Organization

comScore, Inc., together with its consolidated subsidiaries (collectively, "comScore" or the “Company”), headquartered in Reston, Virginia, is a global information and analytics company that measures audiences, consumer behavior and advertising across media platforms. On January 29, 2016, the Company completed a merger with Rentrak Corporation ("Rentrak") a global media measurement and advanced consumer targeting company serving the entertainment, television, movie, video and advertising industries, and Rentrak became a wholly-owned subsidiary of the Company. Refer to Footnote 3, Business Combinations and Acquisitions.

Operating segments are defined as components of a business that can earn revenues and incur expenses for which discrete financial information is available that is evaluated on a regular basis by the chief operating decision maker ("CODM"). The Company’s CODM is its Principal Executive Officer, who decides how to allocate resources and assess performance. The Company operates in one operating segment. A single management team reports to the CODM who manages the entire business. The Company’s CODM reviews consolidated results of operations to make decisions, allocate resources and assess performance and does not evaluate the profit or loss from any separate geography or product lines. The Company's President and Executive Vice Chairman assumed the role of CODM following the retirement of the Company's Chief Executive Officer in November 2017.

As a result of the delay in the Company's filings of its Quarterly Reports on Form 10-Q and Annual Report on Form 10-K, the Company’s common stock ("Common Stock") was delisted from The Nasdaq Global Select Market on May 30, 2017. Upon the suspension of trading of the Company’s Common Stock on The Nasdaq Global Select Market, the Common Stock has been traded on the OTC Pink Tier under the symbol “SCOR.”

Uses and Sources of Liquidity and Management’s Plans

The Company’s primary need for liquidity is to fund working capital requirements of its businesses, capital expenditures and for general corporate purposes. The Company incurred significant investigation and audit related expenses, which significantly reduced working capital as of December 31, 2017. In response to this reduction, in December 2017, the Company announced that it was implementing an organizational restructuring to reduce staffing levels by approximately 10% and exit certain geographic regions, to enable the Company to decrease its global costs and more effectively align resources to business priorities. To increase the Company’s available working capital, on January 16, 2018, the Company entered into certain agreements with funds affiliated with or managed by Starboard Value LP (collectively, “Starboard”), pursuant to which, among other things, the Company issued and sold to Starboard $150.0 million of senior secured convertible notes (“Notes") in exchange for $85.0 million in cash and 2,600,000 shares of Common Stock valued at $65.0 million. The Company also granted to Starboard an option (the “Notes Option”) to purchase up to an additional $50.0 million of Notes in exchange for a range of $15.0 million to $35.0 million of Common Stock, at Starboard’s option, and the balance in cash.

In addition, under the agreements, the Company has the right to conduct a rights offering (the “Rights Offering”), which would be open to all stockholders of the Company, for up to $150.0 million in senior secured convertible notes (the “Rights Offering Notes”). Starboard also agreed to backstop up to $100.0 million in aggregate principal amount of Rights Offering Notes through the purchase of additional Notes, with such backstop obligation to be reduced by the principal amount of Notes purchased by Starboard pursuant to the Notes Option, if any.

If undertaken, the Rights Offering would provide a minimum of $50.0 million to $70.0 million in cash if not fully subscribed (depending on whether Starboard exercises the Notes Option and assuming that any Notes purchased by Starboard pursuant to the backstop obligation will be issued on the same terms as the Rights Offering Notes), and at least $105.0 million in cash if fully subscribed, as stockholders of the Company who elect to participate in the Rights Offering will be allowed to elect to have up to 30% of the value of the Rights Offering Notes they acquire pursuant thereto delivered through the sale to or exchange with the Company of shares of Common Stock. For additional information, refer to Footnote 20, Subsequent Events.

The Company believes that the restructuring and financing actions discussed above are probable of occurring and satisfying the Company’s estimated liquidity needs within one year after the date that the financial statements are issued. However, the Company cannot predict, with certainty, the outcome of its actions to generate liquidity, including the availability of additional debt financing, or whether such actions would generate the expected liquidity as currently planned.

