XML 22 R11.htm IDEA: XBRL DOCUMENT

Business Acquisitions - Earnout Liability

3 Months Ended

Mar. 31, 2021

Business Acquisitions - Earnout Liability

5.	Business Acquisitions – Earnout Liability

On March 2, 2020, we acquired all of the issued and outstanding stock of Graphic Sciences. The purchase price paid for Graphic Sciences was $3,906,253 in cash plus potential contingent, or earnout, payments of up $833,000 annually over a three year period based on a gross profit level achieved by Graphic Sciences on an annual basis, for maximum total earnout payments over a three year period of $2,500,000, and with no minimum earnout payments. At the time of this acquisition, management estimated a fair value of the contingent liability—earnout (“earnout liability”) of $686,200 based on the terms of the earnout, and accordingly, recorded this amount as our earnout liability at the acquisition date in accordance with GAAP. At March 31, 2021, we accrued an earnout liability of $2,179,950 to reflect the improved performance of the acquisition against its threshold target and a reduction of uncertainty driven by the COVID-19 pandemic. See Note 7 for the estimated fair value of the earnout liability as of March 31, 2021.

On April 21, 2020, we acquired substantially all of the assets of CEO Image. The purchase price paid for the assets of CEO Image consisted of $128,832 in cash, $170,000 in installment payments paid during 2020, and potential contingent, or earnout, payments of up $185,000 annually over a two year based on a sales revenue level achieved by certain customers of CEO Image on an annual basis, for maximum total earnout payments over a two year period of $370,000, and with no minimum earnout payments. At the time of this acquisition, management estimated a fair value of the contingent liability—earnout (“earnout liability”) of $203,000 based on the terms of the earnout, and accordingly, recorded this amount as our earnout liability at the acquisition date in accordance with GAAP. At March 31, 2021, we accrued an earnout liability of $334,000 to reflect the improved performance of the acquisition against its threshold target and a reduction of uncertainty driven by the COVID-19 pandemic. See Note 7 for the estimated fair value of the earnout liability as of March 31, 2021.

The following unaudited pro forma information presents a summary of the condensed consolidated results of operations for the Company as if the acquisitions of Graphic Sciences and CEO Image had occurred on January 1, 2020.

For the three months ended March 31, 2020	(unaudited)
	March 31, 2020
Total revenues	$	2,610,044

Net loss	$	(461,710	)

Basic and diluted net loss per share	$	(0.16	)

The unaudited pro forma consolidated results are based on the Company’s historical financial statements and those of Graphic Sciences and CEO Image and do not necessarily indicate the results of operations that would have resulted had the acquisition actually been completed at the beginning of the applicable period presented. The pro forma financial information assumes that the companies were combined as of January 1, 2020.

The following table presents the amounts of revenue and earnings of the acquirees since the acquisition date included in the condensed consolidated income statement for the reporting period.

For the three months ended March 31, 2021	Graphic Sciences		CEO Image
Total revenues	$	1,843,221	$	132,605

Net income	$	303,521	$	(a)

For the three months ended March 31, 2020	Graphic Sciences		CEO Image
Total revenues	$	556,254	$	-

Net income	$	79,342	$	-

(a)

Total earnings from the CEO Image acquisition is impracticable to disclose as the operations were merged with existing operations and not accounted for separately.