10. Investment in Quest Resource Management Group, LLC

Prior to July 16, 2013, we held a 50% ownership interest in Quest, which Earth911 acquired on August 21, 2008. Subsequent to the purchase of the Quest Interests on July 16, 2013, 100% of the operating activity of Quest was consolidated into the operations of QRHC and reflects the adjustments for the ownership purchase and valuation of goodwill.

On July 16, 2013, we acquired all of the Quest Interests, held by QRG, comprising 50% of the membership interests of Quest. The purchase price for the Quest Interests consisted of 22,000,000 shares of our common stock issued at a fair market value of $2.50 per share based on the closing price of the stock on the date of the transaction and the Sellers Notes in the aggregate principal amount of $22,000,000. The total purchase price of $77,000,000 was paid to the owners of QRG and related parties: the Chief Executive Officer of Quest and the President of Quest. After the close of the transaction, the Chief Executive Officer of Quest became the President, Chief Executive Officer, and member of the Board of Directors of our company.

Concurrently with our acquisition of the Quest Interests, we assigned the Quest Interests to Earth911, our wholly owned subsidiary, which now holds 100% of Quest. We accounted for the acquisition of Quest under ASC Topic 805; thereby, the acquisition accounting for the acquired Quest Interests and the step up basis of the previously owned 50% interest resulted in the following total purchase price for Quest as follows:


Consideration paid for Quest Interest	$	77,000,000
Non-controlling interest in the acquiree at the acquisition date fair value		27,050,000

Total Consideration	$	104,050,000

We primarily employed two methodologies that yielded substantially the same results to determine the fair value of our preexisting equity interest in Quest, which was remeasured as a noncontrolling interest independent of the acquired controlling interest as of the effective date of the acquisition: (i) the amount at which the asset could be bought or sold in a current transaction between willing parties; and (ii) the present value of expected future cash flows of Quest, level 2 and level 3 inputs, respectively. In connection with the fair value adjustment to the Investment in Quest Resource Management Group, LLC due to the acquisition, the Company recorded a gain on investment in Quest Resource Management Group of $23,449,372, the difference between the fair value and the carrying amount of the asset on the date of the acquisition.

The purchase price allocation as of July 16, 2013 for the assets, liabilities, intangibles and goodwill totaling $104,050,000 was as follows:


Net assets and liabilities	$	1,214,804
Customer relationships		12,720,000
Trademarks		6,230,000
Goodwill		83,885,196

	$	104,050,000

The financial condition and operating results of Quest for the relevant periods are presented below:


	Years ended December 31,
	2013			2012
Condensed operating statement information:
Net sales	$	135,211,874		$	130,621,675
Gross profit		10,436,628			12,934,339
Income (loss) from operations		(3,684,856	)		4,005,383
Net income (loss)		(3,788,086	)		3,883,788
Reported as part of the Quest operations for the relevant periods
Equity in Quest Resource Management Group, LLC income
50% ownership interest	$	667,316		$	1,964,540
Consolidated amounts subsequent to July 16, 2013
100% ownership interest
Net sales	$	66,335,172		$	—
Gross margin		4,082,526			—
Income (loss) from operations		(5,075,480	)		—
Net income (loss)		(5,126,033	)		—

The balance sheet of Quest as of December 31, 2012 is present below:


	December 31, 2012
Condensed balance sheet information:
Current assets	$	20,718,638
Long-term assets		2,118,295

Total assets	$	22,836,933

Current liabilities	$	17,925,175
Long-term liabilities		—
Equity		4,911,758

Total liabilities and members’ equity	$	22,836,933

As of December 31, 2013, the condensed balance sheet and the operations reflect the allocation of the purchase price resulting in additional goodwill and intangible assets of $75,985,196 and the related amortization of the intangible assets of $1,608,426 for the period from July 16, 2013 to December 31, 2013, as well as the impairment of goodwill of $26,850,039, partially offset by a gain on the acquired assets of $23,449,372.