| Summary of preliminary allocation of the purchase price |
Accordingly, the final acquisition accounting adjustments could differ. The preliminary allocation of the purchase price is as follows: | | | | Cash paid to Wilson-Davis shareholders | | $ | 7,127,569 | Short-term notes | | | 5,000,000 | Long-term notes | | | 7,971,197 | Fair value of shares transferred from sponsor | | | 8,850,100 | Total consideration paid | | | 28,948,866 | | | | | Allocated to: | | | | Cash | | $ | 11,333,271 | Cash segregated | | | 22,000,605 | Receivables | | | 4,065,148 | Trading Securities, market value | | | 6,875 | Prepaid Income Tax | | | 201,125 | Accounts payable, accrued expenses and other current liabilities | | | (28,045,034) | Current portion of lease liability | | | (161,212) | Property and equipment | | | 23,645 | Cash deposit BDs and Clearing Organizations | | | 3,536,664 | Operating Lease Right-to-Use Lease Assets | | | 395,063 | Other Assets | | | 385,058 | Stock loan | | | (1,431,068) | Long-term Lease liability | | | (239,629) | Subordinated Borrowing | | | (1,950,000) | Trading Account deposit | | | (100,000) | Net assets acquired | | | 10,020,511 | Excess of purchase price over net liabilities assumed before allocation to identifiable intangible assets and goodwill | | $ | 18,928,355 |
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| Summary of identifiable intangible assets acquired |
| | | | | | | | | | | Estimated | | | | | | Useful Life | | | Amount | | (Years) | Licenses(a) | | $ | 4,553,944 | | Indefinite | Customer Lists(b) | | | 14,374,411 | | 15 | Intangible Assets | | $ | 18,928,355 | | — |
(a) | The value of the licenses was based on replacement costs for an operating enterprise which are estimated to be $4.55 million over 16 months. The replication cost was then allocated a 12% estimated. The development period was estimated as 1.25 years. The rate of return was based on an annual rate of return of 27.9%. |
(b) | The Wilson Davis customer relationships were valued using the Multi-Period Excess Earnings Method (“MPEEM”). The MPEEM reflects the present value of the operating cash flows generated by existing customer relationships after taking into account the cost to realize the revenue and an appropriate discount rate to reflect the time value and risk associated with the cash flows. |
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