ACQUISITION

3 Months Ended

Mar. 31, 2021

On October 1, 2020, the Company, entered into an asset purchase agreement (the “APA”) by and among the Company, Hudson Coit, Inc., a wholly-owned subsidiary of the Company (“Buyer”), Coit Staffing, Inc. (“Seller”), Joe Belluomini, and Tim Farrelly (together with Mr. Belluomini, the “Principals”) and completed the acquisition by Buyer of substantially all of the assets used in the business of the Seller, as set forth in the APA (the “Acquisition”).

Per the terms of the APA, the Seller received (i) $3,997 in cash subject to certain adjustments set forth in the APA at the closing of the Acquisition; (ii) a promissory note in the aggregate principal amount of $1,350, payable in annual installments of $450 per year on the first, second, and third anniversaries of the closing; (iii) $500 worth of shares of the Company’s common stock, with the amount of such shares to be determined by dividing $500 by the weighted average price of the Company’s common stock for the five trading days prior to the closing date, to be issued in three equal installments on each of the 10-month, 20-month, and 30-month anniversaries of the closing date; and (iv) earn-out payments not to exceed $1,500 and $2,030 in the years ended December 31, 2021 and 2022, respectively, based upon the achievement of certain performance thresholds in those years. In addition the Principals each entered into employment agreements with the Company for a term of two years.

The Acquisition was accounted for as a business combination under the acquisition method of accounting. The purchase price consists of the amount paid in cash of $3,997, which was allocated to the net tangible and intangible assets and liabilities based on their fair values on the acquisition date of October 1, 2020, with the excess recorded as goodwill. The Company incurred transaction costs related to the acquisition of $436 that were expensed as part of Office and general on the Consolidated Statements of Operations.

The promissory note and shares of the Company’s common stock to be paid to the Seller as outlined in the APA are tied to the continuing employment of the Principals at the Company, and therefore have been accounted for as compensation expense. This compensation expense is recorded on a straight-line basis under the assumption that the Principals will remain employed by the Company, and therefore that the note will be paid in full and the shares will be issued. For the three months ended March 31, 2021, the Company recognized $90 in stock-based compensation associated with the 52,226 restricted shares of common stock to be issued over 30 months (see Note 6 to the Condensed Consolidated Financial Statements), $91 related to the promissory note, and $200 related to payments. The compensation expense associated with the promissory note payable to the Seller is reflected in Accrued expenses and other current liabilities on the Consolidated Balance Sheets. The total of $381 for the three months ended March 31, 2021 is reflected in Salaries and related expenses on the Condensed Consolidated Statements of Operations.

The Company’s Consolidated Statements of Operations for the three months ended March 31, 2021 included revenue of $1,316 and net loss of $334 from the acquired company.

Below is a summary of the fair value of the net assets acquired on the acquisition date based on external valuations at the date of acquisition.


	Fair Value
Assets Acquired:
Accounts receivable	$	518
Intangible assets	1,480
Goodwill	2,088
Assets Acquired	$	4,086
Liabilities Assumed:
Accrued commissions	$	44
Deferred revenue	45
Liabilities Assumed	$	89

Fair value of assets acquired and consideration transferred	$	3,997

Intangible assets are amortized on a straight-line basis over their estimated useful lives. The following table sets forth the components of identifiable intangible assets acquired and their estimated useful lives as of the date of acquisition.


	Fair Value		Useful Life
Non-compete agreements	$	80	2 years
Trade name	400		5 years
Customer lists	1,000		5 years
Total identifiable assets	$	1,480

Unaudited Pro Forma Financial Information

The following unaudited consolidated pro forma information gives effect to the acquisition of Coit Staffing, Inc. as if the transaction had occurred on January 1, 2020.


	Three Months Ended
	March 31, 2020
Revenue	$	25,529
Net loss	$	(393)

The unaudited pro forma supplemental information provided above is based on estimates and assumptions that the Company believes are reasonable, and reflects the pro forma impact of additional amortization related to the fair value of acquired intangible assets for the three months ended March 31, 2020. This supplemental pro forma information has been prepared for comparative purposes and is not intended to reflect what would have occurred had the Acquisition taken place on January 1, 2020.