This isn't easy to explain but basically BTZO investments such as Lex Luu, E-motion apparel were purchased with shares booked as intangible Assets which we were supposed to benefit with additional common shares from 2014...that didn't happen so they ended up writing off a portion of that amount for tax purposes...that's why you have a reduction of assets at the end of the quarter...it's not a reduction of actual assets it's a bookkeeping entry only...also Marilu and Hub were paid with shares which they originally booked as a prepaid asset...they expense the quarterly portion...all those write offs contributed that huge increase in operating expenses...another words most of it was for accounting purposes not moneys actually paid out...I hope this helps...if you aren't an accountant or have a degree in business this stuff will not be easy to understand but take my word for it things are getting better
Intangible Assets
On July 16, 2014, we entered into a sales purchase agreement in 100% acquisition of all outstanding shares of Lexi Luu. Designs. Bitzio paid 500,000,000 restricted common shares for this acquisition. Lexi Luu shareholders are able to earn an additional $300,000 in restricted common shares over the course of years in an earn out upon hitting certain revenue benchmarks. We accounted for the transaction as an equity purchase. Of the purchase price paid as of July 16, 2014 ($183,629) was allocated among the assets and liabilities and difference was taken to intangible assets in amount of $690,629. As of September 30, 2015, the net carrying amount is $273,414. This intangible assets will be amortized over life of 2 years, estimated remaining amortization expense for 2015 and 2016 are $87,038 and $186,376 respectively.
On July 18, 2014, we entered into a sales purchase agreement in 100% acquisition of all outstanding shares of E-motion Apparel. Designs. Bitzio paid 350,000,000 restricted common shares for this acquisition. E-motion Apparel shareholders are able to earn an additional $300,000 in restricted common shares over the course of years in an earn out upon hitting certain revenue benchmarks. We accounted for the transaction as an equity purchase. Of the purchase price paid as of July 18, 2014 ($26,235) was allocated among the assets and liabilities and difference was taken to intangible assets in amount of $74,235. As of September 30, 2015, the net carrying amount is $29,592. This intangible assets will be amortized over life of 2 years, estimated remaining amortization expense for 2015 and 2016 are $9,356 and $20,236 respectively.
In the Skipjack acquisition (see note 5), of the purchase price paid as of February 26, 2015 ($15,249) was allocated among the assets and liabilities and difference was taken to intangible assets in amount of $84,751. As of September 30, 2015, the net carrying amount is $59,674. This intangible assets will be amortized over life of 2 years, estimated remaining amortization expense for 2015, 2016, and 2017 are $10,681 and $42,492, and $6,501 respectively.
In the Punkz acquisition (see note 5), of the purchase price paid as of March 3, 2015 ($24,062) was allocated among the assets and liabilities and difference was taken to intangible assets in amount of $175,938. As of September 30, 2015, the net carrying amount is $125,085. This intangible assets will be amortized over life of 2 years, estimated remaining amortization expense for 2015, 2016, and 2017 are $22,173, and $88,210, and $14,702 respectively.
Amortization of intangible assets is computed using the straight-line method and is recognized over the estimated useful lives of the intangible assets. Amortization expense was $104,877 and $0 for the nine months ended September 30, 2015 and 2014, respectively.
Estimated amortization expense for the intangible assets for the next five years consists of the following:
Year ending December 31,
2015 $ 129,248
2016 337,314
2017 21,203
Operating Expenses
The primary component of our operating expenses for the nine months ended September 30, 2015 consisted of general and administrative expenses of $1,054,871. During the nine months ended September 30, 2014, our general and administrative expenses totaled $407,249. General and administrative expenses increased by $647,622 mainly due to the amortization of intangible assets and management prepaid wage related to newly acquired subsidiaries.
