Quarterly report pursuant to Section 13 or 15(d)

BUSINESS COMBINATION

v3.21.2
BUSINESS COMBINATION
9 Months Ended
Sep. 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. At September 30, 2021 and December 31, 2020, the outstanding balances on the BSS Note were $196,948 and $230,000, respectively.

 

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. At September 30, 2021, the outstanding balance on the CTS Note was $112,407. 

 

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 September 30, 2021, the outstanding balance on the PSI Note was $401,322.

 

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:

 

   

Prairie Tech

   

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 nine months ended September 30, 2020 as if the acquisitions occurred on January 1, 2020. For the three and nine months ended September 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

September 30, 2020

 

Net revenues

  $ 10,793,456  

Cost of revenues

    6,352,929  

Operating expenses

    4,320,048  

Income (loss) before taxes

    116,420  

Net income (loss)

    79,629  

Basic and diluted income (loss) per common share

  $ 0.02  

 

Pro Forma

 

Nine Months Ended

September 30, 2021

   

Nine Months Ended

September 30, 2020

 

Net revenues

  $ 31,542,459     $ 32,195,243  

Cost of revenues

    18,286,990       18,720,902  

Operating expenses

    12,750,648       13,438,332  

Income (loss) before taxes

    504,821       42,715  

Net income (loss)

    342,881       81,647  

Basic and diluted income (loss) per common share

  $ 0.07     $ 0.02  

 

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

 

For the nine months ended September 30, 2021 pro-forma results above include six months of results of CTS and five months of PSI. For the nine months ended September 30, 2021, $4,644 of estimated amortization expense and $606 of estimated interest expense is included in the pro-forma results for CTS and $33,126 of estimated amortization and $2,797 of estimated interest expense included for PSI in the pro-forma results.

 

For the three months ended September 30, 2020, there is $10,149 of estimated amortization expense and $979 of estimated interest expense included in the pro-forma results for PT, $6,864 of estimated amortization expense and $5,457,of estimated interest expense included in the pro-forma results for CMS, $8,214 of estimated amortization expense and $1,105,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 $24,844 of estimated amortization expense and $1,822 of estimated interest expense is included in the pro-forma results for PSI.

 

For the nine months ended September 30, 2020, there is $30,447 of estimated amortization expense and $7,231 of estimated interest expense included in the pro-forma results for PT, $20,592 of estimated amortization expense and $16,577,of estimated interest expense included in the pro-forma results for CMS, $24,642 of estimated amortization expense and $3,314 of estimated interest expense included in the pro-forma results for BSS, $13,932 of estimated amortization expense and $1,818 of estimated interest expense is included in the pro-forma results for CTS, and $74,533 of estimated amortization expense and $6,018 of estimated interest expense is included in the pro-forma results for PSI.