purchase their interest as redeemable noncontrolling interests within mezzanine equity on the Company’s consolidated balance sheet. Cash and Cash Equivalents The Company considers all cash on hand and in banks, including accounts in book overdraft positions, certificates of deposit and highly liquid investments with maturities of three months or less from the date of purchase to be cash and cash equivalents. As of December 31, 2019, the Company’s cash equivalents included U.S. Treasury Bills with maturities of 90 days or less. Realized and unrealized gains and losses on highly liquid investments classified as cash equivalents are reported in investment income in the consolidated statement of operations. The Company had no cash equivalents as of December 31, 2020. Concentration of credit risk The Company maintains its cash in bank deposit accounts which, at times, may exceed federally insured limits. The Company has not experienced any losses in such accounts and periodically evaluates the credit worthiness of the financial institutions and has determined the credit exposure to be negligible. Concentrations of credit risk with respect to trade accounts receivable are limited due to the number of customers comprising the customer base. During the year ended December 31, 2020 (Successor), the period from October 4, 2019 through December 31, 2019 (Successor) and the period January 1, 2019 through October 3, 2019 (Predecessor), no customer accounted for more than 10% of the Company’s total revenue. Accounts Receivable Accounts receivable are recorded at the invoiced amount and do not bear interest. The Company reserves for all accounts that are deemed to be uncollectible and reviews its allowance for doubtful accounts regularly. The allowance is based on the age of receivables and a specific identification of receivables considered at risk. Account balances are written off against the allowance when the potential for recovery is considered remote. The following table provides a roll forward of the allowance for doubtful accounts:
|  | Successor |  |  | Predecessor
|  | Year Ended |  | October 4, 2019 |  |  | January 1, 2019
|  | December 31, |  | through |  |  | through
|  | 2020 |  | December 31, 2019 |  |  | October 3, 2019
Allowance for doubtful accounts, beginning of period |  | $ | 2,467 |  | $ | — |  |  | $ | 34,976
Bad debt expense |  |  | 24,695 |  |  | 2,467 |  |  |  | —
Allowance for doubtful accounts, end of period |  | $ | 27,162 |  | $ | 2,467 |  |  | $ | 34,976
Prepaid expenses and other current assets Prepaid expenses consist of payments that the Company has made in advance for goods or services to be received in the future. Prepaid expenses primarily consist of payments associated with insurance contracts. Property and Equipment Property and equipment, stated at cost, are depreciated using the straight-line method over the estimated useful life of the asset, or for leasehold improvements, over the shorter of the estimated useful life or the lease term. As of December 31, 2020 and 2019, the estimated useful lives (in years) of each of the Company’s classes of property and equipment were as follows:
|  | Useful Lives
|  | (in years)
Vehicles |  | 5-10
Equipment |  | 5-7
Buildings |  | 15
Leasehold improvements |  | 5
Office equipment |  | 5-7
Equipment replacement, maintenance and repair costs, which do not extend the lives of the assets, are charged to operating expense as incurred. Impairment of Long-Lived Assets Long-lived assets, which include property and equipment, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The Company considers the following to be some examples of important indicators that may trigger an impairment review: (i) historical, current and/ or projected operating or cash flow losses associated with the use of the asset; (ii) significant changes in the extent or manner in which the assets are used; (iii) significant changes in the business climate in which the assets are used, such as negative industry or economic trends, or increased competitive pressures; (iv) a significant decline in the market price of the asset; and (v) legal or regulatory changes. The Company evaluates assets for potential impairment indicators at least annually and more frequently upon the occurrence of such events. The Company does not test for impairment in the year of acquisition of premises and equipment, so long as those premises and equipment are acquired from unrelated third parties. The Company assesses the recoverability of its long-lived assets by comparing the projected undiscounted net cash flows associated with the related long-lived asset or group of long-lived assets over their remaining estimated useful lives against their respective carrying amounts. In cases where estimated future net undiscounted cash flows are less than the carrying value, an impairment loss is recognized equal to an amount by which the carrying value exceeds the fair value of the asset or asset group. Fair value is generally determined using the assets expected future discounted cash flows or market value, if readily determinable. If long- lived assets are determined to be recoverable, but the newly determined remaining estimated useful lives are shorter than originally estimated, the net book values of the long-lived assets are depreciated and amortized prospectively over the newly determined remaining estimated useful lives. Leases (Successor) The Company accounts for its leases under Accounting Standard Codification (“ASC”) Topic 842, Leases. The Company determines if an arrangement is a lease at