Note 4. Goodwill and Other Intangible Assets

12 Months Ended

Dec. 31, 2015

Notes to Financial Statements

Goodwill and Other Intangible Assets

Acquisition of Accesswire

On October 29, 2014, the Company completed its acquisition of all of the assets relating to the “Accesswire” business (as defined below) owned and operated by Baystreet.ca Media Corp., a British Columbia company (“Baystreet”) for consideration totaling $1,840,000. Accesswire is a business corporate news and content distribution and dissemination business (“Accesswire”). In consideration of the assets related to Accesswire, the Company paid to Baystreet on the closing date the following: (i) $1,700,000 in cash from the Company’s current cash reserves and (ii) 15,385 shares of the Company’s common stock with a value of $140,000 based on the Company’s stock price at the time of closing.

During the year ended December 31, 2014, the Company employed a third party valuation firm to assist in determining the purchase price allocation of assets acquired from Accesswire. The income approach was used to determine the value of Accesswire’s trademarks and client relationships. The income approach determines the fair value for the asset based on the present value of cash flows projected to be generated by the asset. Projected cash flows are discounted at a rate of return that reflects the relative risk of achieving the cash flow and the time value of money. Projected cash flows for each asset considered multiple factors, including current revenue from existing customers; analysis of expected revenue and attrition trends; reasonable contract renewal assumptions from the perspective of a marketplace participant; expected profit margins giving consideration to marketplace synergies; and required returns to contributory assets. The cost approach was used to determine the value of Accesswire’s technology.  The cost approach is based on replacement cost as an indicator of value. It assumes that a prudent investor would pay no more for an asset than the amount for which it could be replaced new. Further, to the extent a particular asset provides less utility than a new one, its value will be less than its replacement cost new. To account for this difference, the replacement cost new is adjusted for losses in value that is, depreciated.  No liabilities or tangible assets were assumed.

 The transaction resulted in recording intangible assets and goodwill at a fair value of $1,840,000 as follows:

Total Consideration	$	1,840,000
Allocation of Accesswire intangible assets and goodwill:
Amortizable intangible assets	$	423,000
Trademarks		232,000
Goodwill		1,185,000
Total fair value of Accesswire intangible assets and goodwill	$	1,840,000

The identifiable amortizable intangible assets created as a result of the acquisition will be amortized straight line over their estimated useful life as follows:

	Asset Amount		Useful Life (years)
Client relationships	$	242,000		7
Software		181,000		5
	$	423,000

The Company has elected not to provide unaudited pro forma financial information for the Accesswire acquisition, as management determined that providing useful, accurate pro-forma information would be impracticable, and because the acquisition was not considered a significant acquisition in accordance with Rule 3-05 of the SEC's Regulation S-X.   Because the Accesswire news distribution service was just one of many services offered by Baystreet Media ca. separate financial information was not maintained, and creating separate financials statements would include too many estimates and assumptions to be portrayed as useful and accurate.

The components of intangible assets are as follows:

	December 31, 2015
	Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount
Customer lists	$	1,770,000	$	(1,408,920	)	$	361,080
Customer relationships		1,747,000		(564,810	)		1,182,190
Proprietary software		782,000		(526,508	)		255,492
Trademarks – definite-lived		173,000		(12,466	)		160,534
Trademarks – indefinite-lived		232,000		-			232,000
Total intangible assets	$	4,704,000	$	(2,512,704	)	$	2,191,296
	December 31, 2014
	Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount
Customer lists	$	1,770,000	$	(891,585	)	$	878,415
Customer relationships		1,747,000		(318,809	)		1,428,191
Proprietary software		782,000		(306,972	)		475,028
Trademarks – indefinite-lived		952,000		—			952,000
Total intangible assets	$	5,251,000	$	(1,517,366	)	$	3,733,634

During the fourth quarter of 2015, the Company elected not to renew certain trademarks purchased in conjunction with the acquisition of PIR. These trademarks had an allocated value of $148,680 and the write-off of this value is included in Impairment loss on intangible assets on the Consolidated Statements of Net Income for the year ended December 31, 2015. Additionally, as part of the Company’s annual review of impairment of goodwill and intangible assets, the Company determined the remaining trademarks purchased as part of the acquisition of PIR are no longer indefinite-lived assets as the Company plans to integrate and rebrand the associated trademarks with Issuer Direct. As a result of this determination, the Company was required to perform a goodwill impairment assessment. Due to lower future projections of revenue associated with our ARS service and a shortened useful life of the trademarks, this assessment resulted in an impairment loss of $398,320, which is also included in Impairment loss on intangible assets in the Consolidated Statements of Income for the year ended December 31, 2015.

The amortization of intangible assets is a charge to operating expenses and totaled $995,338 and $934,495 in the years ended 2015 and 2014, respectively.

The future amortization of the identifiable intangible assets is as follows:

Years Ending December 31:
2016	$	811,079
2017		332,964
2018		322,733
2019		286,042
2020		178,599
Thereafter		27,879
Total	$	1,959,296

Our goodwill balance of $2,241,872 at December 31, 2015 and 2014, was related to our acquisition of Basset Press in July 2007, the acquisition of PIR in 2013 and the acquisition of Accesswire in 2014. We conducted our annual impairment analyses as of October 1, of 2015 and 2014 and determined that no goodwill was impaired.