Business Acquisition

12 Months Ended

Dec. 31, 2018

BUSINESS ACQUISITIONS

On December 6, 2018, we acquired certain assets of Paofit Holdings Pte Limited, its subsidiaries and related companies (collectively, "Paofit") for an aggregate purchase price of $2.8 million. The acquisition was funded with cash on hand. Based primarily in Singapore, the Paofit business is focused on developing and distributing software applications known as RunSocial^® and RideSocial™. The Paofit acquisition is expected to broaden our digital platform applications and deepen our talent pool. We accounted for the transaction as a business combination.

Since the acquisition occurred on December 6, 2018, no amount of net sales or net income related to the Paofit business was included in our reported 2018 amounts. We expect to categorize Paofit's results of operations in our Direct segment.

Total acquisition costs incurred through December 31, 2018 were $0.2 million and were expensed in general and administrative costs.

Purchase Price Allocation

Acquired assets were recorded at estimated fair value as of the acquisition date. The excess of the purchase price over the estimated fair value of identifiable net assets resulted in the recognition of goodwill of $1.6 million, all of which was assigned to the Direct segment, and is attributed primarily to Paofit's intellectual property base, employee workforce and application to future digital

technologies. The goodwill is not expected to be deductible for income tax purposes. No liabilities were acquired as part of the transaction.

The purchase price allocation was determined based on the preliminary fair values of the assets identified as of the acquisition date. It may be adjusted, within a period of no more than 12 months from the acquisition date, if the preliminary fair values change as a result of circumstances existing at the acquisition date, and upon receipt of final appraisals and valuations. Such fair value adjustments may arise in respect to intangible assets and inventories upon completion of the necessary valuations and physical verifications of such assets.

As of December 31, 2018, the fair values of the assets acquired are preliminary because final appraisals and valuations have not yet been completed. The following table summarizes the preliminary fair values of the assets acquired as of the December 6, 2018 acquisition date (in thousands):



	Preliminary Valuation at December 6, 2018
Inventories	$	8
Intangible assets	1,140
Identifiable assets acquired	1,148
Goodwill	1,602
Total assets acquired	$	2,750

The following table sets forth the components of identifiable intangible assets and their estimated fair values and useful lives as of the acquisition date (in thousands):



	Estimated fair value		Weighted-average amortization period (years)
Trade mark - RunSocial	$	250	5
Patents	410		7
Developed technology	480		5
	$	1,140	5.7

This acquisition is not material to our net sales, results of operations or total assets during any period presented. Accordingly, our consolidated results from operations do not differ materially from historical performance as a result of this acquisition, and, therefore, pro forma results are not presented.