Business Combination

9 Months Ended

Sep. 30, 2021

Note 4- Business Combination

ANC Green Solutions Potter’s

As described in Note 1, on February 3, 2020, the Company acquired a 60% membership interest in ANC Potter’s for $1.68 million in cash, consisting of approximately $1.5 million paid at closing and $0.147 million in deferred consideration to be paid on the two-year anniversary of the closing of the acquisition.

The following table presents the allocation of the purchase price to the assets acquired and liabilities assumed for the acquisition of ANC Potter’s (in thousands):


Total purchase price	$	1,529

Assets acquired:
Accounts receivable and other current assets	$	107
Property and equipment		234
Right-of-use asset		113
Identifiable intangible assets		1,285
Total assets acquired	$	1,739

Liabilities assumed:
Accounts payable and accrued liabilities	$	84
Lease liability		113
Notes payable		139
Deferred cash consideration		147
Non-controlling interest in ANC Green Solutions- Potters		1,145
Total liabilities assumed	$	1,628
Estimated fair value of net assets acquired:	$	111

Goodwill	$	1,418

The Company identified tradename, customer relationship and non-compete intangible assets. The tradename, customer relationship and non-compete intangible assets will be amortized on a straight-line basis over its estimated useful life (see Note 6).

The goodwill recognized results from such factors as an assembled workforce and management’s industry know-how and is expected to be deductible for income tax purposes.

The ANC Potter’s acquisition resulted in a redeemable noncontrolling interest, which has been classified as mezzanine equity due to the option of the noncontrolling shareholders to require the Company to purchase their interest. The acquisition-date fair value of the noncontrolling interest was determined using a market approach based on the transaction price observed in the ANC Potter’s acquisition.

The nine months ended September 30, 2020 includes the operations of ANC Potter’s for the period from February 3, 2020, the date of acquisition, to September 30, 2020. The consolidated statement of operations for the three months ended September 30, 2020 includes approximately $0.4 million and $0.1 million of revenue and loss from operations, respectively, contributed by ANC Potter’s. The consolidated statement of operations for the nine months ended September 30, 2020 includes approximately $1.3 million and $0.1 million of revenue and loss from operations respectively, contributed by ANC Potter’s.

In the nine months ended September 30, 2020, the Company incurred $0.1 million of transaction costs related to the acquisition of ANC Potter’s.

ANC Green Solutions Smith’s

As described in Note 1, on February 28, 2020, the Company acquired a 60% membership interest in ANC Smith’s for $3.0 million cash, consisting of $2.6 million paid at closing and an aggregate of $0.4 million in deferred consideration, and working capital adjustment, to be paid on the one- and two-year anniversary of the closing of the acquisition. In addition, the ANC Smith’s acquisition agreement provides that the Smith Seller is entitled to an amount, if any, by which the final working capital, as defined in the agreement, delivered by the Smith Seller is greater than the target working capital provided for in the agreement, (the “Smith Working Capital Adjustment”). As of September 30, 2021, the Company settled the Smith Working Capital Adjustment due to Smith Seller for approximately $1.0 million.

The following table presents the allocation of the purchase price to the assets acquired and liabilities assumed for the acquisition of ANC Smith’s (in thousands):


Total purchase price	$	1,651

Assets acquired:
Accounts receivable and other current assets	$	167
Property and equipment		1,117
Identifiable intangible assets		1,537
Total assets acquired	$	2,821

Liabilities assumed:
Accounts payable and accrued liabilities	$	80
Deferred cash consideration		1,276
Non-controlling interest in ANC Green Solutions - Smith		2,000
Total liabilities assumed	$	3,356
Estimated fair value of net assets acquired:	$	(535)

Goodwill	$	2,186

The Company identified tradename, customer relationship and non-compete intangible assets. The tradename, customer relationships and non-compete intangible assets will be amortized on a straight-line basis over its estimated useful life (see Note 6).

The goodwill recognized results from such factors as an assembled workforce and management’s industry know-how and is expected to be deductible for income tax purposes.

