Quarterly report pursuant to Section 13 or 15(d)

2017 Asset Acquisition

v3.8.0.1
2017 Asset Acquisition
3 Months Ended
Mar. 31, 2018
Business Combinations [Abstract]  
2017 Asset Acquisition
2017 Asset Acquisition

On February 6, 2017, we entered into an Asset Purchase Agreement to acquire substantially all of the assets and certain liabilities and personnel obligations, in exchange for 3,529,000 shares of our common stock. Of this amount, 529,350 shares were deposited into escrow with our counsel under the terms of an escrow agreement pending possible post-closing adjustments in the purchase price related to working capital and audited financial statement adjustments, as well as in connection with possible indemnification claims post-closing. The operating results of this acquisition have been included in the consolidated statements of operations since the acquisition date. As a result of the business acquisition, the Company recognized goodwill in the amount of $4,013,034. The factors contributing to the recognition of the amount of goodwill are based on strategic benefits that are expected to be realized from the asset acquisition. The Company incurred approximately $350,000 in acquisition related costs, which are recorded in selling, general and administrative expenses in the accompanying consolidated statements of operations.
 

Total consideration paid in common stock (with marketability discount applied)
$
4,459,244

Fair value of assets acquired:


Accounts receivable, net
(2,292,485
)
Prepaid expenses and other current assets
(236,163
)
Property and equipment, net
(119,101
)
Goodwill
(4,013,034
)
Intangible assets
(4,360,000
)
Fair value of liabilities assumed:


Accounts payable
$
3,579,787

Accrued expenses and other current liabilities
1,152,789

Other long-term liabilities
49,149

Debt
2,015,577

Cash received in acquisition
$
235,763






In accordance with ASC guidance related to business combinations, net consideration was first allocated to the fair value of assets acquired, including specifically identifiable intangible assets and liabilities assumed, with the excess being recorded as goodwill. Goodwill related to this acquisition is not deductible for tax purposes and is not amortized, but instead is subject to periodic impairment tests.

The purchase includes the assumption of gross customer accounts receivable totaling $2,292,485. The Company estimates that most of these receivables will be collected. Therefore, the receivables are recorded at the estimated fair value, which equals the gross contractual amount. Specifically, identifiable intangible assets consist of $4,360,000 and are amortized on a straight-line basis over the estimated useful life. Additionally, revenue totaling approximately $1.9 million as of March 31, 2017 from the 2017 asset acquisition is included in the consolidated statement of operations.