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2. ACQUISITIONS | 12 Months Ended
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Sep. 30, 2020
Business Combinations [Abstract] |
ACQUISITIONS | On December 20, 2018 (the “Closing”), the Company, and its newly organized wholly-owned subsidiaries AcqCo, LLC and cbdMD LLC, both North Carolina limited liability companies, completed a two-step merger (the “Merger Agreement”) with Cure Based Development. The Merger Agreement provided that AcqCo LLC merged with and into Cure Based Development with Cure Based Development as the surviving entity (the “Merger”), and immediately thereafter Cure Based Development merged with and into cbdMD LLC with cbdMD LLC as the surviving entity (the “Secondary Merger” and collectively with the Merger, the “Mergers”). cbdMD LLC was renamed on April 10, 2019 to CBDI and has continued as a wholly-owned subsidiary of the Company and maintains the operations of Cure Based Development pre-closing. As consideration for the Merger, the Company had a contractual obligation, after approval by our shareholders, to issue 15,250,000 shares of our common stock to the members of Cure Based Development, of which unrestricted voting rights to 8,750,000 of the shares vest over a five year period and are subject to a voting proxy agreement. The Merger Agreement also provides that an additional 15,250,000 shares of our common stock can be issued upon the satisfaction of aggregate net revenue criteria by CBDI, within 60 months following the Closing. The net revenue criteria are: $20.0, $40.0, $80.0 and $160.0 million, in aggregate $300.0 million (See Note 8 for more information). The initial 15,250,000 shares were approved by our shareholders and issued on April 19, 2019. On February 27, 2020, 5,127,792 shares were issued upon satisfaction of aggregate net revenue criteria per the Merger Agreement. The Company owns 100% of the equity interest of CBDI. The valuation and purchase price allocation for the Mergers was finalized at September 30, 2019. The following table presents the final purchase price allocation:
Consideration |  | $ | 74,353,483 |
Assets acquired: |  |  |  |
Cash and cash equivalents |  | $ | 1,822,331 |
Accounts receivable |  |  | 850,921 |
Inventory |  |  | 1,054,926 |
Other current assets |  |  | 38,745 |
Property and equipment, net |  |  | 723,223 |
Intangible assets |  |  | 21,585,000 |
Goodwill |  |  | 54,669,997 |
Total assets acquired |  |  | 80,745,143 |
Liabilities assumed: |  |  |  |
Accounts payable |  |  | 257,081 |
Notes payable – related party |  |  | 764,300 |
Customer deposits - related party |  |  | 265,000 |
Accrued expenses |  |  | 460,979 |
Deferred tax liability |  |  | 4,644,300 |
Total Liabilities assumed |  |  | 6,391,660 |
Net Assets Acquired |  | $ | 74,353,483 |
The goodwill generated from this transaction can be attributed to the benefits the Company expects to realize from the growth strategies the acquired Company had developed and the entry into an emerging market with high growth potential. See Note 8 regarding contingent liability. In connection with the purchase price allocation, the Company recorded a deferred tax liability of approximately $4,644,000, with a corresponding increase to goodwill. The deferred tax liability established upon the Merger was mainly related to the tax effect of the acquired intangible assets from Cure Base Development as there will be no future tax deductions related to the acquired intangibles, and we have identified these as indefinite-lived intangible assets. The Company also acquired estimated net operating loss carryforwards of approximately $1,996,000, Under Internal Revenue Code (IRC) Section 382, the use of net operating loss (“NOL”) carryforwards may be limited to an annual limit if a change in ownership of a company occurs. The company has recently determined that an ownership change has occurred, and the annual Section 382 limit related to these NOLs is $0 - (See Note 17 for more information).

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- Definition The entire disclosure for business combinations, including leverage buyout transactions (as applicable), and divestitures. This may include a description of a business combination or divestiture (or series of individually immaterial business combinations or divestitures) completed during the period, including background, timing, and assets and liabilities recognized and reclassified or sold. This element does not include fixed asset sales and plant closings. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 205 -SubTopic 20 -URI http://asc.fasb.org/subtopic&trid=2122178 Reference 2: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -URI http://asc.fasb.org/topic&trid=2303972 + Details
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