NOTE 4  MERGERS AND ACQUISITIONS Shore Fire Media, Ltd On December 3, 2019, (the Shore Fire Closing Date), the Company acquired all of the issued and outstanding capital stock of Shore Fire, a New York corporation (the Shore Fire Purchase), pursuant to a share purchase agreement (the Shore Fire Share Purchase Agreement) dated on the Shore Fire Closing Date, between the Company and Shore Fire seller. Shore Fire is an entertainment public relations agency, offering talent publicity in the music, events, books, podcasts, and comedy sectors. The total consideration paid to the Shore Fire seller in respect of the Shore Fire Purchase is $3.1 million as follows: (i) $1,140,000 in cash on the Shore Fire Closing date (adjusted for Shore Fire's indebtedness, working capital and cash targets); (ii) $200,000 in shares of Common Stock at a price of $0.64 per share (314,812 shares) issued to the seller on the Shore Fire Closing Date, (iii) an additional $400,000 in shares of common stock paid in two equal installments of $200,000 each on the first and second anniversary of the Shore Fire Closing Date, (iv) an additional $1,000,000 in cash paid in four equal payments of $250,000 each to the seller on the three, six, twelve, and twenty-four month anniversaries of the Shore Fire Closing Date, and (v) $140,000 and $120,000 in cash paid to key employees on the first and second anniversary of the Shore Fire Closing Date. In addition, on March 31, 2020, the Company and the seller agreed on $124,836 as the amount of the working capital adjustment, pursuant to the terms of the Shore Fire Purchase Agreement. The Shore Fire Purchase Agreement contains customary representations, warranties, and covenants of the parties thereto. The Common Stock issued as part of the Initial Consideration has not been registered under the Securities Act of 1933, as amended (the Securities Act). As a condition to the Shore Fire Purchase, the seller entered into an employment agreement with the Company to continue as an employee after the closing of the Shore Fire Purchase. The seller's employment agreement is through December 3, 2022 and the contract defines base compensation and a bonus structure based on Shore Fire achieving certain financial targets. The employment agreement contains provisions for termination and as a result of death or disability and entitles the employee to vacations and to participate in all employee benefit plans offered by the Company. The provisional acquisition-date fair value of the consideration transferred totaled $3,124,836, which consisted of the following: Common Stock issued at closing (314,812 shares) $ 200,000 Cash Consideration paid at closing 1,140,000 Cash Installment to be paid on March 3, 2020 250,000 Cash Installment to be paid on June 3, 2020 250,000 Cash Installment to be paid on December 3, 2020 390,000 Common Stock to be issued on December 3, 2020 200,000 Cash Installment to be paid on December 3, 2021 370,000 Common Stock to be issued on December 3, 2021 200,000 Working capital adjustment paid on April 1, 2020 124,836 $ 3,124,836 The final amount of consideration may potentially change due to other closing adjustments, which have not yet been determined. The fair value of the 314,812 shares of Common Stock issued on the Shore Fire Closing Date was determined based on the closing market price of the Company's Common Stock on the Shore Fire Closing Date of $0.64 per share. The following table summarizes the provisional fair values of the assets acquired and liabilities assumed at the Shore Fire Closing Date. Amounts in the table are provisional estimates that may change, as described below. Cash $ 384,530 Accounts receivable 294,033 Other current assets 33,402 Property, plant &amp; equipment 112,787 Intangibles 1,080,000 Total identifiable assets acquired 1,904,752 Accrued expenses (298,870 ) Accounts payable (38,750 ) Deferred tax liability (358,153 ) Contract liability (143,339 ) Other current liability (16,651 ) Total liabilities assumed (855,763 ) Net identifiable assets acquired 1,048,989 Goodwill 2,075,847 Net assets acquired $ 3,124,836 Of the provisional fair value of the $1,080,000 of acquired identifiable intangible assets, $510,000 was assigned to customer relationships (5 years useful life) and $570,000 was assigned to the trade name (10-year useful life), that were recognized at a provisional fair value on the acquisition date. The customer relationships will be amortized using an accelerated method, and the trade name will be amortized using the straight-line method. The provisional fair value of accounts receivable acquired is $294,033. The provisional fair values of property and equipment and leasehold improvements of $112,787, and other assets of $33,402, are based on Shore Fire's carrying values prior to the acquisition, which approximate their provisional fair values. The provisional amount of $2,075,847 of goodwill was assigned to the entertainment publicity and marketing segment. The goodwill recognized is attributable primarily to expectations of continued successful efforts to obtain new customers, buyer specific synergies and the assembled workforce of Shore Fire. The following is a reconciliation of the initially reported fair value to the adjusted fair value of goodwill: Goodwill originally reported at December 3, 2020 $ 1,951,011 Changes to estimated fair values: Working capital adjustment 124,836 Adjusted goodwill $ 2,075,847 The above estimated fair values of assets acquired and liabilities assumed are based on the information that was available as of the acquisition date to estimate the fair value of assets acquired and liabilities assumed. As of March 31, 2020, the Company recorded the identifiable net assets acquired of $1,048,989 as shown in the table above in its condensed consolidated balance sheet. The Company did not recognize any adjustments to the identifiable net assets during the three months ended March 31, 2020. Unaudited Pro Forma Consolidated Statements of Operations The following represents the Company's unaudited pro forma consolidated operations for the three months ended March 31, 2019 as if Shore Fire had been acquired on January 1, 2019 and its results had been included in the consolidated results of the Company for such period: March 31, 2019 Revenue $ 7,461,227 Net income $ 162,035 These amounts have been calculated after applying the Company's accounting policies and adjusting the results of the acquisitions to reflect the amortization that would have been charged, assuming the intangible assets had been recorded on January 1, 2019. The impact of the acquisition of Shore Fire on the Company's actual results for periods following the acquisition may differ significantly from that reflected in this unaudited pro forma information for a number of reasons. As a result, this unaudited pro forma information is not necessarily indicative of what the combined company's financial condition or results of operations would have been had the acquisitions been completed on January 1, 2019, as provided in this pro forma financial information. In addition, the pro forma financial information does not purport to project the future financial condition and results of operations of the combined company. 42West In connection with the 42West acquisition, on March 30, 2017, the Company entered into put agreements (the Put Agreements) with each of the 42West sellers. Pursuant to the terms and subject to the conditions set forth in the Put Agreements, the Company has granted the 42West sellers the right, but not the obligation, to cause the Company to purchase up to an aggregate of 1,187,087 of their respective shares of Common Stock received as consideration for the Company's acquisition of 42West for a purchase price equal to $9.22 per share during certain specified exercise periods set forth in the Put Agreements up until December 2020 (the Put Rights). During the three months ended March 31, 2020, the 42West sellers exercised Put Rights with respect to an aggregate of 177,518 shares of Common Stock. During the three months ended March 31, 2020, the Company made payments of $375,000 related to exercise of Put Rights, of which $275,000 pertained to Put Rights that were exercised in December 2019. As of March 31, 2020, the Company had a balance of $1,537,200 of Put Rights that were exercised but not yet paid. The Company also entered into Put Agreements with three separate 42West employees with change of control provisions in their employment agreements. The Company agreed to purchase up to 50% of the shares of Common Stock to be received by the employees in satisfaction of the change of control provision in their employment agreements. The employees have the right, but not the obligation, to cause the Company to purchase up to an additional 20,246 shares of Common Stock in respect of the Earn Out Consideration.