Note 5 - Goodwill and Other Intangible Assets

12 Months Ended

Dec. 31, 2016

Goodwill and Intangible Assets Disclosure [Text Block]

. Goodwill and Other Intangible Assets

Goodwill

Goodwill represents the excess of purchase price over the fair value of tangible or identifiable intangible assets acquired and liabiliti

es assumed in our acquisitions.

The Company'

s Goodwill balance is

$21.0

million as of

December

31,

2016,

unchanged from

December

31,

2015.

The Company's goodwill relates

90%

($18.9

million) to its Domain Services operating segment and

10%

($2.1

million) to its Network Access Services operating segment.

Goodwill is not amortized, but is subject to an annual impairment test. The Company performed an impairment analysis as outlined in note

2(g)

and there were no indications of impairment

in the

2016

and

2015

impairment tests.

Other Intangible Assets:

Intangible assets consist of acquired brand, customer relationships, surname domain names, direct navigation domain names and network rights. The Company considers its intangible assets consisting of surname

domain names and direct navigation domain names as indefinite life intangible assets. The Company has the exclusive right to these domain names as long as the annual renewal fees are paid to the applicable registry. Renewals occur routinely and at a nominal cost. The indefinite life intangible assets are not amortized, but are subject to impairment tests performed throughout the year. During

2016,

we assessed that certain of the domain names that were originally acquired in the

June

2006

acquisition of Mailbank.com Inc. that were up for renewal, should not be renewed. During the year ended

December

31,

2016,

domain names, with a book value of

$42,673,

were not renewed and were recorded as an impairment of indefinite life intangible assets. During the year ended

December

31,

2015

domain names, with a book value of

$206,116,

were not renewed and were recorded as impairments of indefinite life intangible assets.

Intangible assets, comprising brand, customer relationships and network rights are being amortized on a s

traight-line basis over periods of

four

fifteen

years.

April

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.

million. The acquired assets were funded through a

$6.0

million advance under the

2012

Demand Loan Facilities. These assets have been assigned to Customer Relationships and are being amortized over

years.

In Fiscal

2016,

the Company also completed

four

smaller domain related asset acquisitions, primarily domain hosting customer relationships, for a total consideration of

$0.3

million. These assets have been assigned to Customer Relationships and are being amortized over

years.

Acquired intangible assets consist of the following:

	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, 2014	$	11,525,624		$	1,941,231		$	110,510		$	625,220		$	-		$	14,202,585

Acquisition of Ting Virginia, LLC (note 3)		-			-			-			68,000			692,000			760,000
Additions to/(disposals from) domain portfolio, net		(6,815	)		(17,251	)		-			-			-			(24,066	)
Impairment of indefinite life intangible assets		(179,454	)		(26,662	)		-			-			-			(206,116	)
Amortization expense		-			-			(30,840	)		(193,366	)		(38,520	)		(262,726	)
Balances, December 31, 2015	$	11,339,355		$	1,897,318		$	79,670		$	499,854		$	653,480			14,469,677
		-			-			-			-			-			-
Acquisition of customer relationships		-			-			-			6,529,654			-			6,529,654
Additions to/(disposals from) domain portfolio, net		(6,166	)		(23,525	)		-			-			-			(29,691	)
Impairment of indefinite life intangible assets		(37,968	)		(4,705	)		-			-			-			(42,673	)
Amortization expense		-			-			(74,460	)		(830,697	)		(48,017	)		(953,174	)
Balances, December 31, 2016	$	11,295,221		$	1,869,088		$	5,210		$	6,198,811		$	605,463		$	19,973,793

The following table shows the estimated amortization expense for each of the next

years, assuming no further additions to acquired intangible assets are made:

	Year ending December 31,
201 7	$	1,181,294
201 8		1,128,114
201 9		978,936
20 20		978,936
202 1		978,936
Thereafter		1,563,268
Total	$	6,809,484

- 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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