Usio, Inc 8-K/A, filed Mar 3, 2021
Usio, Inc. (USIO)
About this 8-K/A
Usio, Inc filed this 8-K/A on March 3, 2021, reporting on events of December 15, 2020.
Items reported
- Item 9.01: Financial statements and exhibits
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): December 15, 2020
USIO, INC.
(Exact name of registrant as specified in its charter)
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Nevada |
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000-30152 |
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98-0190072 |
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(State or other jurisdiction |
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(Commission |
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(IRS Employer |
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of incorporation) |
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File Number) |
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Identification No.) |
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3611 Paesanos Parkway, Suite 300, San Antonio, TX |
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78231 |
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(Address of principal executive offices) |
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(Zip Code) |
(210) 249-4100
(Registrant’s telephone number, including area code)
Not applicable.
(Former name or former address, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
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Title of each class |
Trading symbol(s) |
Name of each exchange on which registered |
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Common stock, par value $0.001 per share |
USIO |
The Nasdaq Stock Market LLC |
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
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Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
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Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
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Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
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Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (17 CFR §230.405) or Rule 12b-2 of the Securities Exchange Act of 1934 (17 CFR §240.12b-2). Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Explanatory Note
As previously reported under items 1.01, 2.01, and 3.02 in our Current Report on Form 8-K, filed on December 18, 2020, we entered into an asset purchase agreement with Information Management Solutions, LLC, a Texas limited liability company in the business of electronic bill presentment, document composition, document decomposition, printing and mailing, pursuant to which we agreed to purchase all of the assets in and to Information Management Solutions, LLC.
This Current Report on Form 8-K/A amends the previously filed Current Report on Form 8-K by adding the financial information required by items 9.01(a) and 9.02(b) as permitted by item 9.01(a)(4) and 9.01(b)(2), respectively.
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Item 9.01 |
Financial Statements and Exhibits. |
(a) Financial Statements of Business Acquired.
The audited financial statements of Information Management Solutions, LLC at December 31, 2019 and December 31, 2018, and audited financial statements at September 30, 2020 are attached as Exhibit 99.1 and 99.2 to this Current Report on Form 8-K/A.
(b) Pro Forma Financial Information.
The unaudited pro forma condensed consolidated financial information of Usio, Inc. at September 30, 2020 and December 31, 2019 reflecting the acquisition of Information Management Solutions, LLC are attached as Exhibit 99.3 to this Current Report on Form 8-K/A.
(d) Exhibits.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
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USIO, INC. |
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Date: March 2, 2021 |
By: |
/s/ Louis A. Hoch |
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Name: |
Louis A. Hoch |
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Title: |
Chief Executive Officer |
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Exhibit 23.1
CONSENT OF INDEPENDENT AUDITORS
We hereby consent to the incorporation by reference in the Registration Statements on Form S-3/A (No. 333-251140), Form S-8 (No. 333-231645), Form S-8 (No. 333-221184), and Form S-8 (No. 333-206521) of USIO, Inc. of our report dated November 18, 2020, with respect to the balance sheets of Information Management Solutions, LLC as of September 30, 2020 and December 31, 2019, the related statements of income, members’ equity, and cash flows for the nine months ended September 30, 2020 and the year ended December 31, 2019, and the related notes, which report appears in the Form 8-K/A of USIO, Inc. dated March 2, 2021. We also consent to the incorporation by reference in the Registration Statements on Form S-3/A (No. 333-251140), Form S-8 (No. 333-231645), Form S-8 (No. 333-221184), and Form S-8 (No. 333- 206521) of USIO, Inc. of our report dated November 3, 2020, with respect to the balance sheets of Information Management Solutions, LLC as of December 31, 2019 and 2018, the related statements of income, members’ equity, and cash flows for each of the years ended December 31, 2019 and 2018, and the related notes, which report appears in the Form 8-K/A of USIO, Inc. dated March 2, 2021.
/s/ Weaver and Tidwell, L.L.P.
Weaver and Tidwell, L.L.P.
San Antonio, Texas
March 2, 2021
Exhibit 99.1
Information Management Solutions, L.L.C.
Financial Report December 31, 2019
C O N T E N T S
| Page | |
| Independent Auditor’s Report | 1 |
| Financial Statements | |
| Balance Sheets | 3 |
| Statements of Income and Changes in Members’ Equity | 4 |
| Statements of Cash Flows | 5 |
| Notes to Financial Statements | 6 |
Independent Auditor’s Report
To the Members of
Information Management Solutions, L.L.C.
San Antonio, Texas
Report on the Financial Statements
We have audited the accompanying financial statements of Information Management Solutions, L.L.C., which comprise the balance sheets as of December 31, 2019 and 2018, and the related statements of income, changes in members’ equity, and cash flows for the years then ended, and the related notes to the financial statements.
Management’s Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.
Auditor’s Responsibility
Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Weaver and Tidwell, L.L.P.
9311 San Pedro Avenue, Suite 1400 | San Antonio, Texas 78216
Main: 210.737.1042
CPAs AND ADVISORS | WEAVER.COM
The Members of
Information Management Solutions, L.L.C.
Opinion
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Information Management Solutions, L.L.C. as of December 31, 2019 and 2018, and the results of their operations, and their cash flows for the years then ended in accordance with accounting principles generally accepted in the United States of America.
WEAVER AND TIDWELL, L.L.P.
San Antonio, Texas
November 3, 2020
Information Management Solutions, L.L.C
Balance Sheets
December 31, 2019 and 2018
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2019 |
2018 |
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CURRENT ASSETS |
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Cash and cash equivalents |
$ | 3,197,362 | $ | 2,904,084 | ||||
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Accounts receivable |
1,219,974 | 1,022,537 | ||||||
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Total current assets |
4,417,336 | 3,926,621 | ||||||
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PROPERTY, PLANT, AND EQUIPMENT, net |
1,367,127 | 1,773,429 | ||||||
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TOTAL ASSETS |
$ | 5,784,463 | $ | 5,700,050 | ||||
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CURRENT LIABILITIES |
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Accounts payable |
$ | 112,206 | $ | 156,436 | ||||
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Accrued liabilities |
175,090 | 105,569 | ||||||
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Current maturities of long-term debt |
170,139 | 171,845 | ||||||
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Current portion of capitalized lease obligations |
135,821 | 119,043 | ||||||
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Customer deposits |
1,418,592 | 1,231,559 | ||||||
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Total current liabilities |
2,011,848 | 1,784,452 | ||||||
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LONG-TERM LIABILITIES |
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Note payable ̶ related party |
199,316 | 191,216 | ||||||
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Long-term debt ̶ less current maturities |
595,534 | 765,589 | ||||||
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Long-term portion of capitalized lease obligations |
441,478 | 587,857 | ||||||
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Total long-term liabilities |
1,236,328 | 1,544,662 | ||||||
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Total liabilities |
3,248,176 | 3,329,114 | ||||||
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MEMBERS' EQUITY |
2,536,287 | 2,370,936 | ||||||
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TOTAL LIABILITIES AND MEMBERS' EQUITY |
$ | 5,784,463 | $ | 5,700,050 | ||||
The Notes to Financial Statements
are an integral part of these statements
Information Management Solutions, L.L.C
Statements of Income and Changes in Members’ Equity
December 31, 2019 and 2018
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2019 |
2018 |
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SALES, net |
$ | 4,818,012 | $ | 4,706,653 | ||||
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COST OF GOODS SOLD |
2,667,354 | 2,343,773 | ||||||
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Gross profit |
2,150,658 | 2,362,880 | ||||||
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SELLING, GENERAL AND ADMINISTRATIVE EXPENSES |
1,904,345 | 1,849,479 | ||||||
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OPERATING INCOME |
246,313 | 513,401 | ||||||
| OTHER INCOME (EXPENSE) | ||||||||
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Interest expense |
(80,962 | ) | (62,617 | ) | ||||
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NET INCOME |
165,351 | 450,784 | ||||||
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MEMBERS' EQUITY, beginning of year |
2,370,936 | 1,920,152 | ||||||
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MEMBERS' EQUITY, ending |
$ | 2,536,287 | $ | 2,370,936 | ||||
The Notes to Financial Statements
are an integral part of these statements
Information Management Solutions, L.L.C
Statements of Cash Flows
Years Ended December 31, 2019 and 2018
| 2019 | 2018 | |||||||
| CASH FLOWS FROM OPERATING ACTIVITIES | ||||||||
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Net income |
$ | 165,351 | $ | 450,784 | ||||
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Adjustments to reconcile net income to net cash provided by operating activities |
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| Depreciation and amortization | 474,242 | 460,527 | ||||||
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Gain on disposal of assets |
1,535 | - | ||||||
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Accrued rent, not yet paid, related party |
12,362 | 6,564 | ||||||
| Accrued interest, not yet paid, note payable related party | 8,100 | (3,452 | ) | |||||
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Changes in operating assets and liabilities |
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Receivables |
(197,437 | ) | (277,239 | ) | ||||
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Accounts payable |
(44,230 | ) | 58,135 | |||||
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Accrued liabilities |
57,159 | (20,508 | ) | |||||
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Customer deposits |
187,033 | 106,393 | ||||||
| Net cash provided by operating activities | 664,115 | 781,204 | ||||||
| CASH FLOWS FROM INVESTING ACTIVITIES | ||||||||
| Capital expenditures | (69,475 | ) | (754,689 | ) | ||||
| Net cash used in investing activities | (69,475 | ) | (754,689 | ) | ||||
| CASH FLOWS FROM FINANCING ACTIVITIES | ||||||||
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Proceeds from notes payable |
- | 700,802 | ||||||
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Payments on notes payable, related party |
- | (23,000 | ) | |||||
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Payments on long-term debt |
(171,887 | ) | (157,762 | ) | ||||
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Payments on capitalized lease obligations |
(129,475 | ) | (29,639 | ) | ||||
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Net cash provided by (used in) financing activities |
(301,362 | 490,401 | ||||||
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Net change in cash |
293,278 | 516,916 | ||||||
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CASH, beginning of period |
2,904,084 | 2,387,168 | ||||||
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CASH, end of period |
$ | 3,197,362 | $ | 2,904,084 | ||||
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SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION |
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Interest paid |
$ | 71,492 | $ | 57,528 | ||||
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Taxes paid |
$ | 25,035 | $ | 21,459 | ||||
| NONCASH FINANCING AND INVESTING ACTIVITIES | ||||||||
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Acquisition of property and equipment by capital lease |
$ | - | $ | 712,000 |
The Notes to Financial Statements
are an integral part of these statements
Information Management Solutions, L.L.C
Notes to Financial Statements
Note 1. Summary of Significant Accounting Policies
Nature of Operations
Information Management Solutions, L.L.C. (the Company) organized on December 11, 1995 in the state of Texas. The Company provides printing and mailing services to both commercial and governmental customers.
