Quarterly report pursuant to Section 13 or 15(d)

6. Acquisition

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6. Acquisition
9 Months Ended
Sep. 30, 2016
Notes to Financial Statements  
6. Acquisition

On March 31, 2016, the Company completed the acquisition of certain assets from TFB, a provider of industry leading contact center solutions for an estimated purchase price of approximately $1.3 million consisting of $277,281 in cash and a royalty fee equal to ten percent of the collected monthly recurring revenues derived from sales of the cloud version of the proprietary call center software and maintenance services. The estimated royalty fee of $1,011,606 was recognized as a “non-current liability” in the condensed consolidated balance sheet and will be paid on a quarterly basis, commencing as of the first full calendar quarter following the second anniversary of the closing date of the TFB acquisition. The aggregate purchase price has been allocated to the fair value of the assets acquired and liabilities assumed as follows:

 

 

Covenant not to compete   $ 8,000  
Customer contracts/relationships     99,000  
Proprietary technology     889,000  
Accounts receivable     80,845  
Prepaid asset     5,535  
Line of credit     (100,000 )
Deferred liability     (693,590 )
Goodwill     1,000,097  
Purchase price   $ 1,288,887  

 

The amount of goodwill recognized is primarily attributable to the expected contributions of TFB to the overall corporate strategy in the cloud based call center solutions and synergies of the acquired business. None of the goodwill recognized is expected to be deductible for income tax purposes. The intangible assets subject to amortization consist of proprietary technology, customer relationships and non-compete agreements, with an estimated useful life of 8, 3 and 2 years, respectively.