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Asset Purchase
 3 Months Ended
Mar. 31, 2015
Business Combinations [Abstract]  
Asset Purchase

Note 3 – Asset Purchase

 

On January 22, 2015 (the “Closing Date”), the Company entered into an Asset Purchase Agreement (the “Purchase Agreement”) with Factor Nutrition Labs, LLC, a Delaware limited liability company (the “Seller”), Vita Partners, LLC, RPR Partners, LLC, and Thor Associates, Inc. (each a “Principal Owner”). Pursuant to the Purchase Agreement, the Company purchased all of the assets of the Seller’s line of business and products called FOCUS Factor (the product plus the business related to the product is collectively referred to as the “Focus Factor Business”) and assumed the accounts payable and contractual obligations of the Focus Factor Business for an aggregate purchase price of $6.0 million, with $4.5 million paid on the Closing Date, and $750,000 to be paid on or before January 20, 2016 and an additional $750,000 to be paid on or before January 20, 2017.

 

The Purchase Agreement contains customary representations and warranties and covenants by each party. The Purchase Agreement contains customary indemnification provisions in favor of the Company, including, subject to certain limitations, whereby the Seller and each of the Principal Owners agree to indemnify the Company and its affiliates for any losses arising out of any breach of their representations or warranties and any breach or failure to perform of their covenants under the Purchase Agreement, among others.

 

The Purchase Agreement also provides that during the period beginning on the Closing Date and ending on the fifth anniversary of the Closing Date (the “Restricted Period”), the Seller, the Principal Owners (other than Thor Associates, Inc.), and their respective affiliates agree to not, among other things, (i) compete against the Focus Factor Business, (ii) solicit any employee or consultant providing services in connection with the Focus Factor Business (a “Covered Employee”), (iii) hire any former Covered Employee who left employment or retention by the Company within one year of such departure, or (iv) solicit any customer or supplier of the Company who was a customer or supplier within the two years prior to the solicitation to the extent such business is similar to the business conducted by such customer or supplier with the Company.

 

The Company has accounted for this transaction under the acquisition method of accounting. Under the acquisition method of accounting, the total acquisition consideration price is allocated to the assets acquired and liabilities assumed based on their preliminary estimated fair values. The Company expects the purchase price allocations for the acquisition of FOCUS Factor Business to be completed by September 30, 2015. The preliminary allocation of the purchase price to the assets acquired and liabilities assumed based on the estimated fair values is as follows:

 

Assets        
Accounts Receivable   $ 2,926,369  
Inventory     67,113  
Intellectual Property     1,000,000  
Non-compete provision     50,000  
Non-solicitation provision     50,000  
Intangible assets-Customer relationships     1,941,030  
Goodwill     1,798,047  
Liabilities        
Accounts Payable     (891,113 )
Accrued Expenses     (941,446 )
    $ 6,000,000  

 

The Customer relationships, the non-compete and the non-solicitation provisions will be amortized over their estimated useful lives of 5 years.

 

Pro forma Results of Operations. The historical operating results of FOCUS Factor Business prior to its acquisition date have not been included in the Company's historical consolidated operating results. Pro forma results of operations data (unaudited) for the years ended December 31, 2014 and 2013, as if the acquisition had occurred on January 1, 2013, are as follows:

 

    December 31,  
    2014     2013  
Revenue   $ 12,695,295     $ 10,629,171  
Net income (loss)     (183,471 )      932,209  

 

Pro forma revenue amount above does not include adjustment/reductions relating to certain discounts, coupons and placement fees and is presented gross.

 

The amounts of revenue and earnings of FOCUS Factor Business since the acquisition date included in the unaudited condensed consolidated statement of operations for the three months ended March 31, 2015 are approximately $1,599,132 and $(2,418,752), respectively.