Recent Accounting Pronouncements
In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842), which is intended to increase the transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. In order to meet that objective, the new standard requires recognition of the assets and liabilities that arise from leases. A lessee will be required to recognize on the balance sheet the assets and liabilities for leases with lease terms of more than 12 months. Accounting by lessors will remain largely unchanged from current generally accepted accounting principles in the United States of America (GAAP). Effective June 3, 2020, the FASB issued ASU 2020-05 which delays required implantation of the standard until fiscal years beginning after December 15, 2021. The Company is currently evaluating the effect that adopting this standard will have on their financial statements and related disclosures.
In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606). The standard provides Company with a single model for use in accounting for revenue arising from contracts with customers and supersedes current revenue recognition guidance, including industry-specific revenue guidance. The core principle of the model is to recognize revenue when control of the goods or services transfers to the customer, as opposed to recognizing revenue when the risks and rewards transfer to the customer under the existing revenue guidance. On June 3, the FASB issued ASU 2020-05 which delays required implementation until annual reporting periods beginning after December 15, 2019 and interim reporting periods with annual reporting periods beginning after December 15, 2020. Early adoption is permitted. The guidance permits Company to either apply the requirements retrospectively to all prior periods presented, or apply the requirements in the year of adoption, through a cumulative adjustment. The Company is currently evaluating the effect that adopting this standard will have on their financial statements and related disclosures.
In June 2020, The FASB issues ASU No. 2020-05, Revenue from Contracts with Customers (Topic 606 and Leases (Topic 842): Effective Dates for Certain Entities. This ASU permits private companies that have not yet applied the revenue standard to do so for annual periods beginning after December 15, 2019, and interim reporting periods within annual periods beginning after December 31, 2020. Under the ASU, private companies may apply the new leases standard for fiscal periods after December 31, 2021, and to interim periods within fiscal years beginning after December 31, 2022. The Company has elected to adopt this ASU for all periods presented and had no impact on the financial statements and related disclosures.
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Accordingly, actual results could differ from those estimates.
Information Management Solutions, L.L.C
Notes to Financial Statements
Revenue Recognition
Revenue is recognized when mail has been printed and delivered to USPS and the Company has no significant remaining obligations, persuasive evidence of an arrangement exists, the price to the buyer is fixed or determinable and collection is probable. Deductions from sales or discounts are recorded as reductions of revenues and are provided for at the time of initial sale of product.
Cash and Cash Equivalents
The Company considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents.
Accounts Receivable
Accounts receivable are amounts due from customers for services performed in the ordinary course of business. If collection is expected in one year or less, they are presented as current assets. If not, they are presented as non-current assets.
The Company provides an allowance for doubtful accounts equal to the estimated uncollectible amounts. The Company’s estimate is based on historical collection experience and a review of the current status of accounts receivable. It is reasonably possible that the Company’s estimate of the allowance for doubtful accounts will change. The Company determined that no allowance was necessary for at December 31, 2019 and 2018, respectively.
Property, Plant and Equipment
Property and equipment are carried at cost and depreciated over their useful lives using the straight-line method. Leasehold improvements are amortized over the lesser of the lease term or the estimated useful life of the underlying assets. Estimated useful lives for property and equipment range from 5 – 7 years and computer software from 3 – 5 years. Assets acquired by capital leases are carried at their present values of their acquisition dates. Major additional improvements are capitalized, while maintenance and repairs that do not extend the useful life of the respective asset are charged to expense as incurred. Gains and losses on disposed assets are reflected in current operations.
Long-Lived Assets
The Company review the carrying value of property and equipment for impairment whenever events and circumstances indicate the carrying value of an asset may not be recoverable from the estimated future cash flows, and are less than the carrying value. An impairment loss is recognized equal to an amount by which the carrying value exceeds the fair value of assets. The factors considered by management in performing this assessment include current operating results, trends and prospects, and the effects of obsolescence, demand, competition, and other economic factors. The Company has not experienced an impairment loss on its long-lived assets.
Income Taxes
As a limited liability company, the Company is not a taxpaying entity for federal income tax purposes. Accordingly, the Company’s taxable income or loss is allocated to its members in accordance with their respective percentage ownership. Therefore, no provision or liability for income taxes has been included in the accompanying financial statements.
Information Management Solutions, L.L.C
Notes to Financial Statements
The Company follows the accounting guidance related to uncertain tax positions. Using that guidance, tax provisions initially need to be recognized in the financial statements when it is more-likely-than-not the position will be sustained upon examination by the tax authorities.
As of December 31, 2019, management believes the Company has no uncertain tax positions that qualify for either recognition or disclosure in the financial statements. The Company’s tax year 2018 remains subject to examination.
The Company is subject to the state of Texas gross margin tax, this expense totaled $21,502 and $17,505 for the years ended December 31, 2019 and 2018, respectively and is included in operations.
Concentration of Credit Risk
The Company places its cash and cash equivalents with high credit quality financial institutions, which, at times, may exceed the amount of insurance provided on such deposits. Collateral is not required for credit extended to the Company’s customers in the form of accounts receivable.
The Company is subject to risk related to significant volumes transacted with particular customers.
Revenues related to customers comprising 10% or more of the Company’s total revenues for the year ended December 31, 2019 is as follows:
| Customer | Sales | Concentration | ||||||
| Customer A | $ | 3,803,811 | 79 | % | ||||
| Total revenue | $ | 4,818,012 | ||||||
Revenues related to customers comprising 10% or more of the Company’s total revenues for the year ended December 31, 2018 is as follows:
| Customer | Sales | Concentration | ||||||
| Customer A | $ | 4,233,211 | 90 | % | ||||
| Total revenue | $ | 4,706,653 | ||||||
Receivables related to customers comprising 10% or more of the Company’s total receivables for the year ended December 31, 2019 is as follows:
| Customer | Receivables | Concentration | ||||||
| Customer A | $ | 250,000 | 20 | % | ||||
| Total receivables | $ | 1,219,974 | ||||||
Information Management Solutions, L.L.C
Notes to Financial Statements
Receivables related to customers comprising 10% or more of the Company’s total receivables for the year ended December 31, 2018 is as follows:
| Customer | Receivables | Concentration | ||||||
| Customer A | $ | 135,059 | 13 | % | ||||
| Total receivables | $ | 1,022,537 | ||||||
Payables relating to vendors comprising 10% or more of the Company’s total payables for the year ended December 31, 2019 is as follows:
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Vendor |
Payables |
Concentration |
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Vendor A |
$ | 22,403 | 20 | % | ||||
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Vendor B |
20,910 | 19 | % | |||||
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Vendor C |
18,026 | 16 | % | |||||
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Total payables |
$ | 112,206 | ||||||
Payables relating to vendors comprising 10% or more of the Company’s total payables for the year ended December 31, 2018 is as follows:
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Vendor |
Payables |
Concentration |
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Vendor A |
$ | 56,122 | 36 | % | ||||
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Vendor B |
18,413 | 12 | % | |||||
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Vendor C |
16,734 | 11 | % | |||||
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Total payables |
$ | 156,436 | ||||||
Advertising
Advertising costs are expensed when incurred and totaled $31,945 and $22,003 for the years ended December 31, 2019 and 2018, respectively.
