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NOTE 9 - BUSINESS COMBINATION | 6 Months Ended
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Jun. 30, 2018
Business Combinations [Abstract] |
Business Combination Disclosure [Text Block] | NOTE 9 – BUSINESS COMBINATION On May 31, 2018 SWK acquired certain assets of Info Sys Management, Inc. (“ISM”), a reseller of Sage and Acumatica software, pursuant to an Asset Purchase Agreement for a promissory note in the aggregate principal amount of $1,000,000 (“ISM Note”) and a cash payment of $300,000. The ISM Note is due May 31, 2023 and bears an interest rate of 2% per year. The monthly payments including interest are $17,528. The ISM Note has an optional conversion feature where the Holder may, at its sole and exclusive option, elect to convert, at any time and from time to time, until payment in full of the ISM Note, all of the principal amount of the ISM Note, plus accrued interest, into shares (the “Conversion Shares”) of the Company’s Common Stock, (“Common Stock”), at a price equal to the average closing price of it’s Common Stock for the five (5) trading days immediately preceding the issuance date of the ISM Note (the “Fixed Conversion Price”) which resulted in a $4.03 per share conversion based on the above formula. The purchase 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 five 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. On May 31, 2018 SCS acquired certain assets of Nellnube, Inc. (“NNB”), a business application hosting company, pursuant to an Asset Purchase Agreement for a promissory note (“NNB Note”) in the aggregate principal amount of $400,000. The NNB Note is due on May 31, 2023 and bears an interest rate of 2% per year. The monthly payments including interest are $7,011. The NNB Note has an optional conversion feature where the Holder may, at its sole and exclusive option, elect to convert, at any time and from time to time, until payment in full of the NNB Note, all of the principal amount of the NNB Note, plus accrued interest, into shares (the “Conversion Shares”) of the Company’s Common Stock, (“Common Stock”), at a price equal to the average closing price of it’s Common Stock for the five (5) trading days immediately preceding the issuance date of the NNB Note (the “Fixed Conversion Price”) which resulted in a $4.03 per share conversion based on the above formula. The purchase 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 five 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 summarizes the preliminary purchase price allocation for all current year’s acquisitions:
|  | ISM |  |  | NNB |
Cash consideration |  | $ | 300,000 |  |  | $ | - |
Note payable |  |  | 1,000,000 |  |  |  | 400,000 |
Total purchase price |  | $ | 1,300,000 |  |  | $ | 400,000 |
Deposits and other assets |  | $ | 7,235 |  |  | $ | - |
Property and equipment |  |  | 170,000 |  |  |  | 50,000 |
Customer List |  |  | 1,148,499 |  |  |  | 407,964 |
Total assets acquired |  |  | 1,325,734 |  |  |  | 457,964 |
Capital lease obligations |  |  | (25,734 | ) |  |  | (57,964 | )
Liabilities acquired |  |  | (25,734 | ) |  |  | (57,964 | )
Net assets acquired |  | $ | 1,300,000 |  |  | $ | 400,000 |
The following unaudited pro forma information does not purport to present what the Company’s actual results would have been had the acquisitions occurred on January 1, 2017, nor is the financial information indicative of the results of future operations. The following table represents the unaudited consolidated pro forma results of operations for the three and six months ended June 30, 2018 and 2017 as if the acquisition occurred on January 1, 2017. Operating expenses have been increased for the amortization expense associated with the estimated fair value adjustment as of June 30, 2018 of expected definite lived intangible assets.
Pro Forma |  | Three Months Ended June 30, 2018 |  |  | Three Months Ended June 30, 2017 |
Net revenues |  | $ | 10,525,739 |  |  | $ | 9,589,748 |
Cost of revenues |  |  | 5,967,216 |  |  |  | 5,578,298 |
Operating expenses |  |  | 4,493,274 |  |  |  | 3,880,202 |
Income before taxes |  |  | 65,249 |  |  |  | 131,248 |
Net income |  | $ | 47,581 |  |  | $ | 87,804 |
Basic and diluted income per common share |  | $ | 0.01 |  |  | $ | 0.01 |
Pro Forma |  | Six Months Ended June 30, 2018 |  |  | Six Months Ended June 30, 2017 |
Net revenues |  | $ | 20,866,977 |  |  | $ | 18,673,427 |
Cost of revenues |  |  | 11,747,243 |  |  |  | 10,667,566 |
Operating expenses |  |  | 8,960,470 |  |  |  | 7,629,329 |
Income before taxes |  |  | 144,467 |  |  |  | 359,094 |
Net income |  | $ | 104,181 |  |  | $ | 208,970 |
Basic and diluted income per common share |  | $ | 0.02 |  |  | $ | 0.05 |
The Company’s condensed consolidated financial statements for the three and six months ending June 30, 2018 include the actual results of ISM and NNB since the date of acquisition, May 31, 2018. The three months ended June 30, 2018 pro-forma results above include two months of results of ISM and NNB and for the period ended June 30, 2017 pro-forma results above include three months of actual results for ISM and NNB. The six months ended June 30, 2018 pro-forma results above include five months of results of ISM and NNB and for the period ended June 30, 2017 pro-forma results above include six months of actual results for ISM and NNB. For the three months ending June 30, 2018, there is $52,000 of estimated amortization expense included in the ISM/NNB pro-forma two months results and for the six months ending June 30, 2017, there is $78,000 of estimated amortization expense included in the ISM/NNB pro-forma three months results. For the six months ending June 30, 2018, there is $130,000 of estimated amortization expense included in the ISM/NNB pro-forma five months results and for the six months ending June 30, 2017, there is $156,000 of estimated amortization expense included in the ISM/NNB pro-forma six months results. For the three and six months ended June 30, 2018, the ISM/NNB operations had a net income before taxes of $19,324 which represented one month of operations that was included in the Company’s Condensed Unaudited Consolidated Statement of Income. This consisted of approximately $200,343 in revenues, $75,960 in cost of revenues, and $105,059 in operating expenses.

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- Definition The entire disclosure for a business combination (or series of individually immaterial business combinations) completed during the period, including background, timing, and recognized assets and liabilities. The disclosure may include leverage buyout transactions (as applicable). + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -URI http://asc.fasb.org/topic&trid=2303972 + Details
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