Note 3. Acquisitions SnAPPnet On May 21, 2010, our newly formed subsidiary, SnAPPnet, Inc., a Texas corporation, purchased substantially all the assets of Pelican Applications, LLC ( Pelican ) in exchange for $5,335 cash, 100,000 shares of Series B Convertible Preferred Stock of VHS, and other contingent consideration. The assets acquired included a software application product known as SnAPPnet" which is currently used for physician credentialing, as well as Pelican s entire customer base. The Company intends to utilize the SnAPPnet" software to expand its offering to physicians, and to adapt the software to meet the needs of NOW Solutions  hospital clients who may need a credentialing product for nurses. The fair value of consideration transferred in the acquisition, the assets acquired and the liabilities assumed are set forth in the following table: Consideration: Cash $ 5,335 Series B Convertible Preferred Stock (1) - Contingent consideration (2) (3) 12,256 Total consideration $ 17,591 Below is the purchase price allocation: Recognized amount of identifiable assets acquired and liabilities assumed (3) : Software $ 189,201 Property and equipment 7,604 Intangibles 22,200 Accounts payable (9,274 ) Notes payable (66,660 ) Deferred revenue (119,352 ) Royalty payable (6,128 ) $ 17,591 (1) No value has been assigned to the Series B Convertible Preferred Stock of VHS, since VHS is deemed a development stage company with no assets, liabilities or operations at the time of the transaction. Also, it is a wholly-owned subsidiary of Vertical Computer Systems, Inc. and does not trade on any exchange independently of VCSY. (2) The contingent consideration consists of a 5% royalty payment on sales of the SnAPPnet" software application, and is payable to the members (equity owners) of Pelican, prorated to their respective ownership interests in Pelican. The royalty will expire 10 years following the closing date or the payment of $2.5 million, whichever occurs first. The fair value of the contingent consideration was determi