Shipping and Handling Costs
The Company’ shipping and handling costs are included in cost of sales for all periods presented.
Sales Taxes
The State of Texas imposes a sales tax on all the Company’s sales to nonexempt customers for products sold. The Company collects all sales tax from the customers and remits the entire amount to the State. The Company’s accounting policy is to exclude the tax collected and remitted to the State from sales and cost of sales.
Information Management Solutions, L.L.C
Notes to Financial Statements
Subsequent Events
The Company have evaluated subsequent events through November 3, 2020, which is the date the financial statements were available to be issued. During this period, there were no material subsequent events that required recognition or additional disclosure in these financial statements, except as follows:
COVID-19
The extent of the operational and financial impact the COVID-19 pandemic may have on the Company has yet to be determined and is dependent on its duration and spread, any related operational restrictions and the overall economy. At current, revenues have continued to be consistent with prior year and a strong current ratio. The Company has taken the following measures:
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Encouraging sick employees to stay home |
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Emphasizing respiratory etiquette, hand hygiene and frequent cleanings |
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Requiring employees to self-quarantine if symptomatic, or upon possible exposure or unsafe travel or social gatherings |
Paycheck Protection Program Loan
On May 21, 2020, the Company was granted a loan from Broadway National bank, in the amount of $310,800, pursuant to the Paycheck Protection Program (PPP) under Division A, Title I of the CARES Act, which was enacted March 27, 2020.
The loan dated May 21, 2020 matures on May 21, 2022 and bears interest at a rate of 1.0% per annum, payable monthly commencing on December 21, 2020. The loan may be prepaid by the Company at any time prior to maturity with no prepayment penalties. Per the agreement, funds from the loan may only be used for payroll costs, costs used to continued group health care benefits, rent, and utilities. The Company intends to utilize the entire amount for qualifying expenses. Under the terms of the PPP, certain amounts of the loan may be forgiven if they are used for qualifying expenses as described in the CARES Act.
Note 2. Description of Members’ Interest
The Company was formed on December 11, 1995, as a Limited Liability Company under State of Texas statutes. Under the terms of the LLC Operating Agreement, the term of the Company runs in perpetuity.
At December 31, 2019, a total of 100 units of membership were held by the two members of the Company. Under the terms of the LLC Operating Agreement, allocations of profits, losses, capital gains, and distributions are in the following priorities:
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Profits: Profits are allocated in accordance with respective unit ownership percentages. |
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Losses: Losses are allocated in accordance with respective unit ownership percentages. |
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Gain from Capital Event: Any gain from a capital event (as defined) is allocated in accordance with respective unit ownership percentages. |
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Distributions of Cash: Cash distributions are allocated in accordance with the requirements of the allocation of profits. |
Information Management Solutions, L.L.C
Notes to Financial Statements
Note 3. Accounts Receivable
Accounts receivable consist of the following for:
| 2019 | 2018 | |||||||
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Trade |
$ | 434,086 | $ | 464,404 | ||||
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Postage |
785,288 | 558,133 | ||||||
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Other |
600 | - | ||||||
| $ | 1,219,974 | $ | 1,022,537 | |||||
Note 4. Property, Plant, and Equipment
Property, plant, and equipment consist of the following:
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2019 |
2018 |
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Equipment |
$ | 2,920,718 | $ | 2,924,519 | ||||
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Leasehold improvements |
391,392 | 391,247 | ||||||
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Computer software |
82,573 | 25,561 | ||||||
| 3,394,683 | 3,341,327 | |||||||
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Less accumulated depreciation and amortization |
2,027,556 | 1,567,898 | ||||||
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Net property, plant, and equipment |
$ | 1,367,127 | $ | 1,773,429 | ||||
Depreciation expense totaled $474,242 and $460,527 for the years ended December 31, 2019 and 2018, respectively.
Note 5. Line of Credit
During 2016, the Company obtained a $250,000 line of credit available with a bank. The line of credit was set to expire on December 7, 2017 and is secured by all assets of the Company. The agreement has continually been amended to extend the maturity since inception. The latest amendment on December 26, 2019 extends the maturity date until December 7, 2020. The agreement bears interest at Wall Street Journal Prime, floating with a floor of 4.75%. There are no financial covenants tied to this agreement. At December 31, 2019 and December 31, 2018, $0 was outstanding on the line of credit, respectively.
Note 6. Note Payable – Related Party
During 2017, the Company signed a note payable agreement with a member for $208,248, which bears interest at 4%. On January 15, 2018, a principal payment of $23,000 was made and a new agreement was signed on January 15, 2018 for $185,248 bearing interest at 4%. The note has no installments due. The principal balance at December 31, 2019 and December 31, 2018 totaled $185,248, respectively. Accrued interest for this note totaled $14,068 and $5,968 at December 31, 2019 and December 31, 2018, respectively.
Information Management Solutions, L.L.C
Notes to Financial Statements
Note 7. Long-term Debt
During 2016, the Company entered into a note payable with a financial institution for $1,201,500 maturing February 6, 2024 which bears interest at 4.5% annually. The note is secured by printer equipment as collateral. No financial covenants are noted.
Note payable consists of the following:
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Collateral |
Monthly Installment |
Interest Rate |
Payable Through |
2019 |
2018 |
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Equipment a |
$ | 16,734 | 4.50 | % | 2024 | $ | 765,673 | $ | 937,434 | |||||||||||
| 765,673 | 937,434 | |||||||||||||||||||
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Less current maturities |
170,139 | 171,845 | ||||||||||||||||||
| $ | 595,534 | $ | 765,589 | |||||||||||||||||
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a Guaranteed by a member |
Aggregate maturities required on long-term debt at December 31, 2019 are as follows:
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Year Ending December 31, |
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2020 |
$ | 170,139 | ||
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2021 |
177,955 | |||
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2022 |
186,130 | |||
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2023 |
194,681 | |||
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2024 |
36,768 | |||
| $ | 765,673 |
Information Management Solutions, L.L.C
Notes to Financial Statements
Note 8. Leases
The Company leases certain equipment and office space under various non-cancelable operating and capital leases. Future minimum lease payments required under leases, at December 31, 2019, are as follows:
|
Year Ending December 31, |
Capital Leases |
Operating Lease |
||||||
|
2020 |
$ | 162,175 | $ | 186,784 | ||||
|
2021 |
159,830 | 187,333 | ||||||
|
2022 |
159,361 | 178,022 | ||||||
|
2023 |
159,361 | 45,099 | ||||||
|
Future minimum lease payments |
640,727 | $ | 597,238 | |||||
|
Less amount of net minimum lease payments attributable to interest |
63,428 | |||||||
|
Present value of net minimum lease payments |
577,299 | |||||||
|
Less current portion of capitalized lease obligations |
135,821 | |||||||
|
Long-term portion of capitalized lease obligations |
$ | 441,478 | ||||||
Rental expense for the years ended December 31, 2019 and 2018 totaled approximately $178,176 and $155,270, respectively.
Note 9. Related Party Transactions
During 2015, the Company entered into an agreement to rent warehouse space from an entity owned by one of the members. Amounts accrued under this agreement were $30,916 and $18,553, at December 31, 2019 and December 31, 2018, respectively, but were not paid until September 2020.
Exhibit 99.2
Information Management Solutions, L.L.C.
Financial Report
September 30, 2020
C O N T E N T S
| Page | |
| Independent Auditor’s Report | 1 |
| Financial Statements | |
| Balance Sheets | 3 |
| Statements of Income and Changes in Members’ Equity | 4 |
| Statements of Cash Flows | 5 |
| Notes to Financial Statements | 6 |
Independent Auditor’s Report
To the Members of
Information Management Solutions, L.L.C.
San Antonio, Texas
Report on the Financial Statements
We have audited the accompanying financial statements of Information Management Solutions, L.L.C., which comprise the balance sheets as of September 30, 2020 and December 31, 2019, and the related statements of income, changes in members’ equity, and cash flows for the period from January 1, 2020 through September 30, 2020 and for year ended December 31, 2019, and the related notes to the financial statements.
Management’s Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.
Auditor’s Responsibility
Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Opinion
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Information Management Solutions, L.L.C. as of September 30, 2020 and December 31, 2019, and the results of their operations, and their cash flows for the period from January 1, 2020 through September 30, 2020 and for the year ended December 31, 2019 in accordance with accounting principles generally accepted in the United States of America.
Weaver and Tidwell, L.L.P.
9311 San Pedro Avenue, Suite 1400 | San Antonio, Texas 78216
Main: 210.737.1042
CPAs AND ADVISORS | WEAVER.COM
The Members of
Information Management Solutions, L.L.C.
Other Matter
As noted in Note 1 to the financial statements, in 2020, the entity adopted new accounting guidance Accounting Standards Update (ASU) 2016-02, Leases (Topic 842), as amended by subsequent ASUs. Our opinion is not modified with respect to this matter.
WEAVER AND TIDWELL, L.L.P.
