Quarterly report pursuant to Section 13 or 15(d)

Acquisitions

v3.7.0.1
Acquisitions
 3 Months Ended
Mar. 31, 2017
Business Combination Disclosure [Text Block]
Note 4. Acquisitions
 
The Company completed the following acquisitions during the three months ended March 31, 2017:
 
SuckerPunch
 
On January 4, 2017, the Company acquired the stock of Roundtable Creative Inc., a Virginia corporation d/b/a SuckerPunch Entertainment, a leading fighter management and marketing company, for an aggregate purchase price of $1,686,347, of which $357,500 was paid in cash and $1,146,927 was paid with the issuance of 307,487 shares of Alliance MMA common stock valued at $3.73 per share, the fair value of Alliance MMA common stock on January 4, 2017  and $181,920 was paid with the issuance of a warrant to acquire 93,583 shares of the Company’s common stock.
 
Fight Time
 
On January 18, 2017, the Company acquired the mixed martial arts promotion business of Fight Time Promotions, LLC (“Fight Time”) for an aggregate consideration of $371,468, of which $84,000 was paid in cash and $287,468 was paid with the issuance of 74,667 shares of the Alliance MMA’s common stock valued at $3.85 per share, the fair value of Alliance MMA common stock on January 18, 2017.
 
The acquisitions of SuckerPunch and Fight Time Promotions have been accounted for as business acquisitions, under the acquisition method of accounting.
 
Preliminary Purchase Allocation – SuckerPunch
 
As consideration for the acquisition of SuckerPunch, the Company delivered the following amounts of cash and shares of common stock.
 
 
 
Cash
 
Shares
 
Warrant
Grant
 
Consideration
Paid
 
SuckerPunch
 
$
357,500
 
 
307,487
 
 
93,583
 
$
1,686,347
 
 
In connection with the acquisition, 108,289 shares of the 307,487 shares of common stock that were issued as part of the purchase price were placed into escrow to guarantee the financial performance of SuckerPunch post-closing. Accordingly, in the event the gross profit is less than $265,000 during fiscal year 2017, all 108,289 shares held in escrow will be forfeited.
 
The following table reflects the preliminary allocation of the purchase price for SuckerPunch to identifiable assets and preliminary pro forma intangible assets and goodwill:
 
 
 
SuckerPunch
 
Cash
 
$
—
 
Accounts receivable, net
 
 
—
 
Intangible assets
 
 
1,525,584
 
Goodwill
 
 
160,763
 
Total identifiable assets
 
$
1,686,347
 
Total identifiable liabilities
 
 
—
 
Total purchase price
 
$
1,686,347
 
 
Preliminary Purchase Allocation – Fight Time Promotions
 
As consideration for the acquisition of the MMA promotion business of Fight Time, the Company delivered the following amounts of cash and shares of common stock.
 
 
 
Cash
 
Shares
 
Consideration
Paid
 
Fight Time Promotions
 
$
84,000
 
 
74,667
 
$
371,468
 
 
In connection with the business acquisition, 28,000 shares of the 74,667 shares of common stock that were issued as part of the purchase price were placed into escrow to guarantee the financial performance of Fight Time post-closing. Accordingly, in the event the gross profit of Fight Time is less than $60,000 during fiscal year 2017, all 28,000 shares held in escrow will be forfeited.
 
The following table reflects the preliminary allocation of the purchase price for the business of the Fight Time to identifiable assets and preliminary pro forma intangible assets and goodwill:
 
 
Cash
 
 
—
 
Accounts receivable
 
 
—
 
Intangible assets
 
 
48,867
 
Goodwill
 
 
322,601
 
Total identifiable assets
 
 
371,468
 
Total identifiable liabilities
 
 
—
 
Total purchase price
 
 
371,468
 
 
Under acquisition accounting, assets and liabilities acquired are recorded at their fair value on the acquisition date, with any excess in purchase price over these values being allocated to identifiable intangible assets and goodwill at March 31, 2017.
 
Goodwill and Identifiable Intangible Assets
 
Goodwill
 
The change in the carrying amount of goodwill for the three months ended March 31, 2017 is:
 
Balance as of December 31, 2016
 
$
3,271,815
 
Goodwill – Fight Time Promotions
 
 
322,601
 
Goodwill – Sucker Punch
 
 
160,763
 
Balance as of March 31, 2017
 
$
3,755,179
 
 
Intangible Assets
 
Identified intangible assets consist of the following:
 
 
 
Useful
 
 
 
Intangible assets
 
Life
 
Total
 
Video library, intellectual property
 
5 years
 
$
3,537,741
 
Venue contracts
 
3 years
 
 
1,966,400
 
Brand
 
3 years
 
 
373,867
 
Ticketing software
 
3 years
 
 
360,559
 
Fighter contracts
 
 
 
 
1,525,584
 
Total intangible assets, gross
 
 
 
$
7,764,151
 
Accumulated amortization
 
 
 
 
(901,863)
 
Total intangible assets, net
 
 
 
$
6,862,288
 
 
Amortization expense for the three months ended March 31, 2017 and 2016, was $517,376 and $0, respectively.
 
As of March 31, 2017, estimated amortization expense for the unamortized acquired intangible assets over the next five years and thereafter is as follows:
 
2017
 
$
1,579,764
 
2018
 
 
2,106,352
 
2019
 
 
1,905,355
 
2020
 
 
715,572
 
2021
 
 
536,911
 
Thereafter
 
 
18,334
 
 
 
$
6,862,288