Annual report pursuant to Section 13 and 15(d)

CONTINGENT CONSIDERATION LIABILITY (Tables)

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CONTINGENT CONSIDERATION LIABILITY (Tables)
 12 Months Ended
Dec. 31, 2017
Contingent Consideration Liability Tables  
Contingent Consideration

One-Year Anniversary Date Revenue     Probability    

Revenue-Based

Payment

    

Probability-Weighted

Amounts

  
                     
$ 3,200,000       0.00 %   $ 800,000     $ –  
$ 2,000,000       0.50 %   $ 200,000       1,000  
$ 1,599,999       99.50 %   $ –       –  
                             
Fair Value of Expected Earn-out Payment        1,000  
Discount Rate        25 %
Payments     $  0  
Present Value Factor at 20% Discount Rate for 12 Months        0.9457  
Present Value of Contingent Consideration     $  946  

Performance-Based Cash Consideration
Year 1 Revenue   $ 16,666,666  
Less:     12,000,000  
         
    $ 4,666,666  
      0.44742864  
         
Performance-Based Cash Payment   $ 2,088,000  
Black Oak Contingent Consideration

As of December 31, 2016, the Black Oak Contingent Consideration was based upon the following formula:

 

            One-Year                                      
            Anniversary     Value of                 Probability-Weighted        
            Date of the     Common     Performance-           Amounts        
Year 1           Merger 30-     Stock to     Based Cash           Earn-Out     Performance-        
Revenue           Day VWAP     Issue     Payment     Probability     Shares     Based Cash     Total  
                                                   
              20 %   $ 15,788,827     $ 2,088,000       4 %   $ 631,553     $ 83,520     $ 715,073  
            $ 0.2108                                                  
                                                                 
Upside       20 %     70 %   $ 13,824,526     $ 2,088,000       14 %   $ 1,935,434     $ 292,320     $ 2,227,754  
$ 16,667,000             $ 0.3108                                                  
                                                                     
                  10 %   $ 12,816,555     $ 2,088,000       2 %   $ 256,331     $ 41,760     $ 298,091  
                $ 0.4108                                                  
                                                                     
                  20 %   $ 11,867,575     $ 747,500       15 %   $ 1,780,136     $ 112,125     $ 1,892,261  
                $ 0.2108                                                  
                                                                     
Base       75 %     70 %   $ 11,164,938     $ 747,500       52.5 %   $ 5,861,592     $ 392,438     $ 6,254,030  
$ 13,670,835             $ 0.3108                                                  
                                                                     
                  10 %   $ 10,804,383     $ 747,500       7.5 %   $ 810,329     $ 56,063     $ 866,391  
                $ 0.4108                                                  
                                                                     
                  20 %   $ 7,251,428     $ –       1 %   $ 72,514     $ –     $ 72,514  
                $ 0.2108                                                  
                                                                     
Downside       5 %     70 %   $ 8,034,038     $ –       3.5 %   $ 281,191     $ –     $ 281,191  
$ 10,674,670             $ 0.3108                                                  
                                                                     
                  10 %   $ 8,435,630     $ –       0.5 %   $ 42,178     $ –     $ 42,178  
                $ 0.4108                                                  

 

Fair Value of Expected Earn-Out Payment     $ 11,671,259     $ 978,225     $ 12,649,484  
Price Per Common Share     $ 3.93     $ 3.93          
Discount Rate       20 %     20 %        
Periods (nper)       0.250       0.250          
Payments     $ –     $ –          
                           
Present Value Factor at 20% Discount Rate for 12 Months       0.9554       0.9554          
                           
Present Value of Contingent Consideration     $ 11,151,221     $ 934,638          
                           
Present Value of Contingent Consideration                     $ 12,085,859  

 

The below table summarizes adjustments made to the Black Oak Contingent Consideration during the year ended December 31, 2016.

 

   

 

Preliminary April 1,

2016

    

 

Adjustments

June 30,

2016

    

 

June 30,

2016

    

 

Adjustments

September 30,

2016

    

 

September 30,

2016

    

 

Adjustments

December 31,

2016

    

 

Final as of December 31, 2016

  
                                           
Holdback Consideration Stock   $ 11,324,969     $ (514,339 )   $ 10,810,630     $ 217,895     $ 11,028,525     $ 122,695     $ 11,151,220  
Performance-Based Cash     1,429,583       66,669       1,496,252       130,963       1,627,215       (692,577 )     934,638  
Adjustment to Goodwill     –       447,670 (1)     –       (348,858 )(1)      –       (98,812 )(2)     –  
Change in Fair Value of Contingent Consideration     –       –       –       –       –       98,812       –  
                                                         
Total Contingent Consideration   $ 12,754,553     $ –     $ 12,306,882     $ –     $ 12,655,740     $ (569,882 )   $ 12,085,858  
The summary of contingent consideration
    Amount  
Contingent Consideration Summary :      
       
Balance at December 31, 2016   $ 12,085,859  
Change in Fair Market Valuation of Contingent Consideration     4,348,761  
         
Balance at March 31, 2017 and April 1, 2017   $ 16,434,620  
         
Contingent Consideration Detail :        
         
Performance-Based Cash Contingent Consideration   $ 2,088,000  
Market-Based Stock Contingent Consideration     14,346,620  
         
Balance at March 31, 2017 and April 1, 2017   $ 16,434,620  
The summary of additional market-based contingent consideration clawbacks
Contingent Consideration Balance at March 31, 2017   $ 16,434,620  
         
Change in Fair Market Valuation of Contingent Consideration     77,286  
Payment of Contingent Consideration in Cash     (2,088,000 )
Settlement of Contingent Consideration     (4,739,638 )
Settlement of Contingent Consideration Recorded Against Additional Paid-In Capital     (4,692,697 )
Gain on Settlement of Contingent Consideration     (4,991,571 )
         
Contingent Consideration December 31, 2017   $ -