13. ACQUISITION OF CREATIVE RECREATION

3 Months Ended

Mar. 31, 2014

Business Combinations [Abstract]

Business Combination Disclosure [Text Block]

13. ACQUISITION OF CREATIVE RECREATION

On December 13, 2013, we completed the acquisition of certain assets of Kommonwealth, Inc. including the Creative Recreation trademark, a lifestyle footwear brand best known for its popular crossover between athletic sneakers and dress shoes. The total purchase price was $8,722,843 including cash and assumption of certain liabilities. The acquisition was funded by our existing cash balances and funds available under our existing revolving credit facility.

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The acquisition was accounted for under the purchase method of accounting in accordance with ASC 805, Business Combinations, with the excess of the fair market value of the assets acquired and liabilities assumed in excess of the purchase price recorded as a gain on purchase. Based on the purchase price allocation, the purchase price resulted in a gain on purchase. The purchase price allocation is based upon certain estimates made by management with the assistance of an independent, third-party valuation company.

Purchase Price Allocation

We negotiated the respective purchase prices of the assets based on the expected cash flows to be derived from the assets after integration into our existing sourcing and distribution networks. The acquisition purchase price was allocated based on the fair values of the assets acquired and liabilities assumed, which are based on management estimates and the assistance of third-party appraisals. The following table summarizes the estimated fair values of the assets acquired and liabilities assumed.

Purchase Price	$	2,229,000
Allocation of Purchase Price
Accounts receivable		(1,081,764	)
Inventories		(1,162,360	)
Prepaid expenses and deposits		(82,339	)
Property and equipment		(698,355	)
Trademarks		(5,100,000	)
Customer relationships		(1,200,000	)
Total assets acquired		(9,324,818	)
Accounts payable		6,493,843
Net gain on purchase	$	(601,975	)

Intangible assets related to the acquisitions represent the fair value of trademarks and customer relationships. See Note 8 intangible assets.