Note 5 - Goodwill and Other Intangible Assets

9 Months Ended

Sep. 30, 2016

Goodwill and Intangible Assets Disclosure [Text Block]

5. Goodwill and Other Intangible Assets:

Goodwill

Goodwill represents the excess of the purchase price over the fair value of tangible or identifiable intangible assets acquired and liabilities assumed in our acquisitions.

Goodwill consists of the following:

	September 30, 2016		December 31, 2015

Boardtown Corporation	$	2,044,847	$	2,044,847
Hosted Messaging Assets of Critical Path		4,072,297		4,072,297
Innerwise Inc.		5,801,040		5,801,040
Mailbank.com Inc.		6,072,623		6,072,623
EPAG Domainservices GmbH		882,320		882,320
Ting Fiber Inc.		1,426,893		1,426,893
Ting Virginia Inc.		705,123		705,123
Total	$	21,005,143	$	21,005,143

The Company’s goodwill relates 90% to its Domain Services operating segment and 10% to its Network Access Services – Other Services operating segment.

Goodwill is not amortized, but is subject to an annual impairment evaluation.

Other Intangible Assets:

Intangible assets consist of network rights, brand, customer relationships, surname domain names and our portfolio of domain names. As reflected in the table below, these balances are being amortized on a straight-line basis over the life of the intangible assets, except for the surname domain names and direct navigation domain names, which have been determined to have an indefinite life and which are evaluated at least annually for impairment.

A summary of acquired intangible assets for the three months ended September 30, 2016 is as follows:

	Surname domain names			Direct navigation domain names			Brand			Customer relationships			Network rights			Total
Amortization period	indefinite life			indefinite life			7 years			4 - 7 years			15 years

Balances, June 30, 2016	$	11,314,043		$	1,876,930		$	64,250		$	6,431,929		$	630,416		$	20,317,568

Acquisition of customer relationships		-			-			-			74,400			-			74,400
Additions to/(disposals from) domain portfolio, net		(1,622	)		(3,138	)		-			-			-			(4,760	)
Impairment of indefinite life intangible assets		(1,298	)		(1,568	)		-			-			-			(2,866	)
Amortization expense		-			-			(7,710	)		(273,305	)		(11,532	)		(292,547	)
Balances September 30, 2016	$	11,311,123		$	1,872,224		$	56,540		$	6,233,024		$	618,884		$	20,091,795

A summary of acquired intangible assets for the nine months ended September 30, 2016 is as follows:

	Surname domain names			Direct navigation domain names			Brand			Customer relationships			Network rights			Total
Amortization period	indefinite life			indefinite life			7 years			4 - 7 years			15 years

Balances, December 31, 2015	$	11,339,355		$	1,897,318		$	79,670		$	499,854		$	653,480		$	14,469,677

Acquisition of customer relationships		-			-			-			6,324,970			-			6,324,970
Additions to/(disposals from) domain portfolio, net		(5,192	)		(20,389	)		-			-			-			(25,581	)
Impairment of indefinite life intangible assets		(23,040	)		(4,705	)		-			-			-			(27,745	)
Amortization expense		-			-			(23,130	)		(591,800	)		(34,596	)		(649,526	)
Balances September 30, 2016	$	11,311,123		$	1,872,224		$	56,540		$	6,233,024		$	618,884		$	20,091,795

The following table shows the estimated amortization expense for each of the next 5 years, assuming no further additions to acquired intangible assets are made:

	Year ending December 31,

Remainder of 2016	$	294,519
2017		1,178,078
2018		1,073,638
2019		950,090
2020		950,090
Thereafter		2,462,035
Total	$	6,908,450

As of September 30, 2016, the accumulated amortization for the definite life intangible assets was $6.6 million.

With regard to indefinite life intangible assets, as part of our normal renewal process we assessed that certain domain names that were acquired in the June 2006 acquisition of Mailbank.com Inc. and that were up for renewal should not be renewed. Accordingly, for the three months ended September 30, 2016, domain names, with a book value of $2,866 (three months ended September 30, 2015 - $18,550) were not renewed and were recorded as an impairment of indefinite life intangible assets. For the nine months ended September 30, 2016, domain names, with a book value of $27,745 (nine months ended September 30, 2015 - $68,848), were not renewed and were recorded as an impairment of indefinite life intangible assets.

On April 1, 2016, the Company acquired the international reseller channel from Melbourne IT Limited for consideration of $6.0 million, excluding legal and registry related transaction costs of $0.2 million. The acquired assets were funded through a $6.0 million advance under the 2012 Demand Loan Facilities on March 31, 2016. These assets have been assigned to Other Intangible Assets, Customer Relationships and are being amortized over 7 years.

- Definition

The entire disclosure for the aggregate amount of goodwill and a description of intangible assets, which may include (a) for amortizable intangible assets (also referred to as finite-lived intangible assets), the carrying amount, the amount of any significant residual value, and the weighted-average amortization period, (b) for intangible assets not subject to amortization (also referred to as indefinite-lived intangible assets), the carrying amount, and (c) the amount of research and development assets acquired and written off in the period, including the line item in the income statement in which the amounts written off are aggregated, if not readily apparent from the income statement. Also discloses (a) for amortizable intangibles assets in total and by major class, the gross carrying amount and accumulated amortization, the total amortization expense for the period, and the estimated aggregate amortization expense for each of the five succeeding fiscal years, (b) for intangible assets not subject to amortization the carrying amount in total and by major class, and (c) for goodwill, in total and for each reportable segment, the changes in the carrying amount of goodwill during the period (including the aggregate amount of goodwill acquired, the aggregate amount of impairment losses recognized, and the amount of goodwill included in the gain (loss) on disposal of a reporting unit). If any part of goodwill has not been allocated to a reportable segment, discloses the unallocated amount and the reasons for not allocating. For each impairment loss recognized related to an intangible asset (excluding goodwill), discloses: (a) a description of the impaired intangible asset and the facts and circumstances leading to the impairment, (b) the amount of the impairment loss and the method for determining fair value, (c) the caption in the income statement or the statement of activities in which the impairment loss is aggregated, and (d) the segment in which the impaired intangible asset is reported. For each goodwill impairment loss recognized, discloses: (a) a description of the facts and circumstances leading to the impairment, (b) the amount of the impairment loss and the method of determining the fair value of the associated reporting unit, and (c) if a recognized impairment loss is an estimate not finalized and the reasons why the estimate is not final. May also disclose the nature and amount of any significant adjustments made to a previous estimate of an impairment loss.

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