Note 3. Acquisition of Interwest Transfer Company, Inc.

6 Months Ended

Jun. 30, 2018

Notes to Financial Statements

Acquisition of Interwest Transfer Company, Inc.

On October 2, 2017, the Company entered into a Stock Purchase Agreement (the “Purchase Agreement’) with Kurtis D. Hughes whereby the Company purchased all of the outstanding equity securities of Interwest Transfer Company, Inc., a Utah corporation (“Interwest”) a transfer agent business located in Salt Lake City, Utah. Under the terms of the Purchase Agreement, the Company paid $1,935,000 at closing and will pay $320,000 on each of the first, second and third anniversary dates of the closing and issued 25,235 shares of restricted common stock of the Company to Mr. Hughes at closing.

The acquisition was accounted for under the acquisition method of accounting for business combinations in accordance with FASB ASC 805, Business Combinations, which requires, among other things, that the assets acquired and liabilities assumed be recognized at their fair values as of the acquisition date. Acquisition-related costs, which totaled approximately $20,000, are not included as a component of the acquisition accounting, but are recognized as expenses in the periods in which the costs are incurred. Any changes within the measurement period resulting from facts and circumstances that existed as of the acquisition date may result in retrospective adjustments to the provisional amounts recorded at the acquisition date. During the year ended December 31, 2017, the Company employed a third party valuation firm to assist in determining the purchase price allocation of assets and liabilities acquired from Interwest. The income approach was used to determine the value of Interwest’s trademarks and client relationships. The income approach determines the fair value for the asset based on the present value of cash flows projected to be generated by the asset. Projected cash flows are discounted at a rate of return that reflects the relative risk of achieving the cash flow and the time value of money. Projected cash flows for each asset considered multiple factors, including current revenue from existing customers; analysis of expected revenue and attrition trends; reasonable contract renewal assumptions from the perspective of a marketplace participant; expected profit margins giving consideration to marketplace synergies; and required returns to contributory assets.

The transaction resulted in recording intangible assets and goodwill at a fair value of $3,680,000 as follows (in 000’s):

Initial payment	$	1,935
Fair value of restricted common stock issued		318
Fair value of anniversary payments		851
Total Consideration		3,104
Plus: excess of liabilities assumed over assets acquired		576
Total fair value of Interwest intangible assets and goodwill	$	3,680

The tangible assets and liabilities acquired were as follows (in 000’s):

Cash	$	63
Accounts receivable, net		84
Prepaid expenses		17
Total assets		164
Accounts payable and accrued expenses		12
Deferred revenue		21
Deferred tax liability		707
Total liabilities		740
Excess of liabilities assumed over assets acquired	$	(576	)

The identified intangible assets as a result of the acquisition are as follows (in 000’s):

Customer relationships	$	1,677
Tradename		176
Goodwill		1,827
	$	3,680

Select Pro-Forma Financial Information (Unaudited)

The following represents our unaudited condensed pro-forma financial results as if the acquisition with Interwest and the Company had occurred as of January 1, 2017. Unaudited condensed pro-forma results are based upon accounting estimates and judgments that we believe are reasonable. The condensed pro-forma results are not necessarily indicative of the actual results of our operations had the acquisitions occurred at the beginning of the period presented, nor does it purport to represent the results of operations for future periods.

$ in 000’s	Three months ended June 30, 2017		Six months ended June 30, 2017
Revenues	$	3,898	$	7,105
Net Income	$	644	$	1,099
Basic earnings per share	$	0.21	$	0.37
Diluted earnings per share	$	0.21	$	0.36