The ANC Smith’s acquisition resulted in a redeemable noncontrolling interest, which has been classified as mezzanine equity due to the option of the noncontrolling shareholders to require the Company to purchase their interest. The acquisition-date fair value of the noncontrolling interest was determined using a market approach based on the transaction price observed in the acquisition of ANC Smith’s.

The nine months ended September 30, 2020 includes the operations of ANC Smith’s for the period from February 28, 2020, the date of acquisition, to September 30, 2020. The consolidated statement of operations for the three and nine months ended September 30, 2020, includes revenue of approximately $1.0 million and $2.2 million, respectively, and net income, including amortization expense, of approximately $0.2 million in both periods contributed by ANC Smith’s.

In the nine months ended September 30, 2020, the Company incurred $0.1 million of transaction costs related to the acquisition of ANC Smith’s.

ANC Zodega and subsidiaries

As described in Note 1, on January 20, 2021, the Company acquired a 51% membership interest in ANC Green Solutions- Zodega, in exchange for consideration of 46,161 shares of the Company’s Class A common stock, with a value of approximately $0.6 million.

On January 26, 2021, the Company’s subsidiary ANC Green Solutions- Zodega acquired all of the assets and property of Texas Seasons Corporation through the Company’s indirect subsidiary and ANC Zodega’s wholly-owned subsidiary Zodega Landscape Services, LLC for $0.8 million cash, consisting of $0.5 million paid at closing and an aggregate of $0.3 million in deferred consideration to be paid on the one-two-and three year anniversary of the closing of the acquisition.

On February 18, 2021, the Company’s subsidiary ANC Green Solutions- Zodega acquired all of the assets and property of Greentex Landscaping Inc., through the Company’s indirect subsidiary and ANC Zodega’s wholly-owned subsidiary Zodega Landscape Services,

LLC for $0.3 million cash, consisting of $0.2 million paid at closing and an aggregate of $0.1 million in deferred consideration to be paid on the one-two-and three year anniversary of the closing of the acquisition.

On February 19, 2021, the Company’s subsidiary ANC Green Solutions- Zodega acquired all of the assets and property of C.J.’s Yardworks, Inc. through the Company’s indirect subsidiary and ANC Zodega’s wholly-owned subsidiary Zodega Landscape Services, LLC for $2.0 million, consisting of $1.6 million paid at closing and a $0.4 million promissory note.

On March 12, 2021, the Company’s subsidiary ANC Green Solutions- Zodega acquired all of the assets and property of Lillard Lawn & Landscaping, Inc. through the Company’s indirect subsidiary and ANC Zodega’s wholly-owned subsidiary Zodega Landscape Services, LLC for $0.8 million, consisting of $0.4 million paid at closing and a $0.4 million promissory note.

The following table presents the preliminary allocation of the purchase price to the assets acquired and liabilities assumed for all of the acquisitions of ANC Zodega and subsidiaries (in thousands):

Purchase Price Allocation- Zodega and subsidiaries


Stock purchase price	$	564
Cash purchase price, net of cash acquired		1,212
Total purchase price	$	1,776

Assets acquired:
Accounts receivable and other current assets	$	58
Property and equipment		738
Right-of-use asset		501
Total assets acquired
	$	1,297
Liabilities assumed:
Holdback	$	29
Accounts payable and accrued expenses		91
Contract liability		93
Warranty liability		180
Notes payable		108
Promissory notes		820
Lease liability		501
Deferred cash consideration		341
Non-controlling interest in Zodega subsidiaries		1,951
Total liabilities assumed	$	4,114
Estimated fair value of net assets acquired:	$	(2,817)

Goodwill	$	4,593

The goodwill recognized results from such factors as an assembled workforce and management’s industry know-how and is expected to be deductible for income tax purposes.

The ANC Zodega acquisition resulted in a noncontrolling interest. The acquisition-date fair value of the noncontrolling interest was determined using a market approach based on the transaction price observed in the ANC Zodega’s acquisition.

