Quarterly report pursuant to Section 13 or 15(d)

Business Combinations

v3.10.0.1
Business Combinations
9 Months Ended
Sep. 30, 2018
Business Combinations [Abstract]  
Business Combination Disclosure [Text Block]
 
Note 4. Business Combinations
 
During 2017, we completed several business acquisitions. We have included the financial results of these business acquisitions in our unaudited condensed consolidated financial statements from their respective dates of acquisition. Goodwill generated from all business acquisitions was primarily attributable to expected synergies from future growth and potential monetization opportunities.
 
All acquisitions have been accounted for as business acquisitions, under the acquisition method of accounting.
 
In connection with respective asset purchase agreements, the Company entered into trademark license agreements to license the trademark used by the underlying MMA business.
 
The Company completed no acquisitions during the nine months ended September 30, 2018.
 
The following acquisitions were completed during 2017:
 
SuckerPunch
 
On January 4, 2017, Alliance MMA acquired the stock of Roundtable Creative, Inc., a Virginia corporation d/b/a SuckerPunch Entertainment, a leading fighter management and marketing company, for an aggregate purchase price of $1,686,347, of which $357,500 was paid in cash, $1,146,927 was paid with the issuance of 307,487 shares of Alliance MMA common stock valued at $3.73 per share, the fair value of Alliance MMA common stock on January 4, 2017, and $181,920 was paid with the issuance of a warrant to acquire 93,583 shares of the Company’s common stock.
 
Fight Time
 
On January 18, 2017, Alliance MMA acquired the mixed martial arts promotion business of Fight Time Promotions, LLC (“Fight Time”) for an aggregate consideration of $371,468, of which $84,000 was paid in cash and $287,468 was paid with the issuance of 74,667 shares of the Alliance MMA’s common stock valued at $3.85 per share, the fair value of Alliance MMA common stock on January 18, 2017.
 
National Fighting Championships
 
On May 12, 2017, Alliance MMA acquired the mixed martial arts promotion business of Undisputed Productions, LLC, doing business as National Fighting Championships or NFC for an aggregate consideration of $506,227, of which $140,000 was paid in cash and $366,227 was paid with the issuance of 273,304 shares of Alliance MMA common stock valued at $1.34 per share, the fair value of Alliance MMA common stock on May 12, 2017.
 
Fight Club Orange County
 
On June 14, 2017, Alliance MMA acquired the mixed martial arts promotion business of The Englebrecht Company, Inc., doing business as Roy Englebrecht Promotions and Fight Club Orange County, for an aggregate consideration of $1,018,710, of which $207,900 was paid in cash and $810,810 was paid with the issuance of 693,000 shares of the Company’s common stock valued at $1.17 per share, the fair value of Alliance MMA common stock on June 14, 2017.
  
Victory Fighting Championship
 
On September 28, 2017, Alliance MMA acquired the mixed martial arts promotion business of Victory Fighting Championship, LLC, doing business as Victory Fighting Championship, for an aggregate consideration of $822,938, of which $180,000 was paid in cash and $642,938 was paid with the issuance of 267,891 shares of the Company’s common stock valued at $2.40 per share, the fair value of Alliance MMA common stock on September 28, 2017.
 
Final Purchase Allocation – SuckerPunch
 
As consideration for the acquisition of SuckerPunch, the Company delivered the following amounts of cash and shares of common stock.
 
 
 
Cash
 
 
Shares
 
 
Warrant

Grant
 
 
Consideration

Paid
 
SuckerPunch
 
$
357,500
 
 
 
307,487
 
 
 
93,583
 
 
$
1,686,347
 
 
In connection with the acquisition, 108,289 shares of the 307,487 shares of common stock that were issued as part of the purchase price were placed into escrow to guarantee the financial performance of SuckerPunch post-closing. Accordingly, if the gross profit was less than $265,000 during fiscal year 2017, all 108,289
shares held in escrow would have been forfeited.  During the third quarter 2018, Management entered a separation agreement with the former owner of SuckerPunch and released the shares held under escrow, and recorded stock based compensation expense of $31,000, the fair value of the shares on the date the agreement was entered.
 
The following table reflects the final allocation of the purchase price for SuckerPunch to identifiable assets, intangible assets, goodwill and identifiable liabilities:
 
 
 
Final Fair Value
 
Cash
 
$
 
Accounts receivable, net
 
 
 
Intangible assets
 
 
210,000
 
Goodwill
 
 
1,522,605
 
Total identifiable assets
 
$
1,732,605
 
Total identifiable liabilities
 
 
(46,258
)
Total purchase price
 
$
1,686,347
 
 
During the three months ended June 30, 2018, the Company recognized an impairment charge of the net intangible assets and goodwill and fully wrote off these assets. The impairment charge is a component of net loss from discontinued operations, net of tax for the nine months ended September 30, 2018.
 
Final Purchase Allocation – Fight Time Promotions
 
As consideration for the acquisition of the MMA promotion business of Fight Time, the Company delivered the following amounts of cash and shares of common stock.
 
 
 
Cash
 
 
Shares
 
 
Consideration

Paid
 
Fight Time
 
$
84,000
 
 
 
74,667
 
 
$
371,468
 
 
In connection with the business acquisition, 28,000 shares of the 74,667 shares of common stock that were issued as part of the purchase price were placed into escrow to guarantee the financial performance of Fight Time post-closing. If the gross profit of Fight Time was less than $60,000 during fiscal year 2017, all 28,000 shares held in escrow were to be forfeited. During the first quarter 2018, Management entered a separation agreement with the former owner of Fight Time and released the shares held under escrow.
 
