GOODWILL AND INTANGIBLE ASSETS

12 Months Ended

Dec. 31, 2011

Goodwill

During the year ended December 31, 2011, our goodwill impairment test indicated that future revenues from the acquisition of Bitzio, LLC would not support the carrying value of the associated goodwill. We acquired Bitzio, LLC for its 4,000 mobile app roadmap which the Company plans to use in the future and for its key personnel. However, a key criterion of the impairment test is historic operating performance. Bitzio, LLC, as a recent start-up, had limited operating history at the time of acquisition. As such, according to U.S. generally accepted accounting principles, the Company was required to record a goodwill impairment charge of $2,350,000 which was calculated as the difference between the fair value of the assets and liabilities of the reporting unit, including the carrying value of its goodwill, to the reporting unit’s fair value, measured by an income approach utilizing projected discounted cash flows.

In November 2011, we completed the purchase allocation related to the acquisition of Thinking Drone, Inc., which included a $611,461 adjustment to the fair value of acquired mobile applications and goodwill of $638,539. The net carrying value of goodwill at December 31, 2011 and 2010 was $627,134 and $-0-, respectively.

Intangible Assets

Intangible assets include assets capitalized as a result of our acquisitions and represent the valuation of the mobile application portfolio acquired based on net cash flows from the portfolio. The components of intangible assets at December 31, 2011 and 2010 were as follows:

	As of December 31,
	2011			2010
Mobile application portfolio (useful life – 3 years)	$	611,461		$	-
Less: accumulated amortization		(29,037	)		-

Mobile application portfolio, net	$	582,424		$	-

As of December 31, 2011, estimated annual amortization expenses for definite-lived intangible asset for each of the three succeeding years are as follows:

2012	$	203,820
2013		203,820
2014	$	174,784