The nine months ended September 30, 2021 includes the operations of Zodega Landscape Services, LLC for the period from January 20, 2021, the date of acquisition, to September 30, 2021, the operations of Zodega Landscape Services, LLC - Texas Seasons for the period from January 26, 2021, the date of acquisition, to September 30, 2021, the operations of Zodega Landscape Services, LLC - Greentex Landscaping from February 18, 2021, the date of acquisition, to September 30, 2021, the operations of Zodega Landscape

Services, LLC - C.J.’s Yardworks, Inc. from February 19, 2021, the date of acquisition, to September 30, 2021, and the operations of Zodega Landscape Services, LLC - Lillard Lawn & Landscaping, Inc. from March 12, 2021, date of acquisition, to September 30, 2021. The consolidated statement of operations for the three months ended September 30, 2021 includes approximately $2.9 million and $0.5 million of revenue and net loss, respectively, contributed by ANC Zodega. The consolidated statement of operations for the nine months ended September 30, 2021 includes approximately $6.7 million and $0.3 million of revenue and net loss respectively, contributed by ANC Zodega.

In the three and nine months ended September 30, 2021, the Company recognized $237,269 and $237,269, respectively of transaction costs related to the acquisition of Zodega in general and administrative expenses. In the three months ended March 31, 2021, the Company recognized $130,616 of transaction costs related to the acquisition of Zodega and in the three months ended June 30, 2021, the Company inadvertently reversed $130,616 of such transaction costs resulting in a reduction to general and administrative expenses by this amount. The Company should have recognized $237,269 of transaction costs in the three months ended March 31, 2021 and $0 transaction costs for each of the three months ended June 30, 2021 and September 30, 2021. The Company corrected this error in the statement of operations for the three months ended September 30, 2021 as the Company concluded that the error was not material to any previously issued financial statements or to the financial statements for the three months ended September 30, 2021.

Unaudited Pro forma Financial Information

The following unaudited proforma financial information presents the combined results of operations of the Company and gives effect to the ANC Potter’s, ANC Smith’s and ANC Zodega and Subsidiaries’ acquisitions discussed above for the three and nine months ended September 30, 2020, as if the acquisitions had occurred as of the beginning of the first period presented instead of on February 3, 2020, February 28, 2020 and January 20, 2021, respectively.

The following unaudited proforma financial information presents the combined results of operations of the Company and gives effect to the ANC Zodega and Subsidiaries’ acquisitions discussed above for the three and nine months ended September 30, 2021, as if the acquisition had occurred as of the beginning of the first period presented instead of on January 20, 2021.

The pro forma financial information is presented for illustrative purposes only and is not necessarily indicative of the results of operations that would have been realized if the ANC Potters, ANC Smith and ANC Zodega and Subsidiaries’ acquisition had been completed on January 1, 2020, nor does it purport to project the results of operations of the combined company in future periods. The pro forma financial information does not give effect to any anticipated integration costs related to the acquired company and does not include the pro forma effect of the other business combinations which occurred during the periods presented.

The proforma financial information for the Company, ANC Potter’s, ANC Smith’s and ANC Zodega and Subsidiaries is as follows. Pro forma adjustments for ANC Potter’s and ANC Smith’s are not included in 2021 proforma information as the acquisitions occurred on February 3, 2020 and February 28, 2020, respectively:


	For the Three Months Ended				For the Nine Months Ended
	September 30,				September 30,
Description	2021		2020		2021		2020
Revenues	$	5,292,647	$	4,530,276	$	14,270,411	$	13,419,673
Net loss attributable to common shareholders	$	(1,256,190)	$	(674,740)	$	(2,807,787)	$	(2,109,367)

For purposes of the pro forma disclosures above, the primary adjustments for the nine months ended September 30, 2021 include the elimination of transaction costs of approximately $0.2 million. The primary adjustments for the three and nine months ended September 30, 2020 include the elimination of transaction costs of approximately $0 million and $0.1 million, respectively.