NetSeer Acquisition

3 Months Ended

Mar. 31, 2017

Business Combinations [Abstract]

NetSeer Acquisition

NetSeer Acquisition

On February 6, 2017, we entered into an Asset Purchase Agreement to acquire the assets of NetSeer. Under the terms of the agreement, we acquired substantially all of the assets of NetSeer, and assumed certain liabilities and personnel obligations, in exchange for 3,529,000 shares of our common stock. 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 acquiring NetSeer's assembled workforce in addition to other synergies gained from integrating NetSeer's operations into the Company’s consolidated structure. 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.

The Company has not yet completed its evaluation and determination of certain assets and liabilities acquired. The Company expects the final valuations and assessments may result in adjustments to the preliminary values included in the following table:

	March 31, 2017
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 100% 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 and earnings of NetSeer totaling approximately $1.9 million since the acquisition date are included in the consolidated statements of operations.