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INTANGIBLE ASSETS
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6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2012
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| Goodwill and Intangible Assets Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| NOTE 6 - INTANGIBLE ASSETS |
Goodwill
During the six months ended June 30, 2012, our goodwill impairment test indicated write-downs would be required for our two latest acquisitions. Goodwill impairment is 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.
We acquired MPC for its high-end media and animation capabilities. We also plan to secure digital rights to animated versions of the world-renowned athletes and stars with which MPC has relationships. However, a key criterion of the impairment test is historic operating performance. MPC, as a recent start-up, had limited operating history at the time of acquisition. As such, according to GAAP, we are required to record a goodwill impairment charge of $2,145,000.
ACT Smartware GmbH is a European company with a stable profitable history in the software and mobile apps sector. In addition, their talented principals bring a high-level of innovation and talent to Bitzio. However, despite the international expansion, added talent, stable earnings history, and early mobile app portfolio, we applied a conservative approach of the goodwill impairment test focused on historic operating performance. Accordingly, we recorded a goodwill impairment charge of $1,836,508 against the purchased goodwill of $2,061,120. 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 GAAP, we are required to record a goodwill impairment charge of $2,350,000. Intangible Assets
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 include assets capitalized as a result of our acquisitions and represent the valuation of the mobile application portfolio and customer list acquired based on net cash flows from the portfolio. The components of intangible assets were as follows:
Amortization of intangible assets is computed using the straight-line method and is recognized over the estimated useful lives of the intangible assets. Amortization expense was $332,166 and $nil for the six months ended June 30, 2012 and 2011, respectively. |
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