Restatement of Opening Stockholders' Equity

In February 2016, the Audit Committee ("Audit Committee") of the comScore Board of Directors ("Board") commenced an internal investigation, with the assistance of outside advisors, into matters related to the Company's revenue recognition practices, disclosures, internal controls, corporate culture and certain employment practices. As a result of the issues identified in the Audit Committee's investigation and management's subsequent review, on September 12, 2016, the Company announced that the Audit Committee, in consultation with outside advisors and management, had concluded that the Company could no longer support the prior accounting for non-monetary contracts recorded by the Company during 2013, 2014 and 2015. As a result, the Company concluded that (i) the Company's previously issued, unaudited quarterly and year-to-date Consolidated Financial Statements for the quarters ended March 31, June 30 and September 30, 2015 filed on Quarterly Reports on Form 10-Q on May 5, August 7, and November 6, 2015, respectively, (ii) the Company's previously issued, audited Consolidated Financial Statements for the years ended December 31, 2014 and 2013 filed on Annual Reports on Form 10-K on February 20, 2015 and February 18, 2014, respectively (including the interim periods within those years) and (iii) the Company's preliminary unaudited Condensed Consolidated Financial Statements for the quarter and year ended December 31, 2015 included as an exhibit to its Current Report on Form 8-K furnished on February 17, 2016, should no longer be relied upon.

The following table summarizes the effects of the restatement adjustments on the components of total stockholders' equity as of January 1, 2015 as originally reported on the Company's 2014 Annual Report on Form 10-K.



	As of January 1, 2015
				Adjustments
(In thousands)	As Previously Reported			A			B			C			D			Total Restatement Adjustments			As Restated
Common stock	$	36		$	—		$	—		$	—		$	—		$	—		$	36
Additional paid-in capital	324,176			—			—			—			(2,957		)	(2,957		)	321,219
Accumulated other comprehensive loss	(5,591		)	—			(77		)	7			(2		)	(72		)	(5,663		)
Accumulated deficit	(93,076		)	(2,411		)	(8,521		)	(301		)	(28,271		)	(39,504		)	(132,580		)
Treasury stock, at cost	(50,280		)	—			—			—			—			—			(50,280		)
Total stockholders' equity	$	175,265		$	(2,411	)	$	(8,598	)	$	(294	)	$	(31,230	)	$	(42,533	)	$	132,732

(A) Non-monetary revenue contracts: The Company's non-monetary transactions are exchanges of data products between the Company and certain customers. Under Accounting Standards Codification ("ASC") 845, Non-Monetary Transactions ("ASC 845"), a non-monetary exchange of goods can be recorded at fair value if fair value is determinable, the exchanged goods given and received would not be held for sale in the same line of the business and the exchange has commercial substance. Based on the Audit Committee’s investigation and management’s review of its accounting, the Company concluded that the original accounting for all of its non-monetary transactions did not meet the applicable guidance in ASC 845. This adjustment reverses the revenue and associated expense related to these non-monetary transactions. For these non-monetary revenue contracts, since there is no historical cost basis associated with the assets exchanged, there is no revenue recognized or expense incurred for these transactions. While a non-monetary transaction inherently has no effect on operating income or cash flow over the life of the relevant agreement governing such transaction, the timing of revenue recognized relative to the related expense recognized may have an effect on net income on a period-by-period basis.

(B) Monetary revenue adjustments: There were adjustments to revenue and costs for the investigation-related contracts (contracts that were specifically subject to the Audit Committee's investigation) as well as additional contracts that the Company deemed had similar characteristics as the investigation-related contracts. Both groups of contracts had historical data deliverables where there was not a clear indication that the customer needed or requested the historical data and the contracts were multiple-element arrangements requiring a best estimate of selling price ("BESP") determination. When these contracts were re-evaluated, all units of accounts were re-valued utilizing BESP, generally resulting in a substantially reduced or zero value for the historical data. In addition, the investigation-related contracts had additional arrangements, including offsetting purchase contracts that were not previously disclosed. These additional arrangements resulted in revenue either being deferred until the arrangement was considered fixed and determinable, or, in some cases, purchases and sales of data with the same customer were accounted for as a single arrangement, resulting in revenue being netted against expenses under purchase contracts. Also included are other revenue accounting adjustments that are the result of a number of miscellaneous errors related to the Company's revenue accounting processes being ineffective in properly accounting for contracts, errors in revenue recognition, or in the consistent application of the Company's revenue accounting policies.

(C) Other adjustments: There were certain other non-revenue related adjustments that were primarily timing adjustments for expense accruals and recording amounts that were not previously provided for.

(D) Tax adjustments: As a result of the material changes to the Consolidated Financial Statements, the Company re-evaluated the valuation allowance determinations made in prior years. The analysis was updated to consider the changes to the Company's historical operating results following the investigation and subsequent review by management. In that process, the Company evaluated the weight of all evidence, including the decline in earnings, and concluded that as of December 31, 2013 the Company's U.S. federal and state net deferred tax assets were no longer more-likely-than-not to be realized and that a valuation allowance was required. The Company also adjusted income taxes, as necessary, to reflect the tax effect of the above adjustments made to operating results for the periods prior to December 31, 2014.