San Antonio, Texas
November 18, 2020
Information Management Solutions, L.L.C
Balance Sheets
September 30, 2020 and December 31, 2019
|
September 30, |
||||||||
|
2020 |
2019 |
|||||||
|
CURRENT ASSETS |
||||||||
|
Cash and cash equivalents |
$ | 3,925,979 | $ | 3,197,362 | ||||
|
Accounts receivable |
1,212,465 | 1,219,974 | ||||||
|
Total current assets |
5,138,444 | 4,417,336 | ||||||
|
OTHER ASSETS |
||||||||
|
Property and equipment, net |
1,034,972 | 1,367,127 | ||||||
|
Right of use - operating leases |
366,811 | - | ||||||
|
Total other assets |
1,401,783 | 1,367,127 | ||||||
|
TOTAL ASSETS |
$ | 6,540,227 | $ | 5,784,463 | ||||
|
CURRENT LIABILITIES |
||||||||
|
Accounts payable |
194,284 | 112,206 | ||||||
|
Accrued liabilities |
65,366 | 175,090 | ||||||
|
Current maturities of long-term debt |
360,072 | 170,139 | ||||||
|
Current portion of lease liabilities - operating leases |
124,281 | - | ||||||
|
Current portion of lease liabilities - finance lease |
138,079 | 135,821 | ||||||
|
Customer deposits |
1,701,769 | 1,418,592 | ||||||
|
Total current liabilities |
2,583,851 | 2,011,848 | ||||||
|
LONG-TERM LIABILITIES |
||||||||
|
Note payable ̶ related party |
205,634 | 199,316 | ||||||
|
Long-term debt ̶ less current maturities |
590,087 | 595,534 | ||||||
|
Lease liabilities - operating leases, less current portion |
247,213 | - | ||||||
|
Lease liabilities - finance lease, less current portion |
336,760 | 441,478 | ||||||
|
Total long-term liabilities |
1,379,694 | 1,236,328 | ||||||
|
Total liabilities |
3,963,545 | 3,248,176 | ||||||
|
MEMBERS' EQUITY |
2,576,682 | 2,536,287 | ||||||
|
TOTAL LIABILITIES AND MEMBERS' EQUITY |
$ | 6,540,227 | $ | 5,784,463 | ||||
The Notes to Financial Statements
are an integral part of these statements.
Information Management Solutions, L.L.C
Statements of Income and Changes in Members’ Equity
Period from January 1, 2020 through September 30, 2020 and
Year Ended December 31, 2019
|
Nine Months Ended September 30, 2020 |
2019 |
|||||||
|
SALES, net |
$ | 3,668,893 | $ | 4,818,012 | ||||
|
COST OF GOODS SOLD |
2,003,380 | 2,667,354 | ||||||
|
Gross profit |
1,665,513 | 2,150,658 | ||||||
|
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES |
1,566,697 | 1,904,345 | ||||||
|
Operating income |
98,816 | 246,313 | ||||||
| OTHER INCOME (EXPENSE) | ||||||||
|
Interest expense |
(52,283 | ) | (80,962 | ) | ||||
|
NET INCOME |
46,533 | 165,351 | ||||||
|
MEMBERS' EQUITY, beginning of year |
2,536,287 | 2,370,936 | ||||||
| Change in accounting principle - adoption of ASC 842 - Leases | (6,138 | ) | - | |||||
| MEMBERS' EQUITY, ending | $ | 2,576,682 | $ | 2,536,287 | ||||
The Notes to Financial Statements
are an integral part of these statements.
Information Management Solutions, L.L.C
Statements of Cash Flows
Period from January 1, 2020 through September 30, 2020 and
Year Ended December 31, 2019
|
Nine Months Ended September 30, 2020 |
2019 | |||||||
| CASH FLOWS FROM OPERATING ACTIVITIES | ||||||||
|
Net income |
$ | 46,533 | $ | 165,351 | ||||
|
Adjustments to reconcile net income to net cash provided by operating activities |
||||||||
|
Depreciation and amortization |
340,584 | 474,242 | ||||||
|
Lease amortization |
4,683 | - | ||||||
|
Other loss |
(6,138 | ) | - | |||||
|
Gain on disposal of assets |
- | 1,535 | ||||||
|
Accrued rent, not yet paid, related party |
12,362 | 12,362 | ||||||
|
Accrued interest, not yet paid, note payable related party |
6,318 | 8,100 | ||||||
|
Changes in operating assets and liabilities |
||||||||
|
Receivables |
7,509 | (197,437 | ) | |||||
|
Accounts payable |
82,078 | (44,230 | ) | |||||
|
Accrued liabilities |
(122,086 | ) | 57,159 | |||||
|
Customer deposits |
283,177 | 187,033 | ||||||
| Net cash provided by operating activities | 655,020 | 664,115 | ||||||
| CASH FLOWS FROM INVESTING ACTIVITIES | ||||||||
| Capital expenditures | (8,429 | ) | (69,475 | ) | ||||
| Net cash used in investing activities | (8,429 | ) | (69,475 | ) | ||||
| CASH FLOWS FROM FINANCING ACTIVITIES | ||||||||
|
Proceeds from notes payable |
310,800 | - | ||||||
|
Payments on long-term debt |
(126,314 | ) | (171,887 | ) | ||||
|
Payments on finance lease obligations |
(102,460 | ) | (129,475 | ) | ||||
|
Net cash provided by (used in) financing activities |
82,026 | (301,362 | ) | |||||
|
Net change in cash |
728,617 | 293,278 | ||||||
|
CASH, beginning of period |
3,197,362 | 2,904,084 | ||||||
|
CASH, end of period |
$ | 3,925,979 | $ | 3,197,362 | ||||
|
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION |
||||||||
|
Interest paid |
$ | 52,283 | $ | 71,492 | ||||
|
Taxes paid |
$ | 25,041 | $ | 25,035 | ||||
The Notes to Financial Statements
are an integral part of these statements.
Information Management Solutions, L.L.C.
Notes to Financial Statements
Note 1. Summary of Significant Accounting Policies
Nature of Operations
Information Management Solutions, L.L.C. (the Company) organized on December 11, 1995 in the state of Texas. The Company provides printing and mailing services to both commercial and governmental customers.
Recent Accounting Pronouncements
In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606). The standard provides Company with a single model for use in accounting for revenue arising from contracts with customers and supersedes current revenue recognition guidance, including industry-specific revenue guidance. The core principle of the model is to recognize revenue when control of the goods or services transfers to the customer, as opposed to recognizing revenue when the risks and rewards transfer to the customer under the existing revenue guidance. On June 3, the FASB issued ASU 2020-05 which delays required implementation until annual reporting periods beginning after December 15, 2019 and interim reporting periods with annual reporting periods beginning after December 15, 2020. Early adoption is permitted. The guidance permits Company to either apply the requirements retrospectively to all prior periods presented, or apply the requirements in the year of adoption, through a cumulative adjustment. The Company is currently evaluating the effect that adopting this standard will have on their financial statements and related disclosures.
In June 2020, The FASB issues ASU No. 2020-05, Revenue from Contracts with Customers (Topic 606 and Leases (Topic 842): Effective Dates for Certain Entities. This ASU permits private companies that have not yet applied the revenue standard to do so for annual periods beginning after December 15, 2019, and interim reporting periods within annual periods beginning after December 31, 2020. Under the ASU, private companies may apply the new leases standard for fiscal periods after December 31, 2021, and to interim periods within fiscal years beginning after December 31, 2022. The Company has elected to adopt this ASU for all periods presented as it relates to ASU 606 and had no impact on the financial statements and related disclosures.
In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842), which is intended to increase the transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. Effective June 3, 2020, the FASB issued ASU 2020-05 which delays required implementation of the standard until fiscal years beginning after December 15, 2021. Early adoption is permitted.
The Company adopted this ASU effective January 1, 2020 using a modified retrospective transition method. Under this approach, the comparative balance sheet was not adjusted but a cumulative effect adjustment to retained earnings was recorded on January 1, 2020. The Company has elected the package of practical expedients permitted under the transition guidance, which, among other things, allows the Company to carry forward the historical accounting relating to lease identification and classification for existing leases upon adoption. The Company has also elected the practical expedient to not separate lease and non-lease components for the majority of its classes of assets. For leases in which the lease and non-lease components have been combined, the lease expense includes expenses such as common area maintenance. The Company has made an accounting policy election not to recognize leases with an initial term of 12 months or less on the balance sheet.
Information Management Solutions, L.L.C.
Notes to Financial Statements
The adoption of the new lease accounting standard resulted in the recognition of an operating lease liability of $371,494 and an operating right-of-use asset of $366,811, with an immaterial impact on the income statement compared to the previous lease accounting model. The cumulative effect of the adoption to retained earnings was $6,138. See Note 8 for additional disclosures required by this ASU.
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Accordingly, actual results could differ from those estimates.
Revenue Recognition
Revenue is recognized when mail has been printed and delivered to USPS and the Company has no significant remaining obligations, persuasive evidence of an arrangement exists, the price to the buyer is fixed or determinable and collection is probable. Deductions from sales or discounts are recorded as reductions of revenues and are provided for at the time of initial sale of product.
