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Note 3 - Acquisition

12 Months Ended

Dec. 31, 2021

Business Combination Disclosure [Text Block]

3.	ACQUISITION

On December 14, 2020, the Company, through a new wholly-owned subsidiary, Wrap Reality, Inc., entered into an Asset Purchase Agreement with NSENA Inc, a Delaware corporation, to acquire all of NSENA’s tangible and intangible assets, properties, and rights held for use in connection with NSENA’s virtual reality training business. The acquisition enhances the Company’s training services primarily targeting law enforcement agencies.

The Company paid to NSENA cash consideration of $210 and recorded a short-term business acquisition liability of $275. The liability was paid $100 by March 15, 2021, $100 by June 15, 2021 and $75 by September 15, 2021. In addition, the Company assumed a $15 liability for unearned revenues. As additional earn-out consideration, the Company agreed to pay NSENA contingent revenue-based consideration based on certain specific prospects that became customers before September 30, 2021. The fair value of the contingent consideration was determined as a $23 additional business acquisition liability but was revalued to $0 in the third quarter of 2021 resulting in a $23 gain included in other income.

The acquisition was accounted for under the acquisition method of accounting. Under acquisition accounting, the acquired tangible and intangible assets and liabilities of NSENA were recorded at their respective fair values. The following table summarizes the estimates of fair value of the assets acquired and liabilities assumed on December 14, 2020:

Equipment	$	10
Software		460
Customer contracts		40
Tradenames		2
Noncompete agreements		10
Deferred revenue		(15	)
Total consideration	$	507

A portion of the fair value of the consideration transferred was assigned to identifiable intangible assets as follows:

Description	Useful life in years		Fair Value
Software		5	$	460
Customer contracts		1		40
Tradenames		1		2
Noncompete agreements		2		10
Total acquired intangible assets			$	512

All assets acquired were determined to be finite-lived intangible assets and are being amortized on a straight-line basis over their estimated useful life with no residual value.