Quarterly report pursuant to Section 13 or 15(d)

ACQUISITIONS

v3.7.0.1
ACQUISITIONS
6 Months Ended
Jun. 30, 2017
Business Combinations [Abstract]  
ACQUISITIONS

NOTE 3 – ACQUISITIONS.


On January 2, 2016, the Company closed the acquisition of warisboring.com pursuant to the terms and conditions of the Website Asset Purchase Agreement dated December 4, 2015 for an aggregate purchase price of $250,000.  The purchase price consisted of a cash payment of $100,000 at the January 4, 2016 closing and the balance of $150,000, payable monthly in an amount equal to 30% of the net revenues from the website, when collected, with the total amount of the earn out to be paid by January 4, 2019. The Company recorded the future monthly payments totaling $150,000 at a present value of $117,268, net of discount of $32,732.  The present value was calculated at a discount rate of 12% (which is the Company’s then most recent borrowing rate) using the estimated future revenues from the website to estimate the payment dates.  The estimated future revenues from the website were based on the average historical monthly revenues from the website prior to the Company’s acquisition.  During the six months ended June 30, 2017 and 2016, the Company amortized $5,455 and $5,456, respectively, of this discount. The acquisition was accounted following ASC 805 “Business Combinations.”  Under the purchase method of accounting, the transaction was valued for accounting purposes at $217,268, which was the fair value of warisboring.com. The Company has initially determined there was only two amortizable intangible assets. The acquisition date estimated fair value of the consideration transferred consisted of the following:


Customer and related relationships

 

$

39,578

 

Website

 

 

177,690

 

Total

 

$

217,268

 


The above estimated fair value of the intangible assets are based on a preliminary purchase price allocation prepared by management.  As a result, during the preliminary purchase price allocation period, which may be up to one year from the business combination date, we may record adjustments to the asset acquired, with the corresponding offset to website.  After the preliminary purchase price allocation period, we record adjustments to assets acquired subsequent to the purchase price allocation period in our operating results in the period in which the adjustments were determined.  In the year following this transaction, we did not record any adjustments to our initial allocations.


On February 2, 2016, the Company entered into a Website Asset Purchase Agreement with unrelated third parties for a purchase price of $15,000 in cash.  The acquisition was accounted for following ASC 805 "Business Combinations."  The operations of the website prior to the Company's acquisition were immaterial; therefore, pro forma information was not presented. There were no costs of acquisition incurred as a result of this purchase.


On December 16, 2016, with an effective date of December 15, 2016 under the terms of the Asset Purchase Agreement, we acquired the assets constituting the Black Helmet apparel business from Sostre Enterprises, Inc., including various website properties and content, social media content, inventory and other intellectual property rights.  The consideration for the acquisition consisted of $250,000 in cash, 200,000 shares of our common stock valued at $170,000, the assumption of $40,000 in liabilities and the forgiveness of working capital advances we had previously made to the seller totaling $200,000.


A summary of assets acquired is as follows:


Inventory

 

$

58,000

 

Intangibles – website

 

 

80,000

 

Intangibles – trade name

 

 

150,000

 

Intangibles – customer relationships

 

 

252,000

 

Intangibles – non compete agreements

 

 

120,000

 

Total assets acquired

 

$

660,000

 


Pro forma results


The following table sets forth the unaudited pro forma results of the Company as if the acquisition of the assets constituting the Black Helmet apparel business had taken place on the first day of the periods presented. These combined results are not necessarily indicative of the results that may have been achieved had the assets been acquired as of the first day of the periods presented.


 

 

Three Months Ended

 

 

Six Months Ended

 

 

 

June 30,

 

 

June 30,

 

 

 

2016

 

 

2016

 

Total revenue

 

$

677,328

 

 

$

1,349,635

 

Total expenses

 

 

1,310,729

 

 

 

2,726,510

 

Preferred stock dividend

 

 

128,084

 

 

 

218,186

 

Net loss attributable to common shareholders

 

$

(761,485

)

 

$

(1,595,061

)

Basic and diluted net loss per share

 

$

(0.03

)

 

$

(0.05

)


At June 30, 2017 and December 31, 2016, respectively, website acquisition assets consisted of the following:


 

 

June 30,

 

 

December 31,

 

 

 

2017

 

 

2016

 

Website Acquisition Assets

 

$

1,739,179

 

 

$

1,739,179

 

Less: Accumulated Amortization

 

 

(732,587

)

 

 

(581,045

)

Less: Impairment Loss

 

 

(191,020

)

 

 

(191,020

)

Website Acquisition Assets, net

 

$

815,572

 

 

$

967,114

 


Non-cash amortization expense for the three and six month periods ending June 30, 2017 and 2016 was $75,806 and $151,542, respectively and $61,582 and $124,425, respectively.


In connection with the acquisition of the Black Helmet apparel business, the Company recognized $150,000 attributable to tradenames acquired.