v3.26.1
Acquisition of the business of Edgewater Recovery Center
 12 Months Ended
Dec. 31, 2025
Business Combination, Asset Acquisition, Transaction between Entities under Common Control, and Joint Venture Formation [Abstract]  
Acquisition of the business of Edgewater Recovery Center

 

  4. Acquisition of the business of Edgewater Recovery Center

 

On October 22, 2024, ARIA Kentucky LLC (ARIA Kentucky”), a wholly owned subsidiary of the Company, Edgewater Recovery Centers, LLC (“ERC”) and John Elam (the ”Seller”), entered into an Asset Purchase Agreement (”APA”) pursuant to which ARIA Kentucky agreed to acquire and ERC agreed to sell to ARIA Kentucky on the closing date (the “Acquisition”), the addiction treatment operations owned by ERC and located in Morehead and Paducah, Kentucky through a purchase of the assets of ERC (the “Acquired Assets”), including; all assets of ERC used in the business of ERC (except for certain specified assets), including but not limited to all current assets existing at the time of closing, all cash balances and rights to receive cash, all equipment, machinery, all warranties related to the business and acquired assets, all intangible personal property, intellectual property, all business inventories, all property leases associated with the business, all assumed contracts, all governmental authorizations; and all information and records, including patient records, as defined in the APA. Certain of the real property associated with the operations of ERC (the “Real Property”) is fully leveraged and requires credit and personal guarantees which the Company is unable to provide. The entities owning the real property were acquired in a separate transaction by BH Properties Fund LLC (“BH Properties”), a company controlled by Mr. Shawn Leon, the Company’s CEO and therefore a related party. BH Properties through its acquired subsidiaries then entered into lease agreements with ARIA Kentucky on an arms-length basis, at market related rates.

 

On January 9, 2025, ARIA Kentucky consummated the Acquisition of the Acquired Assets of ERC. Pursuant to the terms of the APA, at closing ARIA Kentucky paid the Seller $250,000 and assumed certain liabilities related to the Acquired Assets, including trade payables and liabilities under assumed contracts and certain specifically identified liabilities, including a settlement agreement with the United States government and the State of Kentucky and certain obligations as a borrower or guarantor related to banking obligations.

  

The final allocation of assets acquired and liabilities assumed as of December 31, 2025, is as follows:

 

     
  Amount
Purchase price     
Cash  $250,000 
Allocation of purchase price     
Current assets     
Cash  $299,492 
Accounts receivable   723,181 
Other current assets   61,109 
    1,083,782 
Non-current assets     
Property and equipment   651,752 
Customer relationships   2,944,000 
Non-compete agreements   52,000 
Goodwill   3,427,847 
Deposits   15,000 
    7,090,599 
Total Assets acquired  $8,174,381 
      
Current liabilities     
Accrued liabilities  $253,958 
Related party payables   804,372 
    1,058,330 
      
Non-current liabilities     
Bank loans   4,354,044 
Note payable – related party   66,741 
Assumed liability   1,666,306 
Deferred taxation   778,960 
    6,866,051 
Total liabilities assumed  $7,924,381 
      
Net assets acquired  $250,000 

 

Goodwill includes the value of an assembled workforce of $1,358,000. The assembled workforce produced operational synergies for the Company in the Kentucky addiction treatment market. The assembled workforce does not meet the criteria for recognition as a separate identifiable intangible asset.

 

The adjustments made from the provisional purchase price allocation to the final purchase price allocation during the measurement period (January 9, 2025 to January 9, 2026) were; (i) a reduction in accounts receivable acquired of $63,491; (ii) an increase in other current assets of $27,630 related to short-term investments; and (iii) a reduction in related party payables of $183,409, resulting in a net decrease in goodwill initially measured at $3,573,396 and finally recognized as $3,427,847, a reduction of $147,549.

 

The amount of pro forma revenue and earnings which would have been included in the Company’s consolidated statement of operations for the year ended December 31, 2025, and the revenue and earnings of the combined entity had the acquisition date been January 1, 2024, is presented as follows:

 

       
    Revenue   Net income (loss)
Actual for the period from acquisition to December 31, 2025   $ 10,846,266     $ 39,646  
                 
2025 supplemental pro-forma from January 1, 2025 to December 31, 2025   $ 18,940,509     $ (2,176,566 )
                 
2024 supplemental pro-forma from January 1, 2024 to December 31, 2024   $ 16,268,343     $ (2,814,928 )

 

The supplemental pro forma information for the year ended December 31, 2025 was adjusted to exclude (i) non-recurring legal fees of $35,000 incurred on the acquisition of the business of Edgewater and (ii) amortization of intangibles of $4,530 and the tax effect thereon of $1,178.  

 

The supplemental pro forma information for the year ended December 31, 2024 was adjusted to exclude (i) $2,249,633 related to a settlement reached with the Department of Justice by Edgewater and is unrelated to current and future operations and (ii) amortization of intangibles of $206,667 and the tax effect thereon of $53,733.