ACQUISITION |
6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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May 31, 2026 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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| ACQUISITION | NOTE 7 — ACQUISITION On September 16, 2024, the Company entered into a Stock Purchase Agreement (“Purchase Agreement”) to acquire 100% of the equity interests in JAR for a total purchase price of $1,475,000, as specified in the Purchase Agreement. In accordance with the terms of the Purchase Agreement, the Company made an initial payment of $44,250 (“First Payment”) to the escrow account designated in the Purchase Agreement within three days after the Purchase Agreement was signed. The Company subsequently made another payment of $398,250 (“Second Payment”) on October 22, 2024. Following these payments, the transaction terms of the JAR Acquisition were further revised. Following the revisions in the first amendment, the final consideration was reduced to $1,367,169. Pursuant to the second amendment, the stock transfer date was set as October 25, 2024, which is considered the acquisition date for accounting purposes under ASC 805, Business Combinations (“ASC 805”). The Company made two additional payments totaling $899,669 (“Third and Fourth Payments”) after the acquisition date of October 25, 2024 and prior to the transaction’s official closing date of December 3, 2024. The remaining $25,000, which is contractually due within thirty days of the first anniversary of the Fourth Payment, has been accrued and included in the total purchase consideration recognized in connection with the acquisition. The Company and JAR were unrelated parties. There was no common control between the Company and JAR prior to the JAR Acquisition. Immediately after the JAR Acquisition, the Company took control of JAR in accordance with the Purchase Agreement. No former owners of JAR remain in governance or management positions in the Company post-acquisition. Based on the above factors, the Company assessed the appropriate accounting treatment under ASC 805 and concluded that the Company is the accounting acquirer. JAR became a 100% owned subsidiary of the Company after the acquisition date of October 25, 2024. As part of the transaction structure, certain assets and liabilities, including cash, accounts receivable, and outstanding debt, were excluded from the acquisition and remained the responsibility of the sellers of JAR. The Acquisition was accounted for as a business combination using the purchase method of accounting. In accordance with ASC 805, the purchase price was allocated to the acquired assets and assumed liabilities based on their estimated fair values at the acquisition date. The Company completed the initial purchase price allocation for the acquisition of JAR as of October 25, 2024. Assets (vehicles) acquired were recorded at estimated fair values as of the acquisition date based on management’s estimates, available information, and supportable assumptions that management considered reasonable. No liabilities were assumed per the Purchase Agreement. As part of the purchase price allocation, a deferred tax liability (“DTL”) was recognized for the basis difference in the acquired identifiable intangible asset—customer relationships. In accordance with ASC 805-740-25-3, no DTL was recognized for the reported amount of goodwill that is not deductible for tax purposes. The recognition of the DTL related to customer relationships resulted in a corresponding increase in goodwill, as required under ASC 805. Although the Company recognized a portion of DTL and goodwill based on its initial assessment, the valuation process is ongoing, and the final purchase price allocation, including the measurement of goodwill and deferred taxes, may be subject to further adjustments. The Company will continue to evaluate and refine the allocation based on additional information obtained during the measurement period in accordance with ASC 805. The allocation of the purchase price to the major classes of assets as of October 25, 2024 is as follows:
The fair value of customer relationship was determined using assumptions that are representative of those typically used by a market participant in estimating fair value. The fair value of the identified intangible asset, i.e. customer relationship, and its estimated average useful life as of May 31, 2026 are as follows:
Amortization expense was $13,800 and $13,800 for the three months ended May 31, 2026 and May 31, 2025, respectively, and $27,600 and $27,600 for the six months ended May 31, 2026 and May 31, 2025, respectively. |
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