Cash and Cash Equivalents
The Company considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents.
Accounts Receivable
Accounts receivable are amounts due from customers for services performed in the ordinary course of business. If collection is expected in one year or less, they are presented as current assets. If not, they are presented as non-current assets.
The Company provides an allowance for doubtful accounts equal to the estimated uncollectible amounts. The Company’s estimate is based on historical collection experience and a review of the current status of accounts receivable. It is reasonably possible that the Company’s estimate of the allowance for doubtful accounts will change. The Company determined that no allowance was necessary for at September 30, 2020 and December 31, 2019, respectively.
Property, Plant and Equipment
Property and equipment are carried at cost and depreciated over their useful lives using the straight-line method. Leasehold improvements are amortized over the lesser of the lease term or the estimated useful life of the underlying assets. Estimated useful lives for property and equipment range from 5 – 7 years and computer software from 3 – 5 years. Assets acquired by capital leases are carried at their present values of their acquisition dates. Major additional improvements are capitalized, while maintenance and repairs that do not extend the useful life of the respective asset are charged to expense as incurred. Gains and losses on disposed assets are reflected in current operations.
Information Management Solutions, L.L.C.
Notes to Financial Statements
Long-Lived Assets
The Company review the carrying value of property and equipment for impairment whenever events and circumstances indicate the carrying value of an asset may not be recoverable from the estimated future cash flows, and are less than the carrying value. An impairment loss is recognized equal to an amount by which the carrying value exceeds the fair value of assets. The factors considered by management in performing this assessment include current operating results, trends and prospects, and the effects of obsolescence, demand, competition, and other economic factors. The Company has not experienced an impairment loss on its long-lived assets.
Income Taxes
As a limited liability company, the Company is not a taxpaying entity for federal income tax purposes. Accordingly, the Company’s taxable income or loss is allocated to its members in accordance with their respective percentage ownership. Therefore, no provision or liability for income taxes has been included in the accompanying financial statements.
The Company follows the accounting guidance related to uncertain tax positions. Using that guidance, tax provisions initially need to be recognized in the financial statements when it is more-likely-than-not the position will be sustained upon examination by the tax authorities.
As of September 30, 2020, management believes the Company has no uncertain tax positions that qualify for either recognition or disclosure in the financial statements. The Company’s tax year 2018 remains subject to examination.
The Company is subject to the state of Texas gross margin tax, this expense totaled $22,274 and $21,502 for the period from January 1, 2020 through September 30, 2020 and for the year ended December 31, 2019, respectively and is included in operations.
Concentration of Credit Risk
The Company places its cash and cash equivalents with high credit quality financial institutions, which, at times, may exceed the amount of insurance provided on such deposits. Collateral is not required for credit extended to the Company’s customers in the form of accounts receivable.
The Company is subject to risk related to significant volumes transacted with particular customers.
Revenues related to customers comprising 10% or more of the Company’s total revenues for the period ended September 30, 2020 is as follows:
| Customer | Sales | Concentration | ||||||
|
Customer A |
$ | 664,203 | 18 | % | ||||
| Total revenue | $ | 3,668,893 | ||||||
Information Management Solutions, L.L.C.
Notes to Financial Statements
Revenues related to customers comprising 10% or more of the Company’s total revenues for the year ended December 31, 2019 is as follows:
| Customer | Sales | Concentration | ||||||
|
Customer A |
$ | 3,803,811 | 79 | % | ||||
| Total revenue | $ | 4,818,012 | ||||||
Receivables related to customers comprising 10% or more of the Company’s total receivables for the period ended September 30, 2020 is as follows:
| Customer | Receivables | Concentration | ||||||
|
Customer A |
$ | 372,299 | 31 | % | ||||
| Total receivables | $ | 1,212,465 | ||||||
Receivables related to customers comprising 10% or more of the Company’s total receivables for the year ended December 31, 2019 is as follows:
| Customer | Receivables | Concentration | ||||||
|
Customer A |
$ | 250,000 | 20 | % | ||||
| Total receivables | $ | 1,219,974 | ||||||
Payables relating to vendors comprising 10% or more of the Company’s total payables for the period ended September 30, 2020 is as follows:
|
Vendor |
Payables |
Concentration |
||||||
|
Vendor A |
$ | 89,234 | 46 | % | ||||
|
Vendor B |
21,289 | 11 | % | |||||
|
Vendor C |
20,000 | 10 | % | |||||
|
Total payables |
$ | 194,284 | ||||||
Payables relating to vendors comprising 10% or more of the Company’s total payables for the year ended December 31, 2019 is as follows:
|
Vendor |
Payables |
Concentration |
||||||
|
Vendor A |
$ | 22,403 | 20 | % | ||||
|
Vendor B |
20,910 | 19 | % | |||||
|
Vendor C |
18,026 | 16 | % | |||||
|
Total payables |
$ | 112,206 | ||||||
Information Management Solutions, L.L.C.
Notes to Financial Statements
Advertising
Advertising costs are expensed when incurred and totaled $19,097 and $31,945 for the period from January 1, 2020 through September 30, 2020 and for the year ended December 31, 2019, respectively.
Shipping and Handling Costs
The Company’ shipping and handling costs are included in cost of sales for all periods presented.
Sales Taxes
The State of Texas imposes a sales tax on all the Company’s sales to nonexempt customers for products sold. The Company collects all sales tax from the customers and remits the entire amount to the State. The Company’s accounting policy is to exclude the tax collected and remitted to the State from sales and cost of sales.
Subsequent Events
The Company have evaluated subsequent events through November 18, 2020, which is the date the financial statements were available to be issued. During this period, there were no material subsequent events that required recognition or additional disclosure in these financial statements, except as follows:
COVID-19
The extent of the operational and financial impact the COVID-19 pandemic may have on the Company has yet to be determined and is dependent on its duration and spread, any related operational restrictions and the overall economy. At current, revenues have continued to be consistent with prior year and a strong current ratio. The Company has taken the following measures:
|
● |
Encouraging sick employees to stay home |
|
● |
Emphasizing respiratory etiquette, hand hygiene and frequent cleanings |
|
● |
Requiring employees to self-quarantine if symptomatic, or upon possible exposure or unsafe travel or social gatherings |
Note 2. Description of Members’ Interest
The Company was formed on December 11, 1995, as a Limited Liability Company under State of Texas statutes. Under the terms of the LLC Operating Agreement, the term of the Company runs in perpetuity.
At September 30, 2020, a total of 100 units of membership were held by the two members of the Company. Under the terms of the LLC Operating Agreement, allocations of profits, losses, capital gains, and distributions are in the following priorities:
|
● |
Profits: Profits are allocated in accordance with respective unit ownership percentages. |
|
● |
Losses: Losses are allocated in accordance with respective unit ownership percentages. |
|
● |
Gain from Capital Event: Any gain from a capital event (as defined) is allocated in accordance with respective unit ownership percentages. |
|
● |
Distributions of Cash: Cash distributions are allocated in accordance with the requirements of the allocation of profits. |
Information Management Solutions, L.L.C.
Notes to Financial Statements
Note 3. Accounts Receivable
Accounts receivable consist of the following for:
| 2020 | 2019 | |||||||
|
Trade |
$ | 435,400 | $ | 434,086 | ||||
|
Postage |
777,065 | 785,288 | ||||||
|
Other |
- | 600 | ||||||
| $ | 1,212,465 | $ | 1,219,974 | |||||
Note 4. Property, Plant, and Equipment
Property, plant, and equipment consist of the following:
|
2020 |
2019 |
|||||||
|
Equipment |
$ | 2,920,718 | $ | 2,920,718 | ||||
|
Leasehold improvements |
391,392 | 391,392 | ||||||
|
Computer software |
91,002 | 82,573 | ||||||
| 3,403,112 | 3,394,683 | |||||||
|
Less accumulated depreciation and amortization |
2,368,140 | 2,027,556 | ||||||
|
Net property, plant, and equipment |
$ | 1,034,972 | $ | 1,367,127 | ||||
Depreciation expense totaled $340,584 and $474,242 for the period from January 1, 2020 through September 30, 2020 and for the year ended December 31, 2019, respectively.
Note 5. Line of Credit
During 2016, the Company obtained a $250,000 line of credit available with a bank. The line of credit was set to expire on December 7, 2017 and is secured by all assets of the Company. The agreement has continually been amended to extend the maturity since inception. The latest amendment on December 26, 2019 extends the maturity date until December 7, 2020. The agreement bears interest at Wall Street Journal Prime, floating with a floor of 4.75%. There are no financial covenants tied to this agreement. At September 30, 2020 and December 31, 2019, $0 was outstanding on the line of credit, respectively.
Note 6. Note Payable – Related Party
During 2017, the Company signed a note payable agreement with a member for $208,248, which bears interest at 4%. On January 15, 2018, a principal payment of $23,000 was made and a new agreement was signed on January 15, 2018 for $185,248 bearing interest at 4%. The note has no installments due. The principal balance at September 30, 2020 and December 31, 2019 totaled $185,248, respectively. Accrued interest for this note totaled $20,386 and $14,068 at September 30, 2020 and December 31, 2019, respectively.