inception. Operating leases are included in right-of-use (“ROU”) assets and lease liabilities on the consolidated balance sheets. Lease ROU assets and operating lease liabilities are initially recognized based on the present value of the future minimum lease payments over the lease term at commencement date calculated using the Company’s incremental borrowing rate applicable to the lease asset, unless the implicit rate is readily determinable. ROU assets also include any lease payments made at or before lease commencement and exclude any lease incentives received. The Company’s lease terms may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option. Lease expense for minimum lease payments is recognized on a straight-line basis over the lease term. The Company accounts for lease and non-lease components as a single lease component for all its leases. The Company does not recognize ROU assets and lease liabilities that arise from leases with an original term of 12 months or less. Rather, the Company recognizes the lease payments associated with these leases on a straight-line basis over the term of the lease. Leases (Predecessor) The Company accounted for leases under ASC 840. The Company recorded rent expense associated with its operating leases on a straight-line basis over the term of the lease. Goodwill and Intangible Assets (Successor) Goodwill. Goodwill represents the excess acquisition cost over the fair value of the net tangible and intangible assets acquired. Goodwill is not amortized and is subject to annual impairment testing on or between annual tests if an event or change in circumstance occurs that would more likely than not reduce the fair value of a reporting unit below its carrying value. In testing for goodwill impairment, the Company has the option to first assess qualitative factors to determine whether the existence of events or circumstances lead to a determination that it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If, after assessing the totality of events and circumstances, the Company concludes that it is not more likely than not that the fair value of a reporting unit is less than its carrying amount, then performing the two-step impairment test is not required. If the Company concludes otherwise, the Company is required to perform the two-step impairment test. The goodwill impairment test is performed at the reporting unit level by comparing the estimated fair value of a reporting unit with its respective carrying value. If the estimated fair value exceeds the carrying value, goodwill at the reporting unit level is not impaired. If the estimated fair value is less than the carrying value, further analysis is necessary to determine the amount of impairment, if any, by comparing the implied fair value of the reporting unit’s goodwill to the carrying value of the reporting unit’s goodwill. Intangible Assets. Intangible assets deemed to have finite lives are amortized on a straight-line basis over their estimated useful lives, where the useful life is the period over which the asset is expected to contribute directly, or indirectly, to the Company’s future cash flows. Intangible assets are reviewed for impairment on an interim basis when certain events or circumstances exist. For amortizable intangible assets, impairment exists when the carrying amount of the intangible asset exceeds its fair value. At least annually, the remaining useful life is evaluated. Business Combinations (Successor) The Company applies the provisions of Accounting Standard Codification (“ASC”) Topic 805, Business Combinations, in the accounting for acquisitions. ASC 805 requires the Company to recognize separately from goodwill the assets acquired and the liabilities assumed at their acquisition date fair values. Goodwill as of the acquisition date is measured as the excess of consideration transferred over the net of the acquisition date fair values of the assets acquired and the liabilities assumed. While the Company uses its best estimates and assumptions to accurately apply preliminary value to assets acquired and liabilities assumed at the acquisition date, where applicable, these estimates are inherently uncertain and subject to refinement. As a result, during the measurement period, which may be up to one year from the acquisition date, the Company records adjustments in the current period, rather than a revision to a prior period. Upon the conclusion of the measurement period or final determination of the values of the assets acquired or liabilities assumed, whichever comes first, any subsequent adjustments are recorded in the consolidated statements of operations. Accounting for business combinations requires management to make significant estimates and assumptions, especially at the acquisition date, including estimates for intangible assets, contractual obligations assumed, restructuring liabilities, preacquisition contingencies, and contingent consideration, where applicable. Although the Company believes the assumptions and estimates made have been reasonable and appropriate, they are based in part on historical experience and information obtained from management of the acquired companies and are inherently uncertain. Unanticipated events and circumstances may occur that may affect the accuracy or validity of such assumptions, estimates, or actual results. Revenue Recognition The Company recognizes revenue from contracts with customers in accordance with ASC Topic 606, Revenue from Contracts with Customers (the “revenue standard”). The core principle of the revenue standard is that a company should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. A good or service is transferred to a customer when, or as, the customer obtains control of that good or service. The following five steps are applied to achieve that core principle:
