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Note 4 - Swivel Secure Europe, SA Acquisition | 6 Months Ended
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Jun. 30, 2022
Notes to Financial Statements |
Business Combination Disclosure [Text Block] |
4. | SWIVEL SECURE EUROPE, SA ACQUISITION
On March 8, 2022, the Company completed the acquisition of 100% of the issued and outstanding capital stock of Swivel Secure based in Madrid, Spain, pursuant to the terms of a stock purchase agreement. The aggregate purchase price consisted of a base purchase price of $1.75 million, subject to closing adjustments based on the closing date working capital, indebtedness and unpaid transaction expenses, and an earn-out of up to $500,000. The earn-out is payable based on Swivel Secure generating $3,000,000 of revenue and $1,000,000 of operating profit during an earn-out period commencing on the closing date and ending on January 31, 2023. The earn-out payment, if any, will be paid at the Company’s option, in cash or shares of Company common stock priced at the 20 day volume-weighted average price of the Company’s common stock immediately prior to the payment date as reported on the Nasdaq Capital Market. At the closing, the Company made a cash payment of $1.27 million and issued 269,060 shares of common stock of which 89,687 shares were held back by the Company to secure certain indemnification obligations under the stock purchase agreement. The shares of Company common stock were priced at $2.23, the contractual 20 day volume-weighted average price of the Company’s common stock immediately prior to the payment date as reported on the Nasdaq Capital Market. The business combination has been accounted for as an acquisition and, in accordance with ASC 805. The Company recorded the assets acquired and liabilities assumed at their respective fair values as of the acquisition date. The following table summarizes the purchase price allocation, assuming the earnout will be paid:
Purchase consideration: |  |  |  |
Total cash paid, including working capital adjustment |  | $ | 1,273,483 |
Earnout payable |  |  | 500,000 |
Common stock issued |  |  | 600,004 |
Total purchase price consideration |  | $ | 2,373,487 |
Fair value of assets acquired and liabilities assumed: |  |  |  |
Cash and cash equivalents |  | $ | 729,905 |
Accounts receivable |  |  | 702,886 |
Equipment acquired |  |  | 65,640 |
Other assets |  |  | 20,708 |
Intangible assets |  |  | 762,860 |
Goodwill |  |  | 1,067,372 |
Total estimated assets acquired |  |  | 3,349,371 |
Accounts payable and accrued expenses |  |  | 431,884 |
Government loan |  |  | 544,000 |
Total liabilities assumed |  |  | 975,884 |
Total estimated fair value of assets acquired and liabilities assumed |  | $ | 2,373,487 |
The fair value of the assets acquired and liabilities assumed was less than the purchase price, resulting in the recognition of goodwill. The goodwill reflected the value of the synergies the Company expected to realize and the assembled workforce. The significant intangible asset identified in the purchase price allocation discussed above include Customer Relationships. To value the Customer Relationships, with a useful life between six to eight years. The Company utilized the Excess Earnings Method, which isolates the value of the specific intangible asset by discounting its income stream to present value. The Company previously reported an estimated value of $1,379,589, which was reduced to $762,860 during the purchase price allocation analysis, and the difference was allocated to goodwill. Any other difference in reported amounts is from foreign currency adjustments only. The government loan was issued through BBVA Bank during the COVID-19 pandemic. The loan bears interest at the rate of 1.75% per annum and is payable in monthly installments of approximately $11,900 inclusive of interest from May 2022 through April 2026. The installment payments have been paid monthly as per the schedule, as of the date of this report.

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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 https://asc.fasb.org/topic&trid=2303972 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 20 -Section 50 -Paragraph 5 -Subparagraph (b) -URI https://asc.fasb.org/extlink&oid=128092470&loc=d3e4946-128472 + Details
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