Information Management Solutions, L.L.C.
Notes to Financial Statements
Note 7. Long-term Debt
During 2016, the Company entered into a note payable with a financial institution for $1,201,500 maturing February 6, 2024 which bears interest at 4.5% annually. The note is secured by printer equipment as collateral. No financial covenants are noted.
On May 21, 2020, the Company was granted a loan from Broadway National bank, in the amount of $310,800, pursuant to the Paycheck Protection Program (PPP) under Division A, Title I of the CARES Act, which was enacted March 27, 2020.
The loan dated May 21, 2020 matures on May 21, 2022 and bears interest at a rate of 1.0% per annum, payable monthly commencing on December 21, 2020. The loan may be prepaid by the Company at any time prior to maturity with no prepayment penalties. Per the agreement, funds from the loan may only be used for payroll costs, costs used to continued group health care benefits, rent, and utilities. The Company intends to utilize the entire amount for qualifying expenses. Under the terms of the PPP, certain amounts of the loan may be forgiven if they are used for qualifying expenses as described in the CARES Act.
Notes payable consists of the following:
| Monthly |
Interest |
Payable |
||||||||||||||||||
|
Collateral |
Installment |
Rate |
Through |
2020 |
2019 |
|||||||||||||||
|
Equipment a |
$ | 16,734 | 4.50 | % | 2024 | $ | 639,359 | $ | 765,673 | |||||||||||
|
PPP Loan |
17,267 | 1 | % | 2022 | 310,800 | - | ||||||||||||||
| 950,159 | 765,673 | |||||||||||||||||||
|
Less current maturities |
360,072 | 170,139 | ||||||||||||||||||
| $ | 590,087 | $ | 595,534 | |||||||||||||||||
a Guaranteed by a member
Aggregate maturities required on long-term debt at December 31, 2019 are as follows:
|
Year Ending December 31, |
||||
|
2020 |
$ | 360,072 | ||
|
2021 |
298,822 | |||
|
2022 |
186,130 | |||
|
2023 |
105,135 | |||
|
2024 |
- | |||
| $ | 950,159 |
Information Management Solutions, L.L.C.
Notes to Financial Statements
Note 8. Leases
On January 1, 2020, the Company adopted ASC Topic 842, Leases. The standard requires lessees to recognize a right-of-use ("ROU") asset and lease liability for all leases. Some of the Company’s leases contain both lease and non-lease components, which the Company has elected to treat as a single lease component. The Company has also elected not to recognize leases that have an original lease term, including reasonably certain renewal or purchase options, of twelve months or less on the balance sheets for all classes of underlying assets. Lease costs for short-term leases are recognized on a straight-line basis over the lease term. The Company elected the package of transition practical expedients for existing contracts, which allowed the Company to carry forward its historical assessments of whether contracts are, or contain, leases, lease classification and determination of initial direct costs.
The Company leases property and equipment under finance and operating leases. The Company has finance and operating leases for printers, warehouses, and corporate office space. Certain leases for printers or real estate contain options to purchase, extend, or terminate the lease. Determining the lease term and amount of lease payments to include in the calculation of the ROU asset and lease liability for leases containing options requires the use of judgment to determine whether the exercise of an option is reasonably certain, and if the optional period and payments should be included in the calculation of the associated ROU asset and liability. In making this determination, the Company considers all relevant economic factors that would compel it to exercise or not exercise an option.
When available, the Company uses the rate implicit in the lease to discount lease payments; however, the rate implicit in the lease is not readily determinable for some of the Company’s leases. For these leases, the Company uses an estimate of its incremental borrowing rate to discount lease payments based on information available at lease commencement. The incremental borrowing rate is derived using multiple inputs including the Company’s credit rating, the impact of full collateralization, and lease term. The remaining lease terms vary from 1 to 3 years.
From time to time, the Company enters into leases with the intention of purchasing the property, either through purchase options with a fixed price or a purchase agreement negotiated contemporaneously with the lease agreement. The Company classifies these leases as finance leases and include the purchase date and purchase price in the lease term and lease payments, respectively, when the option to exercise is reasonable certain.
The components of lease expense for the nine months ended September 30, 2020 are as follows:
|
Operating lease costs |
$ | 139,324 | ||
|
Finance lease costs |
||||
|
Amortization of assets |
106,938 | |||
|
Interest on lease liabilities |
26,662 | |||
| Total finance lease costs | 133,600 | |||
| Total lease costs | $ | 272,924 |
Information Management Solutions, L.L.C.
Notes to Financial Statements
Supplemental information related to leases and location within the balance sheets are as follows:
| Operating leases | ||||
|
Operating lease right-of-use assets |
$ | 366,811 | ||
|
Current maturities of operating leases |
124,281 | |||
|
Non-current operating leases |
247,213 | |||
|
Total operating lease liabilities |
$ | 371,494 | ||
| Finance leases | ||||
|
Equipment |
$ | 712,270 | ||
|
Accumulated amortization |
(250,563 | ) | ||
|
Property, plant and equipment, net |
$ | 461,707 | ||
|
Current maturities of finance leases |
$ | 138,079 | ||
|
Non-current finance leases |
336,760 | |||
|
Total finance lease liabilities |
$ | 474,839 | ||
| Weighted average remaining lease term (in years) | ||||
| Operating leases | 3.0 | |||
| Finance leases | 3.3 | |||
| Weighted average discount rate | ||||
| Operating leases | 4.5 | % | ||
| Finance leases | 5.0 | % |
Information Management Solutions, L.L.C.
Notes to Financial Statements
Maturities of lease liabilities as of the nine months ended September 30, 2020 are as follows:
|
Year Ending December 31, |
Finance Lease |
Operating Leases |
||||||
|
2020 |
$ | 39,840 | $ | 34,614 | ||||
|
2021 |
159,361 | 137,986 | ||||||
|
2022 |
159,361 | 127,434 | ||||||
|
2023 |
159,361 | 97,356 | ||||||
| Future minimum lease payments | 517,923 | 397,390 | ||||||
|
Less amount of net minimum lease payments attributable to interest |
43,084 | 25,896 | ||||||
|
Total lease obligations |
474,839 | 371,494 | ||||||
|
Less current portion of lease obligations |
138,079 | 124,281 | ||||||
|
Long-term portion of lease obligations |
$ | 336,760 | $ | 247,213 | ||||
Note 9. Related Party Transactions
During 2015, the Company entered into an agreement to rent warehouse space from an entity owned by one of the members. Amounts accrued under this agreement were $0 and $30,916, at September 30, 2020 and December 31, 2019, respectively. Outstanding balance was paid in September 2020.
Exhibit 99.3
Unaudited Pro Forma Condensed Consolidated Financial Information
Usio, Inc. (the Company) acquired substantially all the assets of Information Management Solutions, LLC (IMS) for a cash payment of $5,907,408 at closing and 945,599 unregistered warrants to purchase shares of common stock of Usio, Inc., or 945,599 shares of our common stock, $0.001 par value per share, with an exercise price of $4.23 per share. The warrants were valued using the Black-Scholes option pricing model. Assumptions used were as follows: (i) the fair value of the underlying stock was $0.58; (ii) the risk-free interest rate is 0.09%; (iii) the contractual life is 5 years; (iv) the dividend yield of 0%; and (v) the volatility is 59.9%. The fair value of the warrants amounted to $552,283 and will be recorded as an increase in the Customer list asset and amortized over five years.
The unaudited pro forma condensed consolidated financial statements set forth below are based on the audited financial statements of Usio, Inc. as of and for the year ended December 31, 2019 and the audited financial statements of Information Management Solutions, LLC as of and for the year ended December 31, 2019.
The following unaudited pro forma condensed consolidated financial statements are based on our historical consolidated financial statements and Information Management Solutions, LLC historical consolidated financial statements as adjusted to give effect to the Company's acquisition of Information Management Solutions, LLC. The unaudited pro forma condensed consolidated statements of operations for the nine months ended September 30, 2020 and the year ended December 31, 2019 give effect to the transaction as if it had occurred on January 1, 2019.
The assumptions and estimates underlying the unaudited adjustments to the pro forma condensed financial statements should be read together with the Company's historical financial statements, which are included in the Company's latest annual report on Form 10-K and quarterly report on Form 10-Q, and Information Management Solutions, LLC historical financial information included herein.
The unaudited pro forma condensed consolidated financial statements have been prepared in accordance with the rules and regulations of the SEC for the preparation of pro forma financial statements. They are based upon available information, preliminary estimates and certain assumptions that we believe are reasonable and are described in the accompanying notes to the unaudited pro forma condensed consolidated financial statements. We emphasize, however, that the unaudited pro forma condensed consolidated financial statements are provided for illustrative purposes only and are subject to a number of uncertainties and assumptions and do not purport to represent what Usio, Inc.’s actual combined performance or financial position would have been had the transactions occurred on the dates indicated and do not purport to indicate financial position or results of operations as of any future date or for any future period.
