Acquisition of Shanghai Engin Technology Co. Ltd.
|9 Months Ended|
Dec. 31, 2019
|Sales, Contract Assets and Contract Liabilities [Abstract]|
|Acquisition of Shanghai Engin Technology Co. Ltd.||
On December 20, 2019, the Company acquired all of the issued and outstanding shares of Shanghai Engin Digital Technology Ltd. a solar design, development and engineering company and its subsidiary. Engin's expertise in solar technologies provides the Company another green technology to market and develop internationally along side our manufacturing. The acquisition was concluded concurrently with two groups. The first purchase of the 75% interest was acquired for consideration of $5,863,006 (¥41,000,000) upon signing (paid), plus a further $2,142,857 (¥15,000,000) due by March 20, 2020 and a final conditional payment of $2,857,143 (¥20,000,000) by June 30, 2020. The remaining 25% interest was acquired for consideration of 125,000 new shares of the Company (issued after year end), plus a further conditional $285,714 (¥2,000,000) payable by June 30, 2020. The final payments under both agreements are conditional upon the successful testing of a project, which is to be concluded by June 30, 2020.
Total purchase consideration is estimated at $11,421,778, inclusive of the fair value of the conditional payments which have been accrued as the Company believes that the conditions will be met. The 125,000 shares in the Company have been estimated to have a fair value of $368,750 or $2.95 per share at closing, based on the most recent trade.
The results of operations of the acquired business and the fair value of the acquired assets and assumed liabilities are included in the Company's consolidated financial statements with effect from the date of the acquisition. The purchase consideration has been preliminary applied to Cash $2,063,358, other net working capital of Engin of $1,024,147, property and equipment $1,283,699, and intangible assets of $611,683. The residual value of consideration after applying it to the carrying values of assets and liabilities acquired and fair value adjustments, resulted in a goodwill valuation of $6,438,923.
The fair value of the property and equipment, acquired intangible assets and goodwill at December 31, 2019, is provisional pending receipt of the final valuation report for those assets from a third party valuation expert. When determined, it may result in the recognition of additional assets and liabilities as of the acquisition date. The measurement period will not exceed one year from the acquisition date.
Transaction costs, consisting primarily of legal and translation charges, were expensed as incurred. Due to the closing date of the acquisition just prior to the Company's financial reporting period, we have been unable to gather reliable financial information for the acquired companies to present the proforma disclosures of combined revenues, gross profits and net income from operations of the Company and the acquired businesses in accordance with US GAAP. These disclosures will be prepared as part of the year end financial statements. The goodwill paid as part of the acquisition is expected to be tax deductible.