General form of registration statement for all companies including face-amount certificate companies

Business Combination

v3.20.1
Business Combination
12 Months Ended
Dec. 31, 2019
Business Combination [Abstract]  
Business Combination

Note 4 – Business Combination 

 

In January 2018, the Former Parent sold its 18.2% ownership interest in Esports Arena, LLC ("ESA"), to Allied Esports. Simultaneously, Allied Esports paid cash of $1,337,454 to purchase an additional 64.2% interest in ESA, such that Allied Esports owned an aggregate 82.4% controlling interest in Esports Arena. The acquisition was considered a business combination as the assets and the intangible assets acquired represent an integrated set of inputs and processes. 

 

Allied Esports recognized goodwill of $4,337,660, arising from the acquisition, which is due mainly to the strategic nature of the Esports Arena acquisition. The goodwill acquired is expected to be deductible for income tax purposes.  The following table summarizes the fair value of the assets acquired and the liabilities recognized at the acquisition date:

 

Assets acquired:      
Cash   $ 10,353  
Property, plant and equipment     1,975,864  
Customer list     940,000  
Trade names     140,000  
Goodwill     4,337,660  
Other intangibles     22,300  
Total assets acquired     7,426,177  
         
Liabilities assumed:        
Affiliate advances     (3,013,706 )
Accounts payable     (241,716 )
Debt     (120,447 )
Total liabilities assumed     (3,375,869 )
         
Non-controlling interests     (712,854 )
    $ 3,337,454  

 

Allied Esports identified the following intangible assets that meet the criteria for separate recognition apart from the goodwill for financial reporting purposes: 

 

  Customer list in the amount of $940,000, which represents the important relationships with its customers who purchased sponsorships, merchandise, gaming services and rented the facilities, and,
  Trade names in the aggregate amount of $140,000, which includes Esports Arena names, trademarks, and related domain names, which have recognition in the industry.

 

Deconsolidation of ESA

 

In January 2018, Allied Esports entered into a contribution agreement with ESA (the "Contribution Agreement"), whereby Allied Esports committed to contribute $40 million to ESA for the acquisition, construction and development of up to 12 new arenas through January 31, 2020 ("Funding"). 

 

Pursuant to the terms of the Contribution Agreement, in the event that Allied Esports failed to contribute the minimum funding commitments noted above, Allied Esports would be required to convey a portion of its membership interests in ESA to the minority investors of ESA. Effective August 1, 2018, Allied Esports entered into an amendment to the agreement with the non-controlling interest members of ESA (who are not related parties to Allied Esports) to reduce Allied Esports's ongoing contribution requirements, and accordingly, conveyed a majority of its membership interests in ESA to the minority investors, and only retained a 25% non-voting interest in ESA. Additionally, as part of the amendment, Allied Esports reduced its funding commitment to $1,803,126. As of August 1, 2018, Allied Esports derecognized the assets, liabilities and equity of ESA since Allied Esports no longer had a controlling interest in ESA. See Note 6 – Other Assets for additional details. The deconsolidation of ESA is not considered a discontinued operation, because deconsolidation of ESA does not meet the criteria for discontinued operations under ASC 205-20 "Presentation of Financial Statements, Discontinued Operations".