Unaudited Pro Forma Condensed Consolidated Balance Sheet
As of December 31, 2019
|
Usio, Inc. Historical |
Information Management Solutions, LLC (Acquiree) Historical |
Pro Forma Adjustments |
Notes |
Pro Forma Consolidated |
|||||||||||||
|
ASSETS |
|||||||||||||||||
|
Current Assets: |
|||||||||||||||||
|
Cash and cash equivalents |
$ | 2,137,580 | $ | 1,778,770 | $ | (1,778,770 | ) |
(c) |
$ | 3,595,173 | |||||||
| (5,907,408 | ) |
(a) |
|||||||||||||||
| 7,365,001 |
(l) |
||||||||||||||||
| Customer deposits | — | 1,418,592 | (1,418,592 | ) | (c) | 1,324,689 | |||||||||||
| 1,324,689 | (e) | ||||||||||||||||
|
Accounts receivable, net |
1,274,001 | 1,219,974 | 683,736 |
(a) |
1,957,737 | ||||||||||||
| (1,219,974 | ) | (c) | |||||||||||||||
|
Inventory |
— | — | 168,138 | (a) | 168,138 | ||||||||||||
|
Settlement processing assets |
38,906,780 | — | — | 38,906,780 | |||||||||||||
| Prepaid card load assets | 528,434 | — | — | 528,434 | |||||||||||||
|
Prepaid expenses and other |
183,575 | — | 29,849 | (a) | 213,424 | ||||||||||||
|
Current assets before merchant reserves |
43,030,370 | 4,417,336 | (753,331 | ) | 46,694,375 | ||||||||||||
|
Merchant reserves |
10,016,904 | — | — | 10,016,904 | |||||||||||||
|
Total current assets |
53,047,274 | 4,417,336 | (753,331 | ) | 56,711,279 | ||||||||||||
|
Property and equipment, net |
1,557,521 | 1,367,127 | (1,367,127 | ) |
(c) |
2,768,746 | |||||||||||
| 1,211,225 | (a) | ||||||||||||||||
|
Other Assets: |
|||||||||||||||||
|
Intangibles, net |
2,676,427 | — | 3,807,052 |
(a) (b) |
7,035,762 | ||||||||||||
| 552,283 | (g) (b) | ||||||||||||||||
|
Deferred tax asset |
1,394,000 | — | — | 1,394,000 | |||||||||||||
|
Operating lease, right-of-use assets |
2,480,902 | — | 426,391 | (f) | 2,907,293 | ||||||||||||
|
Other assets |
404,055 | — | 7,408 | (a) | 411,463 | ||||||||||||
|
Total other assets |
6,955,384 | — | 4,793,134 | 11,748,518 | |||||||||||||
|
Total Assets |
$ | 61,560,179 | $ | 5,784,463 | $ | 3,883,901 | $ | 71,228,543 | |||||||||
|
LIABILITIES AND STOCKHOLDERS' EQUITY |
|||||||||||||||||
|
Current Liabilities: |
|||||||||||||||||
|
Accounts payable |
$ | 419,849 | $ | 112,206 | $ | (112,206 | ) |
(c) |
$ | 419,849 | |||||||
|
Accrued expenses |
1,360,551 | 175,090 | (175,090 | ) |
(c) |
1,360,551 | |||||||||||
| Operating lease liabilities, current portion | 356,184 | — | 104,628 | (f) | 460,812 | ||||||||||||
| Capitalized lease obligations, current portion | — | 135,821 | (135,821 | ) | (c) | — | |||||||||||
| Long term debt, current portion | — | 170,139 | (170,139 | ) | (c) | — | |||||||||||
|
Settlement processing obligations |
38,906,780 | — | — | 38,906,780 | |||||||||||||
| Customer deposit liabilities | — | 1,418,592 | (1,418,592 | ) | (c) | 1,324,689 | |||||||||||
| 1,324,689 | (e) | ||||||||||||||||
| Prepaid card load obligations | 528,434 | — | — | 528,434 | |||||||||||||
| Deferred revenues | 123,529 | — | — | 123,529 | |||||||||||||
|
Current liabilities before merchant reserves |
41,695,327 | 2,011,848 | (582,531 | ) | 43,124,644 | ||||||||||||
|
Merchant reserve obligations |
10,016,904 | — | — | 10,016,904 | |||||||||||||
|
Total current liabilities |
51,712,231 | 2,011,848 | (582,531 | ) | 53,141,548 | ||||||||||||
| Non-current liabilities: | |||||||||||||||||
| Operating lease liabilities, non-current portion | 2,279,613 | — | 321,763 | (f) | 2,601,376 | ||||||||||||
| Capitalized lease obligations, non-current portion | — | 441,478 | (441,478 | ) | (c) | — | |||||||||||
| Long term debt, non-current portion | — | 595,534 | (595,534 | ) | (c) | — | |||||||||||
| Note payable - related parties | — | 199,316 | (199,316 | ) | (c) | — | |||||||||||
| Total liabilities | 53,991,844 | 3,248,176 | (1,497,096 | ) | 55,742,924 | ||||||||||||
|
Stockholders' Equity: |
|||||||||||||||||
|
Preferred stock |
— | — | — | — | |||||||||||||
|
Common stock |
186,656 | — | 4,706 |
(l) |
191,362 | ||||||||||||
|
Additional paid-in capital |
77,055,273 | — | 7,360,295 |
(l) |
84,967,851 | ||||||||||||
| 552,283 | (g) | ||||||||||||||||
|
Treasury stock |
(1,885,452 | ) | — | — | (1,885,452 | ) | |||||||||||
|
Deferred compensation |
(5,636,154 | ) | — | — | (5,636,154 | ) | |||||||||||
|
Accumulated deficit |
(62,141,988 | ) | — | — |
|
(62,151,988 | ) | ||||||||||
| Members' equity | — | 2,536,287 | (2,536,287 | ) | (d) | — | |||||||||||
|
Total stockholders' equity |
7,568,335 | 2,536,287 | 5,380,997 | 15,485,619 | |||||||||||||
|
Total Liabilities and Stockholders' Equity |
$ | 61,560,179 | $ | 5,784,463 | $ | 3,883,901 | $ | 71,228,543 | |||||||||
|
See accompanying notes to the Unaudited Pro Forma Condensed Consolidated Financial Information |
Unaudited Pro Forma Condensed Consolidated Statements of Operations
Year Ended December 31, 2019
|
Usio, Inc. Historical |
Information Management Solutions, LLC Historical |
Pro Forma Adjustments |
Notes |
Pro Forma Consolidated |
|||||||||||||
|
Revenues |
$ | 28,200,535 | $ | 4,818,012 | $ | 8,791,450 |
(h) |
$ | 41,809,997 | ||||||||
|
Cost of services |
22,251,325 | 2,667,354 | 8,791,450 |
(h) |
33,710,129 | ||||||||||||
| Gross profits |
5,949,210 |
2,150,658 | — | 8,099,868 | |||||||||||||
|
Selling, general and administrative: |
|||||||||||||||||
|
Stock-based compensation |
1,292,419 | — | — |
|
1,292,419 | ||||||||||||
|
Other SG&A expenses |
7,697,267 | 1,429,873 | (600,000 | ) | (k) | 8,527,140 | |||||||||||
|
Depreciation and amortization |
2,022,520 | 474,472 | (474,472 | ) |
(k) |
3,136,632 | |||||||||||
| 242,245 | (j) | ||||||||||||||||
| 871,867 | (i) | ||||||||||||||||
|
Total operating expense |
11,012,206 | 1,904,345 | 39,640 | 12,956,191 | |||||||||||||
|
Operating income (loss) |
(5,062,996 | ) | 246,313 | (39,640 | ) | (4,856,323 | ) | ||||||||||
|
Other income and (expenses) |
|||||||||||||||||
|
Interest income |
81,790 | — | — | 81,790 | |||||||||||||
|
Other income (expense) |
(32,653 | ) | (80,962 | ) | 80,962 |
(k) |
(32,653 | ) | |||||||||
|
Other income (expenses), net |
49,137 | (80,962 | ) | 80,962 | 49,137 | ||||||||||||
|
(Loss) before income taxes |
(5,013,859 | ) | 165,351 | 41,322 | (4,807,186 | ) | |||||||||||
|
Income taxes |
101,888 | — | — | 101,888 | |||||||||||||
|
Net (Loss) |
$ | (5,115,747 | ) | $ | 165,351 | $ | 41,322 | $ | (4,909,074 | ) | |||||||
|
Basic (loss) per common share |
$ | (0.39 | ) | $ | (0.28 | ) | |||||||||||
|
Diluted (loss) per common share |
$ | (0.39 | ) | $ | (0.28 | ) | |||||||||||
|
Weighted average common shares outstanding |
|||||||||||||||||
|
Basic |
12,958,067 | 4,705,883 |
(l) |
17,663,950 | |||||||||||||
|
Diluted |
12,958,067 | 4,705,883 |
(l) |
17,663,950 | |||||||||||||
|
See accompanying notes to the Unaudited Pro Forma Condensed Consolidated Financial Information |
Unaudited Pro Forma Condensed Consolidated Statements of Operations
Nine Months ended September 30, 2020
|
Usio, Inc. Historical |
Information Management Solutions, LLC Historical |
Pro Forma Adjustments |
Notes |
Pro Forma Consolidated |
|||||||||||||
|
Revenues |
$ | 22,869,309 | $ | 3,668,893 | $ | 6,543,659 |
(h) |
$ | 33,081,861 | ||||||||
|
Cost of services |
17,933,089 | 2,003,380 | 6,543,659 |
(h) |
26,480,128 | ||||||||||||
| 4,936,220 | 1,665,513 | — | 6,601,733 | ||||||||||||||
|
Selling, general and administrative: |
|||||||||||||||||
|
Stock-based compensation |
903,326 | — | — |
|
903,326 | ||||||||||||
|
Other SG&A expenses |
5,955,221 | 1,226,113 | (450,000 | ) | (k) | 6,731,334 | |||||||||||
|
Depreciation and amortization |
1,160,255 | 340,584 | (340,584 | ) |
(k) |
1,995,839 | |||||||||||
| 181,684 | (j) | ||||||||||||||||
| 653,900 |
(i) |
||||||||||||||||
|
Total operating expense |
8,018,802 | 1,566,697 |
45,000 |
9,630,499 | |||||||||||||
|
Operating income (loss) |
(3,082,582 | ) | 98,816 | (45,000 | ) | (3,028,766 | ) | ||||||||||
|
Other income and (expenses): |
|||||||||||||||||
|
Interest income |
22,800 | — | — | 22,800 | |||||||||||||
|
