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Intangible Assets

3 Months Ended

Sep. 30, 2017

5. INTANGIBLE ASSETS

Domain Name

On June 26, 2015, the Company purchased the rights to the domain “CLOUDCOMMERCE.COM”, from a private party at a purchase price of $20,000, plus transaction costs of $202, which is used as the main landing page for the Company. The total recorded cost of this domain of $20,202 has been included in other assets on the balance sheet. As of June 30, 2017, we have determined that this domain has an indefinite useful life, and as such, is not included in depreciation and amortization expense. The Company will assess this intangible asset annually for impairment, in addition to it being classified with indefinite useful life.

Trademark

On September 22, 2015, the Company purchased the trademark rights of “CLOUDCOMMERCE”, from a private party at a purchase price of $10,000. The total recorded cost of this trademark of $10,000 has been included in other assets on the balance sheet. The trademark expires in 2020 and may be renewed for an additional 10 years. As of September 30, 2015, we determined that this intangible asset has a definite useful life of 174 months, and as such, will be included in depreciation and amortization expense. For the quarter ended September 30, 2017, the Company included $172 in depreciation and amortization expense related to this trademark.

Non-Compete Agreements

On October 1, 2015, the Company acquired Indaba from three members of the limited liability company. At that time, we retained two of the members, who currently serve as the Chief Executive Officer and Chief Technology Officer of Indaba. Both employees have non-compete agreements in place to protect the Company against the risk of either employee leaving Indaba to compete directly with us. We have calculated the value of those non-compete agreements at $201,014, with a useful life of two years, which coincides with the term of the non-compete agreement. This amount was included in depreciation and amortization expense until September 30, 2017. For the quarter ended September 30, 2017, the Company included $25,127 in depreciation and amortization expense related to these non-compete agreements. As of September 30, 2017, the balance for the non-compete agreements was zero.

On August 1, 2017, the Company acquired Parscale Creative. At that time, we retained Mr. Parscale to build the Parscale brandas well as consult with the Company on operating matters. Mr. Parscale has a non-compete agreement in place to protect the Company against the risk of Mr. Parscale leaving the Company to compete directly with us. We have calculated the value of this non-compete agreement at $476,661, with a useful life of three years, which coincides with the term of the non-compete agreement. This amount will be included in depreciation and amortization expense until July 31, 2020. For the quarter ended September 30, 2017, the Company included $26,481 in depreciation and amortization expense related to this non-compete agreement. As of September 30, 2017, the balance for the non-compete agreements was $450,180.

Name Brand

In connection with the Parscale Creative acquisition, the Company obtained the right to use the Parscale name in advertising, marketing and public relations campaigns. We have calculated the value of this brand name at $2,245,000. As of September 30, 2017, we have determined that this intangible asset has an indefinite useful life, and as such, is not included in depreciation and amortization expense. The Company will assess this intangible asset annually for impairment, in addition to it being classified with an indefinite useful life.

Customer List

On October 1, 2015, the Company acquired Indaba Group, LLC, a Colorado limited liability company, which at the time brought an increase in revenue and many new customers. We have calculated the value of the Indaba customer list at $447,171, with a useful life of 3 years. This amount will be included in depreciation and amortization expense until September 30, 2018. For the quarter ended September 30, 2017, the Company included $37,264 in depreciation and amortization expense related to the Indaba customer list.

We have calculated the value of the Parscale Creative customer list at $3,105,837, with a useful life of 3 years. This amount will be included in depreciation and amortization expense until July 31, 2020. For the quarter ended September 30, 2017, the Company included $172,547 in depreciation and amortization expense related to the Parscale Creative customer list.

The Company acquired certain intangible assets pursuant to the acquisitions of Indaba and Parscale Creative. The following is the net book value of these assets:

	September 30, 2017
			Accumulated
	Gross		Amortization			Net
Domain Name	$	20,202	$	—		$	20,202
Trademark		10,000		(1,380	)		8,620
Customer List		3,553,008		(470,661	)		3,082,347
Name Brand		2,245,000		—			2,245,000
Non-Compete Agreements		677,675		(227,495	)		450,180
Goodwill		7,210,420		—			7,210,420
Total	$	13,716,305	$	(699,536	)	$	13,016,769

Total amortization expense charged to operations for the quarter ended September 30, 2017 and 2016 was $261,591 and$54,188, respectively. The following table reflects the remaining amortization of finite life intangible assets, for the years ended June 30:

2018	$	1,007,935
2019		1,232,120
2020		1,194,856
2021		100,203
2022 and thereafter		6,033
Total	$	3,541,147