The following table reflects the final allocation of the purchase price for the business of Fight Time to identifiable assets, intangible assets, goodwill and identifiable liabilities:
 
 
 
Final Fair Value
 
Cash
 
$
 
Accounts receivable
 
 
 
Intangible assets
 
 
140,000
 
Goodwill
 
 
231,468
 
Total identifiable assets
 
$
371,468
 
Total identifiable liabilities
 
 
 
Total purchase price
 
$
371,468
 
 
During the year ended December 31, 2017 the Company recognized an impairment charge of the intangible assets and goodwill and fully wrote off these assets.
 
Final Purchase Allocation – National Fighting Championships
 
As consideration for the acquisition of the MMA promotion business of NFC, the Company delivered the following amounts of cash and shares of common stock.
  
 
 
Cash
 
 
Shares
 
 
Consideration

Paid
 
NFC
 
$
140,000
 
 
 
273,304
 
 
$
506,227
 
 
In connection with the business acquisition, 81,991 shares of the 273,304 shares of common stock that were issued as part of the purchase price were placed into escrow to guarantee the financial performance of NFC post-closing. Accordingly, if the gross profit of NFC was less than $100,000 during the 12-month period following the acquisition, all 81,991 shares held in escrow will be
forfeited. The Company is currently in negotiations with the former owner of NFC to dispose of this business
 
The following table reflects the final allocation of the purchase price for the business of NFC to identifiable assets, intangible assets, goodwill and identifiable liabilities:
 
 
 
Final Fair Value
 
Cash
 
$
 
Accounts receivable
 
 
 
Fixed assets
 
 
20,000
 
Intangible assets
 
 
180,000
 
Goodwill
 
 
306,227
 
Total identifiable assets
 
$
506,227
 
Total identifiable liabilities
 
 
 
Total purchase price
 
$
506,227
 
 
In conjunction with the cessation of the MMA operations, the Company wrote off the residual intangible and tangible assets which is included as a component of discontinued operations – loss on disposal, for the nine months ended September 30, 2018.
 
Final Purchase Allocation – Fight Club OC
 
As consideration for the acquisition of the MMA promotion business of Fight Club OC, the Company delivered the following amounts of cash and shares of common stock.
 
 
 
Cash
 
 
Shares
 
 
Consideration

Paid
 
Fight Club OC
 
$
207,900
 
 
 
693,000
 
 
$
1,018,710
 
 
Among the assets purchased is a cash balance of $159,000 related to customer deposits on ticket sales for future 2017 MMA promotion events. 
In connection with the business acquisition, 258,818 shares of the 693,000 shares of common stock that were issued as part of the purchase price were placed into escrow to guarantee the financial performance of Fight Club OC post-closing. Accordingly, in the event the gross profit of Fight Club OC was less than $148,500 during the 12-month period following the acquisition, all 258,818
shares held in escrow would have been forfeited. In conjunction with the settlement with the former owner of Fight Club OC, Roy Englebrecht, the shares held in escrow were released as part of the separation agreement. The Company recorded stock based compensation expense of $55,000, the fair value of the shares on the date the agreement was entered.
 
The following table reflects the final allocation of the purchase price for the business of the Fight Club OC to identifiable assets, intangible assets, goodwill and identifiable liabilities, and preliminary pro forma intangible assets and goodwill:
 
 
 
Final Fair Value
 
Cash
 
$
159,000
 
Accounts receivable
 
 
 
Intangible assets
 
 
270,000
 
Goodwill
 
 
748,710
 
Total identifiable assets
 
$
1,177,710
 
Total identifiable liabilities
 
 
(159,000
)
Total purchase price
 
$
1,018,710
 
 
In conjunction with the cessation of the MMA operations, the Company wrote off the residual intangible and tangible assets which is included as a component of discontinued operations – loss on disposal, for the nine months ended September 30, 2018.
 
Final Purchase Allocation – Victory Fighting Championship
 
As consideration for the acquisition of the MMA promotion business of Victory, the Company delivered the following amounts of cash and shares of common stock.
 
 
 
Cash
 
 
Shares
 
 
Consideration

Paid
 
Victory Fighting Championship
 
$
180,000
 
 
 
267,891
 
 
$
822,938
 
 
In connection with the business acquisition, 121,699 shares of the 267,891 shares of common stock that were issued as part of the purchase price were placed into escrow to guarantee the financial performance of Victory post-closing. Accordingly, in the event the gross profit of Victory is less than $140,000 during the 12-month period following the acquisition, all 121,699
shares held in escrow would have been forfeited.
Additionally, 146,192
shares were placed into a separate escrow to indemnify the Company for potential additional expenses incurred by Victory prior to the acquisition and to cover any uncollectible accounts receivable. During the third quarter 2018, Management entered a separation agreement with the former owner of Victory and released the shares held under escrow, and recorded stock based compensation expense of $35,000, the fair value of the shares on the date the agreement was entered.
 
The following table reflects the final allocation of the purchase price for the business of Victory to identifiable assets, intangible assets, goodwill and identifiable liabilities:
 
 
 
Final Fair Value
 
Cash
 
$
 
Accounts receivable
 
 
32,180
 
Fixed assets
 
 
30,000
 
Intangible assets
 
 
290,000
 
Goodwill
 
 
578,167
 
Total identifiable assets
 
$
930,347
 
Total identifiable liabilities
 
 
(107,409
)
Total purchase price
 
$
822,938
 
  
In conjunction with the cessation of the MMA operations, the Company wrote off the residual intangible and tangible assets which is included as a component of discontinued operations – loss on disposal, for the nine months ended September 30, 2018.