BUSINESS ACQUISITION

12 Months Ended

Dec. 31, 2022

Business Combination and Asset Acquisition [Abstract]

BUSINESS ACQUISITION

NOTE 2 – BUSINESS ACQUISITION

The Company accounted for the acquisitions as a business combinations using the purchase method of accounting as prescribed in Accounting Standards Codification 805, Business Combinations (“ASC 805") and ASC 820 – Fair Value Measurements and Disclosures (“ASC 820"). In accordance with ASC 805 and ASC 820, the Company used its best estimates and assumptions to accurately assign fair value to the tangible assets acquired, identifiable intangible assets and liabilities assumed as of the acquisition dates. Goodwill as of the acquisition date is measured as the excess of purchase consideration over the fair value of tangible and identifiable intangible assets acquired and liabilities assumed. The results of operations of the acquired businesses since the date of acquisition are included in the consolidated financial statements of the Company years ended December 31, 2022 and 2021. The total purchase consideration was allocated to the assets acquired and liabilities assumed at their estimated fair values as of the date of acquisition, as determined by management. The excess of the purchase price over the amounts allocated to assets acquired and liabilities assumed has been recorded as goodwill. The value of the goodwill from the acquisitions described below can be attributed to a number of business factors including, but not limited to, cost synergies expected to be realized and a trained technical workforce.

In conjunction with acquisitions noted below, we used various valuation techniques to determine fair value of the assets acquired, with the primary techniques being discounted cash flow analysis, relief-from-royalty, a form of the multi-period excess earnings and the with-and-without valuation approaches, which use significant unobservable inputs, or Level 3 inputs, as defined by the fair value hierarchy. Inputs to these valuation approaches require significant judgment including: (i) forecasted sales, growth rates and customer attrition rates, (ii) forecasted operating margins, (iii) royalty rates and discount rates used to present value future cash flows, (iv) the amount of synergies expected from the acquisition, (v) the economic useful life of assets and (vi) the evaluation of historical tax positions. In certain acquisitions, historical data is limited, therefore, we base our estimates and assumptions on budgets, business plans, economic projections, anticipated future cash flows and marketplace data.

Akida Holdings LLC

On February 8, 2021 Applied UV, Inc. (the “Company”), entered into an asset purchase agreement (the “APA”) by and among the Company, SteriLumen, Inc., a New York corporation and wholly-owned subsidiary of the Company (the “Purchaser”) and Akida Holdings LLC, a Florida limited liability company (the “Seller”) pursuant to which the Purchaser acquired substantially all of the assets of the Seller and assumed certain of its current liabilities and contract obligations, as set forth in the APA (the “Acquisition”). In the Acquisition, the Purchaser acquired all the Seller’s assets and was assigned its contracts related to the manufacture and sale of the Airocide™ system, originally developed for NASA with assistance from the University of Wisconsin at Madison, that uses a combination of UV-C and a proprietary, titanium dioxide-based photocatalyst that has applications in the hospitality, hotel, healthcare, nursing homes, grocer, wine, commercial buildings, and retail sectors.

The purchase price and purchase price allocation as of the acquisition completion date follows.

Purchase Price:
Cash	$	760,293
Fair market value of common stock issued (1,375,000 shares)		7,122,500
Total Purchase Price, Net of Cash Acquired		7,882,793
Assets Acquired:
Accounts receivable		233,241
Inventory		211,105
Prepaid expenses		285,490
Machinery and equipment		168,721
Customer relationships		539,000
Trade names		1,156,000
Technology and know how		3,468,000
Total Assets Acquired:		6,061,557
Liabilities Assumed:
Accounts payable		(415,341	)
Deferred revenue		(491,702	)
Total Liabilities Assumed		(907,043	)
Net Assets Acquired		5,154,514
Excess Purchase Price “Goodwill”	$	2,728,279

The excess purchase price has been recorded as goodwill in the amount of approximately $2,728,279. The estimated useful life of the identifiable intangible assets (see note 5) is seven to ten years. The goodwill is amortizable for tax purposes.

KES Science & Technology, Inc.

On September 28, 2021, SteriLumen, Inc. completed an Asset Purchase Agreement with KES Science & Technology, Inc. (“KES”), a Georgia corporation.

The purchase price and purchase price allocation as of the acquisition completion date follows.

Purchase Price:
Cash	$	4,299,900
Fair market value of common stock issued (300,000 shares)		1,959,001
Total Purchase Price, Net of Cash Acquired		6,258,901
Assets Acquired:
Accounts receivable		392,367
Inventory		602,746
Prepaid expenses		10,995
Machinery and equipment		36,146
Customer relationships		—
Trade names		914,000
Technology and know how		3,656,000
Total Assets Acquired:		5,612,254
Liabilities Assumed:
Accounts payable		(296,681	)
Capital lease obligations		—
Total Liabilities Assumed		(296,681	)
Net Assets Acquired		5,315,573
Excess Purchase Price “Goodwill”	$	943,328

The excess purchase price has been recorded as goodwill in the amount of $943,328. The estimated useful life of the identifiable intangible assets is ten years (see note 5). The goodwill is amortizable for tax purposes.

