RMG Networks Holding Corp - 10-Q filing on 2014-05-09

Note 4 - Goodwill and Intangible Assets

3 Months Ended

Mar. 31, 2014

Goodwill and Intangible Assets Disclosure [Abstract]

Goodwill and Intangible Assets Disclosure [Text Block]

4. Goodwill and Intangible Assets

The carrying amount of goodwill at December 31, 2013, resulted from the valuation resulting from the acquisitions of RMG and Symon and the application of Financial Accounting Standards Board Standard Codification 805, “Business Combinations”. As a result, the basis of the net assets and liabilities of RMG and Symon were adjusted to reflect their fair values and the appropriate amount of goodwill was recorded for the consideration given in excess of the fair values assigned to the net identifiable assets.

The following table shows the carrying amount of goodwill:

	March 31, 2014		December 31, 2013
Balance - beginning	$	28,673,156	$	-
Goodwill resulting from acquisitions occurring in April 2013		-		28,642,398
Purchase price accounting adjustment		616,988		-
Foreign exchange adjustment		9,370		30,758
Balance - ending	$	29,299,514		28,673,156

Beginning goodwill at April 20, 2013 consisted of $8,461,359 for RMG and $20,181,039 for Symon.

The carrying value of the Company’s intangible assets at March 31, 2014 were as follows:

	Weighted Average Amortization Years		Gross Carrying Amount		Accumulated Amortization			Net carrying Amount
Software and technology		5	$	9,200,000	$	(1,748,000	)	$	7,452,000
Customer relationships		8		22,200,000		(2,636,250	)		19,563,750
Partner relationships		10		8,800,000		(836,000	)		7,964,000
Tradenames and trademarks		10		1,700,000		(161,500	)		1,538,500
Covenant not-to-compete		2		1,150,000		(546,250	)		603,750
Customer order backlog		1		400,000		(400,000	)		0
Total			$	43,450,000	$	(6,328,000	)	$	37,122,000

The carrying values of the Company’s intangible assets at December 31, 2013, were as follows:

	Weighted Average Amortization Years		Gross Carrying Amount		Accumulated Amortization			Net carrying Amount
Software and technology		5	$	9,200,000	$	(1,288,000	)	$	7,912,000
Customer relationships		8		22,200,000		(1,942,500	)		20,257,500
Partner relationships		10		8,800,000		(616,000	)		8,184,000
Tradenames and trademarks		10		1,700,000		(119,000	)		1,581,000
Covenant not-to-compete		2		1,150,000		(402,500	)		747,500
Customer order backlog		1		400,000		(300,000	)		100,000
Total			$	43,450,000	$	(4,668,000	)	$	38,782,000

Amortization expense for the three months ended March 31, 2014 was $1,660,000. Amortization expense for the Predecessor Company for period February 1 through April 19, 2013 was $9,522.

Projected amortization expense for these assets for the five years ending December 31 and thereafter is as follows:

2014	$	6,340,000
2015		5,837,500
2016		5,665,000
2017		5,665,000
2018		4,377,000
Thereafter		10,897,500
Total	$	38,782,000