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NOTE 4 - ACQUISITIONS | 12 Months Ended
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Dec. 31, 2016
Disclosure Text Block Supplement [Abstract] |
Mergers, Acquisitions and Dispositions Disclosures [Text Block] | NOTE 4 - ACQUISITIONS Subsequent to December 31, 2016, through stock and asset purchases, we closed three strategic acquisitions: Personnel Management Systems, Inc., a leading provider of outsourced HR solutions; Corporate Payroll, Inc. (Payroll Division), a leading provider of payroll services; and Payroll Specialties NW, Inc., a leading provider of payroll services. See Note 14- Subsequent Events for more information about the Stock Purchase Agreement and Asset Purchase Agreements. 2016 Acquisition Through the stock and asset purchases described below, we have entered into the human resource management, payroll processing and benefits administration services businesses, which we intend to integrate into our existing AsureForce® product line. Stock Purchase Agreement In March 2016, we acquired all of the issued and outstanding shares of common stock (the “Shares”) of Mangrove Employer Services, Inc. of Tampa, Florida (“Mangrove”). Pursuant to this stock purchase, we acquired the payroll division of Mangrove, which is engaged in the human resource management and payroll processing businesses. The aggregate consideration for the Shares consisted of (i) $11,348 in cash, a portion of which was used to pay certain obligations of Mangrove and (ii) a secured subordinated promissory note (the “Note”) in the principal amount of $6,000, subject to adjustment as provided in the Stock Purchase Agreement. We funded the cash payment with proceeds from our credit agreement with Wells Fargo. The Note bears interest at an annual rate of 3.50% and matures in March 2018, with the first installment of principal due in March 2017 and the second installment of principal due in March 2018. The Stock Purchase Agreement contains certain customary representations, warranties, indemnities and covenants. Details regarding the financing of the acquisition are described in the below Notes Payable table. Transaction costs for this acquisition were $706 and we expensed them as incurred. Asset Purchase Agreement In March 2016, we also acquired substantially all the assets of Mangrove COBRAsource Inc., a benefits administration services business which then was a wholly owned subsidiary of Mangrove. The aggregate consideration for the assets was $1,036, which Mangrove COBRAsource applied to pay off certain loan balances. The Asset Purchase Agreement contains certain customary representations, warranties, indemnities and covenants. Following is the purchase price allocation for the acquisition of Mangrove. We recorded the transaction using the acquisition method of accounting and recognized assets and liabilities assumed at their fair value as of the date of acquisition. The $8,700 of intangible assets subject to amortization consist of $1,200 allocated to Customer Relationships, $6,900 in Developed Technology and $600 for Trade Names. We estimated the fair value of the Customer Relationships and Developed Technology using the excess earnings method, a form of the income approach. We discounted cash flow projections using a rate of 18.1%, which reflects the risk associated with the intangible asset related to the other assets and the overall business operations to us. We estimated the fair value of the Trade Names using the relief from royalty method based upon a 1.2% royalty rate for the payroll division and 0.5% for the benefits administration services business. The Company believes significant synergies are expected to arise from this strategic acquisition. This factor contributed to a purchase price that was in excess of the fair value of the net assets acquired and, as a result, the Company recorded goodwill. A portion of acquired goodwill will be deductible for tax purposes. We based the allocations on fair values at the date of acquisition:
|  | Amount |
Assets acquired |  |  |
Accounts receivable |  | $ | 523 |
Funds held for clients |  |  | 16,419 |
Fixed assets |  |  | 258 |
Other assets |  |  | 28 |
Goodwill |  |  | 8,837 |
Intangibles |  |  | 8,700 |
Total assets acquired |  | $ | 34,765 |
Liabilities assumed |  |  |  |
Accounts payable |  |  | 64 |
Accrued other liabilities |  |  | 282 |
Client fund obligations |  |  | 16,419 |
Total liabilities assumed |  | $ | 16,765 |
Net assets acquired |  | $ | 18,000 |
Unaudited Pro Forma Financial Information The following unaudited summary of pro forma combined results of operation for the years ended December 31, 2016 and 2015 gives effect to the acquisition of Mangrove and the acquisition of assets of COBRAsource as if we had completed them on January 1, 2015. This pro forma summary does not reflect any operating efficiencies, cost savings or revenue enhancements that we may achieve by combining operations. In addition, we have not reflected certain non-recurring expenses, such as legal expenses and other transactions expenses for the first 12 months after the acquisition, in the pro forma summary. We present this pro forma summary for informational purposes only and it is not necessarily indicative of what our actual results of operations would have been had the acquisitions taken place as of January 1, 2015, nor is it indicative of future consolidated results of operations.
|  | FOR THE YEAR |  |  | FOR THE YEAR |
|  | ENDED DECEMBER 31, |  |  | ENDED DECEMBER 31, |
|  | 2016 |  |  | 2015 |
Revenues |  | $ | 37,671 |  |  | $ | 35,137 |
Net income (loss) |  | $ | (148 | ) |  | $ | (3,113 | )
Net income (loss) per common share: |  |  |  |  |  |  |  |
Basic and diluted |  | $ | (0.02 | ) |  | $ | (0.50 | )
Weighted average shares outstanding: |  |  |  |  |  |  |  |
Basic |  |  | 6,533 |  |  |  | 6,176 |
Diluted |  |  | 6,533 |  |  |  | 6,176 |

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- Definition The entire disclosure for business combinations, including leverage buyout transactions (as applicable), and divestitures. This may include a description of a business combination or divestiture (or series of individually immaterial business combinations or divestitures) completed during the period, including background, timing, and assets and liabilities recognized and reclassified or sold. This element does not include fixed asset sales and plant closings. + References No definition available. + Details
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