Acquisition

12 Months Ended

Dec. 31, 2017

Business Combinations [Abstract]

Acquisition

Note 3 - Acquisition

On September 1, 2017, the Company entered into and closed an Asset Purchase Agreement (the “Purchase Agreement”) with RWJ Advanced Marketing, LLC (“RWJ”), a Georgia corporation, pursuant to which the Company purchased certain assets from RWJ, including inventory, terminals, licenses and permits and intangible assets, in consideration of $400,000, an aggregate 5,000,000 shares of common stock of the Company, secured promissory note in the amount of $2,600,000, and warrants to purchase 9,000,000 shares of common stock and the assumption of certain liabilities incurred by RWJ after the effective date as set forth in the RWJ Agreement.

The RWJ Warrants are exercisable for a period of five years at a fixed exercise price of $0.50 per share and non-dilutive anti-dilution protection. If, prior to the exercise of the RJW Warrants, the Company (i) declares, makes or issues, or fixes a record date for the determination of holders of common stock entitled to receive, a dividend or other distribution payable in shares of its capital stock, (ii) subdivides the outstanding shares, (iii) combines the outstanding shares (including a reverse stock split), (iv) issues any shares of its capital stock by reclassification of the shares, capital reorganization or otherwise (including any such reclassification or reorganization in connection with a consolidation or merger or and sale of all or substantially all of the Company’s assets to any person), then, notwithstanding any such action the exercise price, and the number and kind of shares receivable upon exercise, in effect at the time of the record date for such dividend or of the effective date of such subdivision, combination or reclassification shall remain fixed so that the holder of the RJW Warrants exercised after such time shall be entitled to receive the number and kind of shares which, if the RJW Warrants had been exercised immediately prior to such time, the holder would have owned upon such exercise and been entitled to receive.

The RWJ Note accrues interest at the rate of 3.5% interest per annum and is payable in full on December 31, 2019. The Company may prepay this note at any time without penalty.

The Company incorporated a wholly-owned subsidiary, UGopherServices Corp., to operate the acquired assets.

The Company entered into this Purchase Agreement to acquire terminals in approximately 15,000 locations by which the Company will deploy its technology.

A summary of the purchase price and the purchase price allocations at fair value is below.

Purchase price
Cash (1)	$	400,000
5,000,000 shares of common stock (2)		1,850,000
Secured promissory note		2,600,000
9,000,000 warrants (3)		3,310,819
	$	8,160,819
Allocation of purchase price
Inventory	$	398,151
Property and equipment		210,200
Leased locations		7,000,000
Goodwill		950,619
Assumed liabilities		(398,151	)
Purchase price	$	8,160,819

(1) – the $400,000 cash was advanced to the Company by Guardian LLC and is included in accounts payable and accrued expenses on the accompanying consolidated balance sheet.

(2) – the fair value of the common stock was calculated based on the closing market price of the Company’s common stock at the date of acquisition.

(3) -- the fair value of the 9,000,000 warrants was determined using the Black-Scholes option pricing model with the following assumptions:

● Expected life of 5.0 years

● Volatility of 250%;

● Dividend yield of 0%;

● Risk free interest rate of 1.73%

The revenue from the acquisition of the RWJ assets included in the results of operations from the date of acquisition on to December 31, 2017 was $9,012,354.

The unaudited pro forma information below present statement of operations data as if the acquisition of the RWJ assets took place on January 1, 2016.

	Years Ended December 31,
	2017			2016
Sales	$	47,072,430			67,960,512
Cost of goods sold		44,750,993			64,603,185
Gross profit		2,321,437			3,357,327
Operating expenses		10,475,603			6,099,401
Loss from operations		(8,154,166	)		(2,742,074	)
Net loss		(11,158,375	)		(2,996,206	)
Loss per share		(0.22	)		(0.12	)