| ACQUISITION |
| 5. |
ACQUISITION |
| |
|
| |
On May 5, 2020,
the Company acquired 100% of the equity interests in Roboro, its exclusive manufacturer in in South Africa in order to reduce
its dependence on third parties for production. As a result of this acquisition, the Company now operates directly its sole
manufacturer in South Africa. |
| |
The
acquisition date fair value of the consideration was $557,566, including $500,000 paid in cash. In addition, Roboro’s
sellers purchased 1,388,889 shares of the Company’s common stock for $500,000 at a contractual price of $0.36 per
share. The fair market value of the common stock of $555,556 was based on the stock’s closing price of $0.40 on
May 5, 2020. The difference between the fair market value and the amount paid, was treated as an additional consideration
for the acquisition.
The
estimated fair value of assets acquired and liabilities assumed on May 5, 2020 is as follows:
|
| |
|
ZAR |
|
|
USD |
|
| Property
and equipment |
|
|
6,130,250 |
|
|
$ |
332,182 |
|
| Goodwill |
|
|
5,899,656 |
|
|
|
319,687 |
|
| Right-of-use asset |
|
|
1,004,385 |
|
|
|
54,425 |
|
| Loan payable |
|
|
(2,261,564 |
) |
|
|
(122,548 |
) |
| Operating lease liability,
current |
|
|
(649,426 |
) |
|
|
(35,191 |
) |
| Operating lease liability,
noncurrent |
|
|
(354,959 |
) |
|
|
(19,234 |
) |
| Other net assets |
|
|
521,258 |
|
|
|
28,245 |
|
| Net Assets |
|
|
10,289,600 |
|
|
$ |
557,566 |
|
| |
The
Company is still in the process of finalizing the working capital adjustments and tax impacts, and therefore, the allocation
of the acquisition consideration is subject to change. |
| |
|
| |
The Company’s
accounting policy for goodwill is as follows: |
| |
|
| |
The
Company allocates any excess purchase price over the fair value of the net tangible and identifiable intangible assets acquired
in a business combination to goodwill. The Company will test its goodwill balance during the third quarter of each year for
impairment or more frequently if indicators are present or changes in circumstances suggest that impairment may exist. The
Company will assess goodwill for impairment at the reporting unit level, which is defined as an operating segment or one level
below an operating segment, referred to as a component. |
| |
|
|