Other income (expense) |
912 | (52,283 | ) | 52,283 | (k) | 912 | |||||||||||
|
Other income (expenses), net |
23,712 | (52,283 | ) | 52,283 | 23,712 | ||||||||||||
|
(Loss) before income taxes |
(3,058,870 | ) | 46,533 | 7,283 | (3,005,054 | ) | |||||||||||
|
Income taxes |
325 | — | — | 325 | |||||||||||||
|
Net (Loss) |
$ | (3,059,195 | ) | $ | 46,533 | $ | 7,283 | $ | (3,005,379 | ) | |||||||
|
Basic (loss) per common share |
$ | (0.22 | ) | $ | (0.16 | ) | |||||||||||
|
Diluted (loss) per common share |
$ | (0.22 | ) | $ | (0.16 | ) | |||||||||||
|
Weighted average common shares outstanding |
|||||||||||||||||
|
Basic |
13,924,803 |
4,705,883 |
(l) |
18,630,686 | |||||||||||||
|
Diluted |
13,924,803 | 4,705,883 |
(l) |
18,630,686 | |||||||||||||
|
See accompanying notes to the Unaudited Pro Forma Condensed Consolidated Financial Information |
Notes to the Unaudited Pro Forma Condensed Consolidated Financial Information
Note 1 - Basis of presentation
The historical consolidated financial statements have been adjusted in the pro forma condensed consolidated financial statements to give effect to pro forma effects that are 1) directly attributable to the business combination, 2) factually supportable and 3) with respect to the pro forma condensed consolidated statements of operations, expected to have a continuing impact on the consolidated results following the business combination.
The business combination was accounted for under the acquisition method of accounting in accordance with ASC 805, Business Combinations. As the acquirer for accounting purposes, the Company has estimated the fair value of Information Management Solutions assets acquired and liabilities assumed and conformed the accounting policies of Information Management Solutions to its own accounting policies.
The pro forma condensed consolidated financial statements do not necessarily reflect what the combined company's financial condition or results of operations would have been had the acquisition occurred on the dates indicated. They also may not be useful in predicting the future financial condition and results of operations of the combined company. The actual financial position and results of operations may differ significantly from the pro forma amounts reflected herein due to a variety of factors.
Note 2 - Financing transactions
The Company completed the acquisition of Information Management Solutions for a total consideration of $6,459,691 consisting of $5,907,408 in cash at closing and 945,599 unregistered warrants to purchase shares of common stock of Usio, Inc. or 945,599 shares of our common stock, $0.001 par value per share, with an exercise price of $4.23. The warrants were valued using the Black-Scholes option pricing model. Assumptions used were as follows: (i) the fair value of the underlying stock was $0.58; (ii) the risk-free interest rate is 0.09%; (iii) the contractual life is 5 years; (iv) the dividend yield of 0%; and (v) the volatility is 59.9%. The fair value of the warrants amounted to $552,283 and will be recorded as an increase in the Customer list asset and amortized over five years.
The final number of warrants was determined by dividing $2,000,000 by the 5-day weighted average closing price for the four trading days preceding the closing date and the closing day, or $2.115 per share. The exercise price of the warrants was determined by multiplying the 5-day weighted average closing price by the number 2. The warrants vest in three equal installments on the first, second and third anniversary of the closing date and have a term of five years from vest.
In addition, the Company entered into consulting agreements with the two selling holders Henry Minten and Kelly Dowe for certain transition services for a consideration of $50,000 each.
Note 3 - Purchase price allocation
The Company has performed a valuation analysis of the fair market value of Information Management Solutions assets and liabilities. The following table summarizes the allocation of the purchase price as of December 15, 2020.
|
Accounts receivable |
$ | 683,736 | ||
|
Inventory |
168,138 | |||
|
Fixed assets |
1,211,225 | |||
|
Prepaid expenses |
29,849 | |||
|
Other assets |
7,408 | |||
|
Customer list |
3,807,052 | |||
|
Total Cash Consideration |
$ | 5,907,408 |
In addition to the cash paid at closing, the warrants valued per above were recorded as follows:
|
Customer list |
$ | 552,283 | ||
|
Total Warrant Consideration |
$ | 552,283 | ||
|
Total Purchase Price |
$ | 6,459,691 |
The purchase price allocation has been used to prepare pro forma adjustments to the pro forma balance sheet and income statement.
Note 4 - Warrants
On December 15, 2020, the Company issued Information Management Solutions, LLC warrants to purchase 945,599 shares of the Company's common stock. 315,200 warrants vest on December 15, 2021, 315,200 warrants vest on December 15, 2022 and 315,199 warrants vest on December 15, 2023. The exercise price for the warrants is $4.23. The warrants were valued using the Black-Scholes option pricing model. Assumptions used were as follows: (i) the fair value of the underlying stock was $0.58; (ii) the risk-free interest rate is 0.09%; (iii) the contractual life is 5 years; (iv) the dividend yield of 0%; and (v) the volatility is 59.9%. The fair value of the warrants amounted to $552,283 and will be recorded as an increase in the Customer list asset and amortized over five years.
Note 5 - Pro forma adjustments
The pro forma adjustments are based upon our preliminary estimates and assumptions that are subject to change. The following adjustments have been reflected in the unaudited pro forma condensed combined financial information:
|
a. |
Represents the payment of $5,907,408 in cash related to acquisition of Information Management Solutions and the purchase price allocation of assets acquired. |
|
b. |
Reflects the adjustment of historical intangible assets acquired by the Company to their estimated fair value. As a part of the valuation analysis, the Company identified intangible assets, including customer lists. The fair value of identifiable intangible assets is determined primarily using the "income approach" which requires a forecast of all of the future cash flows. |
|
Estimated Fair Value |
Estimated Useful Life in Years |
Year Ended December 31, 2019 Amortization Expense |
Nine Months Ended September 30, 2020 Amortization Expense |
|||||||||||||
|
Customer list |
$ | 4,359,335 | 5 | $ | 871,867 | $ | 653,900 | |||||||||
|
Pro forma expense adjustment |
$ | 871,867 | $ | 653,900 | ||||||||||||
| Fixed assets | $ | 1,211,225 | 5 | $ | 242,245 | $ | 181,684 | |||||||||
| Pro forma expense adjustment | $ | 242,245 | $ | 181,684 | ||||||||||||
|
c. |
Reflects adjustments for assets and liabilities not acquired based upon the terms of the asset purchase agreement. |
|
d. |
Reflects the elimination of Information Management Solutions members' equity. |
| e. |
Assumption of customer deposits at closing. |
| f. | Record Information Management Solutions right-of-use asset and liabilities assumed. |
| g. | Record warrants issued as a part of acquisition purchase price. |
|
h. |
Information Management Solutions recorded postage revenues and expenses as net. Usio records postage revenues at gross in accordance with ASC 606-10. The recording of revenues as gross reflects setting prices, assuming collection risk and controlling and assuming all delivery risk. The adjustment reflects the difference in accounting from Information Management Solutions to Usio. |
|
i. |
Reflects the incremental customer list amortization expense as a result of the acquisition of Information Management Solutions. |
| j. | Reflects the incremental depreciation expense related to assets acquired as a result of the acquisition of Information Management Solutions. |
|
k. |
Eliminates income and expenses that are no longer applicable to Usio. |
|
l. |
Capital raise completed on September 25, 2020. |