Note 4. Recent Acquisitions

12 Months Ended

Dec. 31, 2018

Business Combinations [Abstract]

Recent Acquisitions

Acquisition of Filing Services Canada Inc. (“FSCwire”)

On July 3, 2018, the Company entered into a Stock Purchase Agreement (the “FSCwire Agreement”) with the sole shareholder of FSCwire, a company incorporated under the Business Corporations Act (Alberta), whereby the Company purchased all of the outstanding equity securities. Under the terms of the FSCwire Agreement, the Company paid $1,140,000 at closing ($180,000 of which was paid into an escrow account to cover standard representations and warranties included within the Purchase agreement) and issued 3,402 shares of restricted common stock of the Company. 

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 $52,000, 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, 2018, the Company employed a third party valuation firm to assist in determining the purchase price allocation of assets and liabilities acquired from FSCwire. The valuation was finalized during the fourth quarter of 2018 and resulted in the tangible and intangible assets and liabilities disclosed below, including the addition of the deferred tax liability which was not included in previous disclosures. The income approach was used to determine the value of FSCwire’s customer 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 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 relief from royalty method was used to value the distribution partner relationships. The relief from royalty method determines the fair value by calculating what a typical license fee would be in order to obtain the same or similar distribution rights from market participants. Projected cash flows consider revenue assumptions allocated to certain distribution partners and royalty rates of willing market participants.

The transaction resulted in recording intangible assets and goodwill at a fair value of $1,426,000 as follows (in 000’s):

Initial cash payment	$	1,140
Fair value of restricted common stock issued		62
Total Consideration		1,202
Plus: excess of liabilities assumed over assets acquired		224
Total fair value of FSCwire intangible assets and goodwill	$	1,426

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

Cash	$	17
Accounts receivable, net		42
Total assets		59
Accounts payable and accrued expenses		35
Deferred revenue		78
Deferred tax liability		170
Total liabilities		283
Excess of liabilities assumed over assets acquired	$	(224	)

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

Customer relationships	$	311
Distribution partner relationships		153
Goodwill		962
	$	1,426

The Company has elected not to provide unaudited pro forma financial information for the FSCwire acquisition, because the acquisition was not considered a significant acquisition in accordance with Rule 3-05 of the SEC's Regulation S-X.

Acquisition of Interwest Transfer Company, Inc.

On October 2, 2017, the Company entered into a Stock Purchase Agreement (the “Interwest Agreement’) with the sole shareholder of Interwest, a Utah corporation and transfer agent business located in Salt Lake City, Utah, whereby the Company purchased all of the outstanding equity securities. Under the terms of the Interwest Agreement, the Company paid $1,935,000 at closing, $288,000 upon the first anniversary of the closing and will pay $320,000 on each of the second and third anniversary dates of the closing and issued 25,235 shares of restricted common stock of the Company to the sole shareholder 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 customer relationships.

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

Initial cash 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 periods presented, nor does it purport to represent the results of operations for future periods.

$ in 000’s	Year Ended December 31, 2017
Revenues	$	13,851
Net Income	$	2,336
Basic earnings per share	$	0.79
Diluted earnings per share	$	0.77