Note 5 - Intangible Assets

The Company acquired a customer relationship with a fair value of $50,000 on August 31, 2011, as part of its acquisition of Diamond Bar. Concurrently with its acquisition of Diamond Bar, the Company entered into a trademark purchase and assignment agreement for all rights, title and interest in two trademarks (Diamond Sofa and Diamond Furniture) for $200,000 paid in full at the closing. Amortization of said customer relationship and the trademarks is provided using the straight-line method and estimated lives were 5 years for each.

The Company acquired a customer relationship with a fair value of $6,100,559 on April 24, 2013, as part of its acquisition of Bright Swallow. Amortization of said customer relationship is provided using the straight-line method and estimated life was 15 years.

The Company’s eCommerce platform is a website through which customers are able to browse and place orders online for the Company’s products. For the downloadable mobile application, customers are able to download the application onto their own mobile devices to browse the Company’s product offerings. The Nova sales kit application is used on mobile devices to enable the Company’s sales representatives to display the Company’s products and inventory to customers. The total cost associated with the development, programming, design and roll-out of the Company’s eCommerce platform, downloadable mobile application, and Nova sales kit application was approximately $1.20 million. The Company’s eCommerce platform, downloadable mobile application, and Nova sales-kit application were completed and put into operation in 2015. These intangible assets are amortized using the straight-line method with an original estimated life of 10 years for each and are revised to 1 year in the quarter ended March 31, 2017. The effect of the change in estimate is accounted for on a prospective basis.

Intangible assets consisted of the following as of September 30, 2018 and December 31, 2017:

	September 30, 2018			December 31, 2017

eCommerce platform	$	1,208,200		$	1,208,200
Customer relationship		6,150,559			6,150,559
Trademarks		200,000			200,000
Less: accumulated amortization		(3,661,179	)		(3,356,151	)
	$	3,897,580		$	4,202,608

Amortization of intangible assets was $305,028 and $1,113,011 for the nine months ended September 30, 2018 and 2017, respectively; and $101,676 and $371,004 for the three months ended September 30, 2018 and 2017, respectively.

Estimated amortization expense relating to the existing intangible assets with finite lives for each of the next five years is as follows:

12 months ending September 30,
2019	$	406,704
2020		406,704
2021		406,704
2022		406,704
2023		406,704