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Asset Acquisition and Related Party Transaction
 3 Months Ended
Apr. 01, 2017
Related Party Transactions [Abstract]  
Asset Acquisition and Related Party Transaction

On March 12, 2017, the Company acquired all of the outstanding equity interests of Healthspan from Robert Fried, Jeffrey Allen and Dr. Charles Brenner (the "Sellers"). Robert Fried is a member of the Board of Directors ("Board") of the Company, a position he has held since July 2015.

 

Upon the closing of, and as consideration for, the acquisition, the Company issued an aggregate of 367,648 shares of the Company’s common stock to the Sellers. The fair value of these shares was approximately $1.0 million based on the closing price of $2.72 per share on March 12, 2017. Also on March 12, 2017, the Company appointed Robert Fried as President and Chief Strategy Officer, effective immediately. Mr. Fried continues to serve as a member of the Board, but resigned as a member of the Nominating and Corporate Governance Committee of the Board.

 

Healthspan was formed in August 2015 to offer and sell finished bottle products that contain NIAGEN® directly to consumers through internet-based selling platforms. NIAGEN® is the leading ingredient the Company currently sells. Prior to the acquisition, the Company has supplied certain amount of NIAGEN® to Healthspan as a raw material inventory in exchange for a 4% equity interest in Healthspan. An additional 5% equity interest was received for granting certain exclusive rights to resell NIAGEN®.

 

The Company acquired the Direct-To-Consumer ("DTC") internet based selling business model that Healthspan has established. Included in the business model acquired is the know-how marketing to date, and the designs and procedures needed to operate a DTC internet based selling business. This transaction was accounted for as an acquisition of assets. An intangible asset of approximately $1.35 million was recorded as a result of this acquisition, which is the difference of consideration transferred and the net amount of assets acquired and liabilities assumed.

 

(A) Consideration transferred     (B) Net amount of assets and liabilities

 

   Fair value    Assets acquired  Fair value
Common Stock $ 1,000,000      Cash and cash equivalents $19,000
Transaction costs 178,000      Trade receivables 11,000
Previously held equity interest 20,000      Inventory 61,000
           
  $ 1,198,000    Liabilities assumed  
         Due to officer (132,000)
         Accounts payable (74,000)
         Credit card payable (30,000)
         Other accrued expenses (3,000)
DTC business model,          
    intangible asset (A) -(B) $ 1,346,000      Net assets $ (148,000)
           

 

The acquired intangible asset is considered to have a useful life of 10 years as we believe the economic benefits from the acquisition will last at least 10 years. The expense is amortized using the straight-line method over the useful life.

 

In cancellation of a loan owed by Healthspan to Mr. Fried prior to the acquisition, the Company repaid $32,500 to Mr. Fried on March 13, 2017 and will also repay $100,000 on March 12, 2018. No interest is to be paid for the outstanding $100,000 due to Mr. Fried.