Business Combinations

12 Months Ended

Dec. 31, 2021

Note 4 – Business Combinations

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, net of cash acquired	$	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 are 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 consolidated statement of operations for the year ended December 31, 2020 includes revenue of approximately $1.8 million and loss from operations of approximately $0.2 million, including intangible amortization expense, contributed by ANC Potter’s.

In the year ended December 31, 2020, the Company incurred $0.1 million of transaction costs related to the acquisition of ANC Potter’s, which are recorded in general and administrative expenses.

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 December 31, 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, net of cash acquired	$	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 consolidated statement of operations for the year ended December 31, 2020 includes revenue of approximately $3.3 million and income from operations, including amortization expense, of approximately $0.3 million contributed by ANC Smith’s.

During the year ended December 31, 2020, the Company incurred $0.1 million of transaction costs related to the acquisition of ANC Smith’s, which are recorded in general and administrative expenses.

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, as well as 5,129 holdback shares, with a total 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 $0.7 million cash, consisting of $0.5 million paid at closing and a gross potential payout of $0.2 million in deferred consideration.

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 $0.2 million cash, consisting of $0.2 million paid at closing and an aggregate of approximately $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 $1.5 million paid at closing, a $0.4 million promissory note, and transaction expenses of $0.1 million.

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.

After the 2021 quarterly financial statements were issued, the Company received a final valuation report from a third-party valuation firm. After considering the results of that valuation report, the Company has estimated that the fair value of the identifiable intangible assets and property and equipment acquired is $1.8 million and $0.8 million, respectively. As a result, the fair value of the identifiable intangible assets acquired was increased by $1.8 million and the fair value of the property and equipment acquired was increased by $0.1 million, on December 31, 2021, due to this new information, with a corresponding net decrease to goodwill of $2.0 million. In addition, the change to the provisional amount of identifiable intangible assets resulted in an increase in amortization expense and accumulated amortization of $0.1 million, which all relates to the 2021 reporting period. The change to the provisional amount of property and equipment resulted in an increase to depreciation expense and accumulated depreciation of less than $0.1 million, which all relates to the 2021 reporting period.

The following table presents the 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		812
Right-of-use asset		341
Customer relationships		1,427
Tradenames		354
Total assets acquired	$	2,992

Liabilities assumed:
Holdback	$	29
Accounts payable and accrued expenses		91
Contract liability		93
Warranty liability		180
Notes payable		108
Promissory notes		820
Lease liability		341
Deferred cash consideration		247
Non-controlling interest in Zodega subsidiaries		1,951
Total liabilities assumed	$	3,860
Estimated fair value of net assets acquired:	$	(868)

Goodwill	$	2,644

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 year ended December 31, 2021 includes the operations of Zodega Landscape Services, LLC for the period from January 20, 2021, the date of acquisition, to December 31, 2021, the operations of Zodega Landscape Services, LLC - Texas Seasons for the period from January 26, 2021, the date of acquisition, to December 31, 2021, the operations of Zodega Landscape Services, LLC - Greentex Landscaping from February 18, 2021, the date of acquisition, to December 31, 2021, the operations of Zodega Landscape Services, LLC - C.J.’s Yardworks, Inc. from February 19, 2021, the date of acquisition, to December 31, 2021, and the operations of Zodega Landscape Services, LLC - Lillard Lawn & Landscaping, Inc. from March 12, 2021, date of acquisition, to December 31, 2021. The consolidated statement of operations for the year ended December 31, 2021 includes approximately $9.0 million and $3.6 million of revenue and net loss respectively, contributed by ANC Zodega.

During the year ended December 31, 2021, the Company incurred $0.2 million of transaction costs related to the acquisition of ANC Zodega, which are recorded in general and administrative expenses.

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 year ended December 31, 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, January 20, 2021, January 26, 2021, February 18, 2021, February 19, 2021, and March 12, 2021, respectively.

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 purposes of the pro forma disclosures above, the primary pro forma adjustments for the year ended December 31, 2021 include the elimination of transaction costs of approximately $0.2 million, and additional intangible asset amortization of approximately $0.3 million. The primary pro forma adjustments for the year ended December 31, 2020 include the elimination of transaction costs of approximately $0.2 million, and additional intangible asset amortization of $0.1 million.

Year Ended December 31,

Description

Net loss attributable to common shareholders

(8,151,096)

(2,704,897)