Acquisition and Intangible Assets

9 Months Ended

Sep. 30, 2017

Intangible Assets

Intangible Assets

The Company holds several patents for the real-time calculation of shipping costs for items purchased through online auctions using a zip code as a destination location indicator. It includes shipping charge calculations across multiple carriers and accounts for additional characteristics of the item being shipped, such as weight, special packaging or handling, and insurance costs. These patents help facilitate rapid and accurate estimation of shipping costs across multiple shipping carriers and also include real-time calculation of shipping.

On October 7, 2015, the Company, through a newly formed limited liability company named PAID Run, LLC, entered into an asset purchase agreement to purchase assets related to BeerRun Software and SpiritRun Software and related intellectual property. The purchase price and additional development for these assets was $297,500, which include all of the client lists, along with all rights, benefits and privileges associated with the software and intellectual property, associated contracts, and books and records.

On December 30, 2016, the Company completed a merger with ShipTime Inc. and its subsidiary to acquire assets related to the technology, client base and other intellectual property. The Company engaged an outside independent third party valuation firm to assist in establishing a value for the ShipTime Inc.

At September 30, 2017 and December 31, 2016, intangible assets consisted of the following:

	September 30, 2017			December 31, 2016
Patents	$	16,000		$	16,000
Software		83,750			83,750
Trade Name		797,000			797,000
Technology		509,000			509,000
Client list / relationship		4,687,750			4,687,750
Accumulated amortization		(745,936	)		(136,729	)
		5,347,564			5,956,771
Effect of exchange rate changes		389,132			-
	$	5,736,696		$	5,956,771

Amortization expense of intangible assets for all subsidiaries for the nine months ended September 30, 2017, and 2016 was $609,206 and $75,081, respectively.

Goodwill

Of the total estimated purchase price, $9,989,685 was allocated to goodwill and is attributable to expected synergies between the combined companies, including the ability for the combined companies to estimate and process shipping calculations and support eCommerce shopping cart platforms in addition to the acquired workforce. Goodwill represents the excess of the purchase price of the acquired business over the estimated fair value of the underlying net tangible and intangible assets acquired. In the event the Company determines that the value of goodwill has become impaired, it will incur an accounting charge for the amount of the impairment during the fiscal quarter in which the determination is made. None of the goodwill is expected to be deductible for income tax purposes.

For the nine months ended September 30, 2017, goodwill activity was as follows:

	For the Nine Months Ended September 30,
		2017
Beginning Balance		$	9,989,685
Effect of exchange rate changes			741,021
Ending Balance		$	10,730,706

Pro Forma Financial Information

The following table presents the Company’s unaudited pro forma results (including ShipTime) for the three and nine month periods ended September 30, 2016 as though the companies had been combined as of the beginning of the periods presented.

The pro forma information is presented for informational purposes only and is not indicative of the results of operations that would have been achieved if the acquisition had taken place at the beginning of each period presented, nor is it indicative of results of operations which may occur in the future. The unaudited pro forma results presented include amortization charges for intangible assets and eliminations of intercompany transactions.

	For the Three Months Ended September 30, 2016			For the Nine Months Ended September 30, 2016
Total revenues	$	1,609,400		$	4,580,962
Net loss	$	(247,239	)	$	(768,011	)