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ACQUISITION OF P2K LABS, INC. | 6 Months Ended
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Mar. 31, 2020
Accounting Policies [Abstract] |
ACQUISITION OF P2K LABS, INC. | On January 31, 2020, the Company, entered into an Agreement with p2k, and its sole stockholder, Amer Tadayon, whereby the Company purchased all of the issued and outstanding shares of p2k in exchange for an aggregate purchase price of cash and equity of $1,688,935. The Transaction closed simultaneously upon the execution of the Agreement by the parties on January 31, 2020. As a result of the Transaction, p2k is now a wholly-owned subsidiary of the Company. Pursuant to the terms of the Agreement, the purchase price was as follows:
| a) | $1,039,500 in cash was paid to the Seller;
| b) | 31,183 restricted shares of the Company’s common stock, valued at $145,000, were issued to the Seller (the “Shares”). The Shares are subject to certain lock-up and leak-out provisions whereby the Seller may sell an amount of Shares equal to ten percent (10%) of the daily dollar trading volume of the Company’s common stock on its principal market for the prior 30 days (the “Leak-Out Terms”);
| c) | $115,500 in cash was paid to an independent third-party escrow where such cash is subject to offset for adjustments to the purchase price and indemnification purposes; and
| d) | 64,516 restricted shares of the Company’s common stock, valued at $300,000, were issued to an independent third-party escrow (the “Holdback Shares”). The Holdback Shares will be released to Seller once p2k achieves certain revenue milestones for the future performance of p2k. The Holdback Shares will also be subject to the Leak-Out Terms once they are released from escrow 12 months from closing. The Shares and Holdback Shares were deemed to have a fair market value of $4.65 per share which was the closing price of the Company’s common stock on January 31, 2020.
| e) | 26,950 Common Stock options which were deemed to have a fair market value of $88,935 on the date of the closing of the Transaction.
The Company accounted for the acquisition of p2k as an acquisition of a business under ASC 805. The Company determined the fair value of the consideration given to the Seller in connection with the Transaction in accordance with ASC 820 was as follows:
Consideration: |  | Fair Value
Cash |  | $ | 1,155,000
95,699 shares of common stock |  | $ | 445,000
26,950 common stock options |  | $ | 88,935
Total Consideration |  | $ | 1,688,935
The total purchase price was allocated to identifiable assets deemed acquired, and liabilities assumed, of the Company’s acquisition of p2k, based on their estimated fair values as indicated below. The business combination accounting is not yet complete and the amounts assigned to the assets acquired and the liabilities assumed are provisional. Therefore, this may result in future adjustments to the provisional amounts as new information is obtained about the facts and circumstances that existed at the acquisition date.
Purchase Price Allocation: |  |
Customer list |  | $ | 1,045,000
Design and other assets |  | $ | 123,000
Goodwill |  | $ | 642,388
Other assets and liabilities assumed, net |  | $ | (121,453)
Total |  | $ | 1,688,935
The following is the unaudited pro forma information assuming the acquisition of p2k occurred on October 1, 2018:
|  | For the Three Months Ended |  | For the Six Months Ended
|  | March 31, 2020 |  | March 31, 2019 |  | March 31, 2020 |  | March 31, 2019
Net sales |  | $ | 3,716,725 |  |  | $ | 924,906 |  |  | $ | 5,006,806 |  |  | $ | 1,409,906
Net loss |  | $ | (5,970,217 | ) |  | $ | (7,770,325 | ) |  | $ | (7,851,673 | ) |  | $ | (10,044,709)
Loss per common share - basic and diluted |  | $ | (1.15 | ) |  | $ | (1.84 | ) |  | $ | (1.56 | ) |  | $ | (2.52)
Weighted average common shares outstanding - basic and diluted |  |  | 5,188,384 |  |  |  | 4,217,662 |  |  |  | 5,031,749 |  |  |  | 3,980,517
The unaudited pro forma consolidated financial results have been prepared for illustrative purposes only and do not purport to be indicative of the results of operations that actually would have resulted had the acquisition occurred on the first day of the earliest period presented, or of future results of the consolidated entities. The unaudited pro forma consolidated financial information does not reflect any operating efficiencies and cost savings that may be realized from the integration of the acquisition. All transitions that would be considered inter-company transactions for proforma purposes have been eliminated.

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- Definition Disclosure of accounting policy for completed business combinations (purchase method, acquisition method or combination of entities under common control). This accounting policy may include a general discussion of the purchase method or acquisition method of accounting (including for example, the treatment accorded contingent consideration, the identification of assets and liabilities, the purchase price allocation process, how the fair values of acquired assets and liabilities are determined) and the entity's specific application thereof. An entity that acquires another entity in a leveraged buyout transaction generally discloses the accounting policy followed by the acquiring entity in determining the basis used to value its interest in the acquired entity, and the rationale for that accounting policy. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 10 -Section 05 -Paragraph 4 -Subparagraph (a)-(d) -URI http://asc.fasb.org/extlink&oid=6909625&loc=d3e227-128457 Reference 2: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -SubTopic 10 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=84158767&loc=d3e18780-107790 + Details
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