Quarterly report pursuant to Section 13 or 15(d)

Intangible Assets and Goodwill

Intangible Assets and Goodwill

6 Months Ended

Jun. 30, 2017

Goodwill and Intangible Assets Disclosure [Abstract]

4. INTANGIBLE ASSETS AND GOODWILL

The fair value of identifiable intangible assets acquired in the acquisition of Benchmark consist of the following:

Contracts in progress	$	10,352
Trademarks and tradenames		1,592
Customer relationships		19,087
Non-compete		599
Total identifiable intangible assets		31,630

Goodwill		46,922
Total Intangible Assets	$	78,552

Contracts in progress

The contracts in progress were valued within the income approach, multi-period excess earnings method. The contracts in progress are being amortized on a straight-line basis over an estimated useful life of eighteen months based on the remaining duration of the contracts in progress.

Trademarks and tradenames

The acquired trademarks and tradenames were valued using the income approach relief from royalty method. The Company has assumed the trade names will generate cash flows for the Company for seven years and will be amortized on a straight-line basis over their determined useful life.

Customer relationships

The existing customer relationships were valued within the income approach, multi-period excess earnings method. The customer relationships are being amortized on a straight-line basis over an estimated useful life of seven years, which is based on historical customer retention and attrition rates.

Non-compete

Non-competes were valued using the income approach, difference in cash flows “with” and “without” competition. The non-competes are being amortized on a straight-line basis over an estimated useful life of five years, which is based on the duration of the agreements.

Goodwill

The existing goodwill was valued as the excess of the purchase price of Benchmark assets over the fair market value of the assets purchased. Goodwill will be evaluated for impairment annually or when events and circumstances warrant such review. Impairment charges, if any, will be charged to operating expenses.

A cost approach was determined to be the most appropriate method for valuing the Assembled Workforce. The Assembled Workforce is not an identified intangible asset under ASC 805, Business Combinations so proceeds are not allocated directly to this asset. Rather, the fair value of the Assembled Workforce is calculated in order to determine the contributory asset charges for use in the multi-period excess earnings method which was used to value the Customer Relationships and the Contracts in Progress. For purposes of the purchase price allocation, the value of the assembled workforce is included within the value of residual goodwill.

Identifiable intangible assets consisted of the following at June 30, 2017:

	Weighted average remaining useful life (Months)		Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount
Indefinite- Lived Intangible
Goodwill		-	$	46,922	$	-		$	46,922

Definite- Lived Intangibles
Trademarks and tradenames		81.7		1,592		44			1,548
Customer relationships		81.7		19,087		523			18,564
Contracts in progress		15.7		10,352		1,720	[1]		8,632
Non-compete		57.7		599		23			576
Total Definite Intangible Assets				31,630		2,310			29,320

Total Intangible Assets			$	78,552	$	2,310		$	76,242

[1] Amortization expense for the three and six months ended June 30, 2017 totaled $2,310, of which $589 was charged to operating expenses and $1,720 was charged to cost of revenues.

Future projected annual amortization consists of the following for each of the following fiscal years ended December 31:

2017 (Remaining)	$	6,027
2018		7,215
2019		3,074
2020		3,231
2021		2,954
Thereafter		6,819
Total	$	29,320