BUSINESS ACQUISITIONS

9 Months Ended

Sep. 30, 2024

BUSINESS ACQUISITIONS

BUSINESS ACQUISITIONS

NOTE 4 – BUSINESS ACQUISITIONS

RevenueZen

On December 31, 2023, RevenueZen (the “Acquired Business”) and the Company and RevenueZen LLC, a Delaware limited liability company ("RevenueZen Delaware") a subsidiary of the Company, entered into and closed an asset purchase agreement (the "RevenueZen Asset Purchase Agreement"), for the purchase by the Company of the Acquired Business.

Pursuant to the RevenueZen Asset Purchase Agreement, and subject to the terms and conditions contained therein, at the closing, RevenueZen agreed to sell to the Company the Acquired Business, all as more fully described in the RevenueZen Asset Purchase Agreement. The aggregate purchase price for the Acquired Business was $1,332,000, consisting of $240,000 in cash at closing, $425,000 in Company Series A Preferred Shares, a $440,000 11% interest only secured promissory note made by RevenueZen Delaware due December 31, 2025 (the “RevenueZen Promissory Note”), and additional earn-out payments that could be paid to RevenueZen pursuant to the earn-out formula described in the RevenueZen Asset Purchase Agreement. In addition, five founders of the RevenueZen received a total of a 12% equity interest in RevenueZen Delaware, and they will serve in leadership roles with the RevenueZen Delaware team. Also, certain of the founders received a total of 270,000 non-qualified stock options to purchase Company common shares at $0.51 per share for a period of 10 years pursuant to the Company’s 2020 Equity Compensation Plan.

The earn-out formula specifies for a period of one year, if the SDE (defined in Note 10 below) of the RevenueZen business exceeds $227,000, the sellers of RevenueZen Delaware would be entitled to receive an amount equal to three times the amount above $227,000 of SDE. SDE in this case is defined as gross revenue, less returns, discounts, and refunds and reduced by the cost of contractor payments, freelance copywriters, and payroll and benefits, consistent with the practices of the Seller in the operations of the Business, and for the sake of clarity exclude any payments, reimbursements, administrative charges, overhead charges, or other payments of any kind to the Buyer, Holdings, or any affiliate thereof. The earn-out amount will include 20% of any revenues of the Company that are from any customers of RevenueZen Delaware. The Company has the option to pay any earn-out amount in cash or in shares of preferred stock of the Company.

The transaction closed on January 4, 2024, when consideration was transferred by the Company and control was obtained by the Company and was accounted for as a business combination under ASC 805. The earn-out agreement is accounted for as a contingent consideration liability under ASC 805, which changes in fair value of the potential earn-out amount recognized in current earnings.

The aggregate fair value of consideration for the RevenueZen acquisition was as follows:

Schedule of preliminary fair value of consideration transferred
	Amount
Cash paid to seller	$	240,000
Notes payable issued to seller		440,000
Options to purchase common shares issued to seller		60,000
Estimated fair value of additional earn-out payments		1,869,000
Series A Preferred Shares issued to seller		425,000
Fair value of 12% equity interest in RevenueZen retained by Sellers		126,000
Total preliminary consideration transferred	$	3,160,000

The following information summarizes the preliminary allocation of the fair values assigned to the assets acquired at the acquisition date:

Preliminary Schedule of Recognized Identified Assets Acquired and Liabilities
Developed technology	$	240,000
Customer relationships		391,000
Trademarks and Trade Names		440,000
Non-Compete agreement		160,000
Goodwill		1,929,000
Preliminary net assets acquired	$	3,160,000

From the period of acquisition of the RevenueZen Business through September 30, 2024, the Company generated total revenue and net loss of $1,625,811 and $14,267, respectively. This net loss is inclusive of $176,417 amortization expenses.

DDS Rank

On June 6, 2024, SEO Marketing, Inc (dba DDS Rank) (“DDS Rank” or the “Acquired Business”) and DDS Rank LLC (“DDS Rank Delaware”), a subsidiary of the Company entered into and closed an asset purchase agreement (the "DDS Asset Purchase Agreement"), for the purchase by the Company of the Acquired Business.

Pursuant to the DDS Asset Purchase Agreement, and subject to the terms and conditions contained therein, at the closing, DDS Rank agreed to sell to the Company the Acquired Business, all as more fully described in the DDS Asset Purchase Agreement. The aggregate purchase price for the Acquired Business was $600,000, consisting of $200,000 in cash paid by OA SPV at closing, $200,000 in Company Series A Preferred Shares, and a $200,000 7% interest only secured promissory note made by DDS Rank Delaware due June 6, 2026 (the “DDS Promissory Note”).

The transaction closed on June 24, 2024, when consideration was transferred by the Company and control was obtained by the Company and was accounted for as a business combination under ASC 805.

The aggregate fair value of consideration for the DDS Rank acquisition was as follows:

Schedule of preliminary fair value of consideration transferred
	Amount
Cash paid to seller		200,000
Notes payable issued to seller		200,000
Series A Preferred Shares issued to seller		200,000
Total preliminary consideration transferred	$	600,000

The following information summarizes the allocation of the fair values assigned to the assets acquired at the acquisition date:

Preliminary Schedule of Recognized Identified Assets Acquired and Liabilities
Developed technology	$	90,000
Customer relationships		360,000
Trademarks and Trade Names		120,000
Non-Compete agreement		30,000
Preliminary net assets acquired	$	600,000

From the period of acquisition of the DDS Rank Business through September 30, 2024, the Company generated total revenue and net loss of $71,335 and $24,996, respectively.

Unaudited Pro Forma Financial Information

The following table sets forth the pro-forma consolidated results of operations for the three and nine months ended September 30, 2024 and 2023 as if the RevenueZen and DDS Rank acquisitions occurred on January 1, 2023. The pro forma results of operations are presented for informational purposes only and are not indicative of the results of operations that would have been achieved if the acquisitions had taken place on the dates noted above, or of results that may occur in the future.

	Three Months ended September 30,						Nine Months ended September 30,
	2024			2023			2024			2023
Revenue	$	2,153,170		$	1,313,311		$	5,466,671		$	4,829,167
Operating loss		(572,299	)		(4,749,722	)		(1,832,828	)		(7,356,039	)
Net loss		(687,321	)		(4,773,136	)		(1,900,674	)		(7,345,289	)
Net loss attributable to common shareholders		(902,129	)		(4,829,386	)		(2,166,507	)		(7,502,808	)
Net loss per common share	$	(0.18	)	$	(0.95	)		(0.42	)		(1.47	)
Weighted Average common shares outstanding		5,110,195			5,110,195			5,110,195			5,110,195