Old SAM Partners (Scientific Air)

On October 13, 2021, the Company entered into an asset purchase agreement by and among the Company, SteriLumen, Inc., a New York corporation and wholly-owned subsidiary of the Company (the “Purchaser”) and Old SAM Partners, LLC, a Florida limited liability company (the “Seller”), pursuant to which the Purchaser acquired substantially all of the assets of the Seller, including the assignment of an exclusive distribution agreement. On October 13, 2021 the Seller received, as consideration for the Acquisition (i) $9,500,000 in cash; and (ii) 200,000 shares of the Company’s common stock and (iii) 200,000 unvested shares of the Company’s common stock, which are subject to cancellation if the earnout is not met. On the date of acquisition, the fair market value of the 200,000 vested shares was $5.57 for a total value of $1,114,000. An additional liability was recorded for $886,000 as a result of the agreement calling for additional cash consideration to the extent the share price is below $10 on the free trading date, as defined in the agreement. On December 31, 2021, the share price of our common stock was $2.70 per share and a loss on contingent consideration of  $574,000 was recorded in the consolidated statements of operations and increased the liability to $1,460,000.

The purchase price and purchase price allocation as of the acquisition completion date follows.

Purchase Price:
Cash	$	9,500,000
Fair market value of common stock issued		1,114,000
Contingent consideration based on stock price		886,000
Total Purchase Price, net of cash acquired		11,500,000
Assets Acquired:
Accounts receivable		129,845
Inventory		369,970
Machinery and equipment		1,982
Customer relationships		6,784,000
Patents		1,533,000
Technology and know how		1,217,000
Trade names		326,000
Total Assets Acquired:		10,361,797
Assets Acquired		10,361,797
Excess Purchase Price “Goodwill”	$	1,138,203

The excess purchase price has been recorded as goodwill in the amount of approximately $1,138,203. The estimated useful life of the identifiable intangible assets (see note 5) is ten years. The goodwill is amortizable for tax purposes.

On March 31, 2022, there was a settlement of a dispute that arose during the first quarter of 2022 between both parties regarding certain representations and warranties in the purchase agreement which resulted in a settlement and mutual release agreement where the seller agreed to relinquish any right, title, and interest in the previously issued 400,000 shares. During the three months ended March 31, 2022, the company recorded a loss on change in fair market value of contingent consideration of $240,000 and, as a result of the settlement agreement, the company recorded a gain on settlement of contingent consideration of $1,700,000. The Company also determined that a triggering event had occurred as a result of the settlement agreement. A quantitative impairment test on the goodwill and intangible assets determined that the fair value was below the carrying value and as a result the Company recorded a full goodwill impairment charge of $1,138,203 in the first quarter of 2022. Subsequently, as of December 31, 2022, we evaluated potential triggering events that might be indicators that our definite lived intangibles were impaired. We saw a significant decrease in the number of orders and demand of certain product lines within our disinfectant business segment.

As a result of our evaluation, we determined that the fair value of certain intangible assets were less than the carrying amount as of December 31, 2022. The Company recorded an impairment on intangibles of $5,854,872 in the Consolidated Statements of Operations during the year ended December 31, 2022.

On March 25, 2022, the Company entered into an asset purchase agreement by and among the Company, Munnworks, LLC., a New York Limited Liability Company and wholly-owned subsidiary of the Company (the “Purchaser”) and VisionMark LLC, a New York limited liability company (the “Seller”), pursuant to which the Purchaser acquired substantially all of the assets of the Seller in exchange for the assumption of obligations of buyer under the sublease and sublease guarantee.

The purchase price and purchase price allocation as of the acquisition completion date follows.

Purchase Price:
Cash paid at closing	$	10
Due to landlord		755,906
Total Purchase Price, net of cash acquired		755,916
Assets Acquired:
Accounts receivable, net		636,550
Inventory		176,583
Costs and estimated earnings in excess of billings		181,152
Machinery and equipment		1,100,000
Total Assets Acquired:		2,094,285
Liabilities Assumed:
Billings in excess of costs and earnings on uncompleted contracts		(1,388,838	)
Total Liabilities Assumed		(1,388,838	)
Net Assets Acquired		705,447
Excess Purchase Price “Goodwill”	$	50,469

The excess purchase price has been recorded as goodwill in the amount of approximately $50,469. The goodwill is amortizable for tax purposes.

In connection with the VisionMark LLC acquisition, the Company is obligated to repay $31,057 of past due lease payments per month for the next 36 months commencing on April 1, 2022. The Company recognized a discount and related liability equal to the present value of the past due lease liability, and amortizes the difference between such present value and the liability through interest expense using a rate of 38.7% as per the effective interest rate method over the repayment period. Amortization of discount included in interest expenses was $146,073 for the year ended December 31, 2022.

As of December 31, 2022, the future maturity of the lease liability as of December 31, is as follows:

Years Ended December 31,
2023	$	372,684
2024		372,684
2025		93,174
Total		838,542
Less: Unamortized discount		(216,078	)
Total amount due to landlord		622,464
Less: current portion of amount due to landlord, net of discount		(229,235	)
Total long-term portion of amount due to landlord	$	393,230