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ACQUISITIONS | 9 Months Ended
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Sep. 30, 2022
ACQUISITIONS |
ACQUISITION | NOTE 5 — ACQUISITION On October 29, 2021, ECHG entered into the Avail Transaction to purchase all of the assets, liabilities and rights and interests of Avail for $4,500,000. The purchase was facilitated by an initial payment of $2,500,000 at closing, with the remaining $2,000,000 represented by an installment note (the “Avail Installment Note”) made by ECHG to the seller to be paid out by 12 quarterly payments starting April 1, 2022, of $166,667 each. See Note 14 to our consolidated financial statements for more information on this loan. The Avail Installment Note for the Avail Transaction does not bear interest but the imputed interest rate was determined to be 3.1%. As part of the Avail Transaction, goodwill was preliminarily recorded as $3,491,284, which was the purchase price less the approximate fair value of the net assets purchased. On May 31, 2022, an additional cash payment of $216,988 was made due to certain conditions being met concerning the cash balance upon a certain date. The additional cash payment was not part of the Avail Installment Note of $2,000,000 from the initial closing of the Avail Transaction. The additional cash payment increased goodwill and the purchase price amount by $216,988, thereby increasing goodwill for the Avail Transaction to $3,708,273. On September 30, 2022, a third party valuation company identified $2,736,000 of intangibles as part of the Avail Transaction not initially included in the fair value of Avail’s net assets. The intangibles identified of $2,736,000, decreases goodwill by $2,736,000 to $972,272, as shown in the purchase price allocation table below. The Avail Transaction was initially recorded as preliminary, but with the third party valuation complete, the purchase price allocation below is considered final. The Company’s goodwill is related to the ECHG segment. ECHG has its own separate financial information to perform goodwill impairment testing. The Company will evaluate goodwill based on cash flows for the ECHG segment. For tax purposes, goodwill is amortized and deductible over 15 years. The purchase price allocation of the Avail Transaction is listed below:
|  | Initial |  |  | Final |
Description |  | Allocation |  |  | Allocation |
Assets |  |  |  |  |  |
Cash |  | $ | 988,870 |  |  | $ | 988,870 |
Account receivables |  |  | 395,144 |  |  |  | 395,144 |
Inventories |  |  | 486,736 |  |  |  | 486,736 |
Prepaid expenses |  |  | 93,727 |  |  |  | 93,727 |
Intangible assets - Trademarks/Tradenames |  |  | - |  |  |  | 1,272,000 |
Intangible assets - Customer Relationships |  |  | - |  |  |  | 1,464,000 |
Fixed assets - net |  |  | 247,038 |  |  |  | 247,038 |
Right-of-use assets |  |  | 609,511 |  |  |  | 609,511 |
Other assets |  |  | 13,268 |  |  |  | 13,268 |
Liabilities |  |  |  |  |  |  |  |
Account payables |  |  | (562,778 | ) |  |  | (562,778 | )
Accrued liabilities |  |  | (653,289 | ) |  |  | (653,289 | )
Operating lease liabilities |  |  | (609,511 | ) |  |  | (609,511 | )
Net assets |  |  | 1,008,716 |  |  |  | 3,744,716 |
Goodwill |  |  | 3,491,284 |  |  |  | 972,272 |
Total Purchase Price |  | $ | 4,500,000 |  |  | $ | 4,716,988 |
The following table compares the results of Avail as part of Company’s financial results for the three months ended September 30, 2022, and the Company’s results of operations as if they were combined for the three months ended September 30, 2021:
|  | Consolidated Statement of |  |  |  |
|  | Income |  |  | Proforma Combined |
|  | For the Three Months Ended |  |  | For the Three Months Ended |
|  | September 30, 2022 |  |  | September 30, 2021 |
|  | (unaudited) |  |  | (unaudited) |
Revenue |  | $ | 45,197,686 |  |  | $ | 40,057,210 |
Income from continuing operations |  | $ | 3,381,770 |  |  | $ | 3,496,441 |
Net income |  | $ | 3,317,709 |  |  | $ | 3,432,380 |
Basic net income per common share |  | $ | 0.12 |  |  | $ | 0.13 |
Diluted net income per common share |  | $ | 0.12 |  |  | $ | 0.13 |
The following table compares the results of Avail as part of the Company’s financial results for the nine months ended September 30, 2022, and the Company’s results of operations as if they were combined for the nine months ended September 30, 2021:
|  | Consolidated Statement of |  |  |  |
|  | Income |  |  | Proforma Combined |
|  | For the Nine Months Ended |  |  | For the Nine Months Ended |
|  | September 30, 2022 |  |  | September 30, 2021 |
|  | (unaudited) |  |  | (unaudited) |
Revenue |  | $ | 135,252,502 |  |  | $ | 102,710,504 |
Income from continuing operations |  | $ | 9,957,397 |  |  | $ | 8,424,665 |
Net income |  | $ | 9,812,792 |  |  | $ | 8,280,060 |
Basic net income per common share |  | $ | 0.36 |  |  | $ | 0.31 |
Diluted net income per common share |  | $ | 0.36 |  |  | $ | 0.31 |

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