Quarterly report pursuant to Section 13 or 15(d)

BUSINESS COMBINATION

v3.21.2
BUSINESS COMBINATION
6 Months Ended
Jun. 30, 2021
Business Combinations [Abstract]  
Business Combination Disclosure [Text Block]

NOTE 10 BUSINESS COMBINATIONS

 

On December 1, 2020, SWK acquired certain assets of Business Software Solutions (“BSS”) pursuant to an Asset Purchase Agreement for a promissory note in the aggregate principal amount of $230,000 (the “BSS Note”).  The BSS Note is due in 60 months from the closing date and bears interest at a rate of two percent (2.0%) per annum.  Monthly payments including interest are $4,031. The purchase price has been allocated to customer list with an estimated life of fifteen years.

 

On April 1, 2021, SWK acquired certain assets of CT-Solution, Inc. (“CTS”) pursuant to an Asset Purchase Agreement for a promissory note in the aggregate principal amount of $130,000 (the “CTS Note”).  The CTS Note is due in 36 months from the closing date and bears interest at a rate of two percent (2.0%) per annum.  Monthly payments including interest are $3,724. The purchase price has been allocated to customer list with an estimated life of fifteen years.

 

On May 1, 2021, SWK acquired certain assets of PeopleSense, Inc. (“PSI”) pursuant to an Asset Purchase Agreement for cash of $145,703, customer deposits related to prepaid time from clients in the amount of $99,938, and the issuance of a promissory note in the aggregate principal amount of $450,000 (the “PSI Note”).  The PSI Note is due in 36 months from the closing date and bears interest at a rate of two percent (2.0%) per annum.  Monthly payments including interest are $12,889. At June 30, 2021, the outstanding balance on the CTS Note was $437,861.

 

The Company expects these acquisitions to create synergies by combining operations and expanding geographic market share and product offerings.

 

The following summarizes the purchase price allocation for the current and prior year acquisitions:

 

   

PT

   

CMS

    BSS    

CTS

   

PSI

(Preliminary)

 
                                         

Cash consideration

  $ 185,000     $ 410     $ -     $ -     $ 145,703  

Note payable

    310,000       170,000       230,000       130,000       450,000  

Total purchase price

  $ 495,000     $ 170,410     $ 230,000     $ 130,000     $ 595,703  
                                         

Deposits and other assets

  $ 32,896     $ -     $ -     $ -     $ -  

Customer List

    406,000       274,115       230,000       130,000       695,641  

Operating Lease Right-of-Use Assets

    64,863       -       -       -       -  

Goodwill

    107,852       13,000       -       -       -  

Total assets acquired

    611,611       287,115       230,000       130,000       695,641  
                                         

Deferred revenue

    (51,748 )     (111,705 )     -       -       (99,938 )

Contingent liability

    -       (5,000 )     -       -       -  

Operating lease liability

    (64,863 )     -       -       -       -  

Net assets acquired

  $ 495,000     $ 170,410     $ 230,000     $ 130,000     $ 595,703  

 

The purchase of PSI was initially allocated, based on the Company’s estimate of fair value, to intangible assets, which are expected to consist primarily of customers lists with an estimated life of seven years. Upon completion of an independent valuation, the allocation of the purchase price to customer lists will be modified with the excess purchase consideration being allocated to goodwill. 

 

The following unaudited pro forma information does not purport to present what the Company’s actual results would have been had the acquisitions of Prairie Technology Solutions Group, LLS (“PT”), acquired July 31, 2020, Computer Management Services, LLC (CMS”), acquired October 1, 2020, Business Software Solutions (“BSS”), acquired December 1, 2020, CT-Solution, Inc. (“CTS”), acquired April 1, 2021, and PeopleSense, Inc. (“PSI), acquired May 1, 2021, occurred on January 1, 2020, nor is the financial information indicative of the results of future operations. The following table represents the unaudited condensed consolidated pro forma results of operations for the three and six months ended June 30, 2020 as if the acquisitions occurred on January 1, 2020. For the three and six months ended June 30, 2020, operating expenses have been increased for the amortization expense of expected definite lived intangible assets and interest on the notes payable.

 

Pro Forma

 

Three Months Ended

June 30, 2021

   

Three Months Ended

June 30, 2020

 

Net revenues

  $ 10,310,241     $ 10,497,605  

Cost of revenues

    5,966,314       5,945,374  

Operating expenses

    4,115,714       4,381,475  

Income before taxes

    221,034       170,757  

Net income

    151,941       154,172  

Basic and diluted income per common share

  $ 0.03     $ 0.03  

 

Pro Forma

 

Six Months Ended

June 30, 2021

   

Six Months Ended

June 30, 2020

 

Net revenues

  $ 21,432,805     $ 21,401,788  

Cost of revenues

    12,116,644       12,367,973  

Operating expenses

    8,521,042       9,118,284  

Income (loss) before taxes

    772,752       (73,705

)

Net income (loss)

    582,910     $ 2,020  

Basic and diluted income (loss) per common share

  $ 0.12     $ (0.00

)

 

The Company’s unaudited condensed consolidated financial statements for the three and six ended June 30, 2021 include the actual results of PT, CMS and BSS.

 

The Company’s unaudited condensed consolidated financial statements for the three months ended June 30, 2021 included the actual results for CTS and actual results for two months for PSI. For three months ended June 30, 2021 pro-forma results above include two months of results for PSI. For the six months ended June 30, 2021 pro-forma results above include three months of results of CTS and four months of PSI. For the three months ended June 30, 2021, there is $8,282 of estimated amortization expense and $699 of estimated interest expense included for PSI in the pro-forma results. For the six months ended June 30, 2021, $4,644 of estimated amortization expense and $606 of estimated interest expense is included in the pro-forma results for CTS and $24,844 of estimated amortization and $2,098 of estimated interest expense included for PSI in the pro-forma results.

 

For the three months ended June 30, 2020, there is $10,149 of estimated amortization expense and $3,126 of estimated interest expense included in the pro-forma results for PT, $6,864 of estimated amortization expense and $5,560,of estimated interest expense included in the pro-forma results for CMS, $8,214 of estimated amortization expense and $1,104,of estimated interest expense included in the pro-forma results for BSS, $4,644 of estimated amortization expense and $606 of estimated interest expense is included in the pro-forma results for CTS, and $24,845 of estimated amortization expense and $2,098 of estimated interest expense is included in the pro-forma results for PSI.

 

For the six months ended June 30, 2020, there is $20,298 of estimated amortization expense and $6,252 of estimated interest expense included in the pro-forma results for PT, $13,728 of estimated amortization expense and $11,120,of estimated interest expense included in the pro-forma results for CMS, $16,428 of estimated amortization expense and $2,209 of estimated interest expense included in the pro-forma results for BSS, $9,288 of estimated amortization expense and $1,212 of estimated interest expense is included in the pro-forma results for CTS, and $49,689 of estimated amortization expense and $4,196 of estimated interest expense is included in the pro-forma results for PSI.