| · |  | Step 1: Identify the contract with the customer
| · |  | Step 2: Identify the performance obligations in the contract
| · |  | Step 3: Determine the transaction price
| · |  | Step 4: Allocate the transaction price to the performance obligation in the contract
| · |  | Step 5: Recognize revenue when the company satisfies a performance condition
The Company’s revenue is primarily generated from residential and commercial lawn care programs and services. The Company generally recognizes revenue from the sale of services as the services are performed, which is typically ratably over the term of the contract(s), which the Company believes to be the best measure of progress. The Company recognizes revenues as it completes services to its customers in an amount reflecting the total consideration it expects to receive from the customer. The Company determined that for contracts containing multiple performance obligations, stand-alone selling price is readily determinable for each performance obligation. The transaction price will include estimates of variable consideration, such as returns and provisions for doubtful accounts and sales incentives, to the extent it is probable that a significant reversal of revenue recognized will not occur. In all cases, when a sale is recorded by the Company, no significant uncertainty exists surrounding the purchaser’s obligation to pay. The Company also grants franchises to operators in exchange for an initial franchise license fee and continuing royalty payments. Franchise revenue is recognized over the license term as the Company has determined that all obligations under the franchise agreements represent a single performance obligation that is satisfied over time. Cost of services provided Cost of services provided represents costs directly related to the provision of the lawncare programs and services, and include direct labor, materials and equipment depreciation. The Company recognizes the costs of services provided as the associated revenues are recognized. Share-based compensation (Successor) The Company accounts for its share-based compensation arrangements in accordance with ASC Topic 718, Compensation – Stock Compensation, which requires the measurement of compensation expense for all share-based compensation granted to employees and non-employees at fair value on the date of grant and recognition of compensation expense over the related service period. Forfeitures are accounted for as they occur. Share-based awards with graded-vesting schedules are recognized on a straight-line basis over the requisite service period for each separately vesting portion of the award. Net Income (Loss) Per Common Share (Successor) Basic net income (loss) per share is calculated by dividing the net income (loss) applicable to the common stockholders by the weighted average number of shares of common stock outstanding during the reporting periods. Diluted net income (loss) per share includes the effect, if any, from the potential exercise or conversion of securities, such as warrants and restricted stock units that would result in the issuance of incremental shares of common stock. In computing the basic and diluted net loss per share applicable to common stockholders for the year ended December 31, 2020 and for the period October 4, 2019 through December 31, 2019, the weighted average number of shares remains the same for both calculations due to the fact that when a net loss exists, dilutive shares are not included in the calculation as the impact is anti-dilutive. Related Party Transactions The Company accounts for related party transactions in accordance with ASC 850, Related Party Disclosures. A party is considered to be related to the Company if the party directly or indirectly, through one or more intermediaries, controls, is controlled by, or is under common control with the Company. Related parties also include principal owners of the Company, its management, members of the immediate families of principal owners of the Company and its management and other parties with which the Company may deal if one party controls or can significantly influence the management or operating policies of the other to an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests. A party which can significantly influence the management or operating policies of the transacting parties or if it has an ownership interest in one of the transacting parties and can significantly influence the other to an extent that one or more of the transacting parties might be prevented from fully pursuing its own separate interests is also a related party. Fair Value Measurements Fair value measurements are based on the premise that fair value is an exit price representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability. As a basis for considering such assumptions, the following three-tier fair value hierarchy has been used in determining the inputs used in measuring fair value: Level 1‑ Quoted prices in active markets for identical assets or liabilities on the reporting date. Level 2‑ Pricing inputs are based on quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active and model-based valuation techniques for which all significant assumptions are observable in the market or can be corroborated by observable market data for substantially the full term of the assets or liabilities. Level 3‑ Pricing inputs are generally unobservable and include situations where there is little, if any, market activity for the investment. The inputs into the determination of fair value require management’s judgment or estimation of assumptions that market participants would use in pricing the assets or liabilities. The fair values are therefore determined using factors that involve considerable judgment and interpretations, including but not limited to private and public comparables, third-party appraisals, discounted cash flow models and fund manager estimates. Financial instruments measured at fair value are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. Management’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the asset or liability. The use of different assumptions and/or estimation methodologies may have a material effect on estimated fair values. Accordingly, the fair value estimates disclosed or initial amounts recorded may not be indicative of the amount that the Company or holders of the instruments could realize in a current market exchange. As of December 31, 2020 and 2019, the recorded values of cash and cash equivalents, accounts receivable, accounts payable and notes payable, approximate the fair values due to the short-term nature of the instruments. Income Taxes Successor Income taxes are accounted for under the asset and liability method. Deferred income taxes are recorded for temporary differences between financial statement carrying amounts and the tax basis of assets and liabilities. Deferred tax assets and liabilities reflect the tax rates expected to be in effect for the years in which the differences are expected to reverse. A valuation allowance is provided if it is more-likely than not that some or all of the deferred tax assets will not be realized. The Company also follows the provisions of accounting for uncertainty in income taxes which prescribes a model for the recognition and measurement of a tax position taken or expected to be taken in a tax return, and provides guidance on derecognition, classification, interest and penalties, disclosure and transition. In accordance with this guidance, tax positions must meet a more-likely than not recognition threshold and measurement attribute for the financial statement recognition and measurement of tax position. The Company’s policy is to account for income tax related interest and penalties in the provision for income taxes in the accompanying consolidated statements of operations. Predecessor The Predecessor’s subsidiaries were Subchapter S pass-through entities for income tax purposes. Accordingly, the Predecessor was not viewed as a taxpaying entity in any jurisdiction and did not require a provision for income taxes. Segment Information The Company operates under one segment which provides residential and commercial lawncare services. Retirement Plans The Company maintains defined benefit contribution retirement plans for eligible employees under Section 401(k) of the Internal Revenue Code. Participants can make voluntary contributions up the Internal Revenue Service limit of $19,500 ($26,000 for employees 50 years or over) for 2020. The Company contributed approximately $27,000, $6,000 and $5,000 during the year ended December 31, 2020 (Successor), the period October 4, 2019 through December 31, 2019 (Successor) and the period January 1, 2019 through October 3, 2019 (Predecessor), respectively. Recent Issued Accounting Pronouncements In December 2019, the FASB issued ASU No. 2019‑12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes (“ASU 2019‑12”), which is intended to simplify various aspects related to accounting for income taxes. ASU 2019‑12 removes certain exceptions to the general principles in Topic 740 and also clarifies and amends existing guidance to improve consistent application. This guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020, with early adoption permitted. The Company is currently evaluating the impact of this standard on its consolidated financial statements and related disclosures. In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments- Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments ("ASU 2016-13"). This guidance introduces a new model for recognizing credit losses on financial instruments based on an estimate of current expected credit losses. ASU 2016-13 also provides updated guidance regarding the impairment of available-for-sale debt securities and includes additional disclosure requirements. The new guidance is effective for public business entities that meet the definition of a Smaller Reporting Company as defined by the Securities and Exchange Commission for interim and annual periods beginning after December 15, 2022. Early adoption is permitted. The Company is currently evaluating the impact of this standard on its consolidated financial statements and related disclosures. In January 2017, the FASB issued ASU No. 2017-04, Intangibles- Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment ("ASU 2017-04"), which simplifies goodwill impairment testing. This new guidance is effective for public business entities that meet the definition of a Smaller Reporting Company as defined by the Securities and Exchange Commission for annual or interim goodwill impairment tests in fiscal years beginning after December 15, 2022. Early adoption is permitted. The Company is currently evaluating the impact of this standard on its consolidated financial statements and related disclosures.

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