Note 8 - Business Combinations

12 Months Ended

Dec. 31, 2013

Business Combinations [Abstract]

Business Combination Disclosure [Text Block]

8.           BUSINESS COMBINATIONS

On May 22, 2013, Chyron and Hego completed the Business Combination which was structured as a share purchase transaction, pursuant to the terms of a stock purchase agreement (the "Stock Purchase Agreement") whereby a wholly-owned subsidiary of Chyron acquired all of the issued and outstanding shares of Hego. Pursuant to the terms of the Stock Purchase Agreement, Chyron issued 12,199,431 shares of Chyron's common stock to the former Hego stockholders. The number of shares issued was equal to 40% of the total of (i) the issued and outstanding shares of Chyron's common stock as of May 10, 2013, (ii) the shares of Chyron's common stock issuable upon the exercise of all outstanding options and restricted stock units that had an exercise price of less than or equal to $1.25 per share as of May 10, 2013, and (iii) the shares issued at the closing, which are collectively referred to as the "Outstanding Closing Shares." In addition, upon Hego achieving certain revenue milestones during the fiscal years 2013, 2014 and 2015, the Company may issue additional shares, which are referred to as the "Earn-Out Shares" to the former Hego stockholders, such that the aggregate amount of shares of the Company's common stock issued in the transaction would equal up to 18,299,147 shares, or 50% of the total Outstanding Closing Shares and Earn-Out Shares. In connection with the Business Combination, the Company incurred $1.0 million in transaction costs that were expensed during 2013. The Company and Hego entered into the Business Combination to create a market leading company in the fields of TV graphics, data visualization and production services for 'Live' and on line news and sports production. The Company intends to broaden its range of sophisticated products and services offerings to grow in international markets.

The total purchase price of $24.6 million is comprised of 12.2 million shares of Chyron common stock (the Closing Shares) valued at $16.6 million, contingent consideration of shares of Chyron common stock (the Earn-Out Shares) valued at an estimated $7.5 million and $0.5 million in cash and other consideration. The $7.5 million represents the value of the Earn-Out Shares based on a probability-based model measuring the likelihood of achieving certain revenue milestones as detailed below, and has been recorded as a liability in the balance sheet. In connection with FASB ASC 805, Business Combinations, the fair value of the contingent consideration was established at the date of the Business Combination and included in the total purchase price at fair value. The contingent consideration is then adjusted to the then current fair value as an increase or decrease to earnings in each reporting period. This adjustment could have a material impact on the Company's financial position or results of operations. In the year ended December 31, 2013 a charge of $4.8 million has been recorded in order to adjust the contingent consideration to $12.3 million, its current fair value at December 31, 2013, in the level 3 category. Based on the revenue milestones, additional shares could be issued as follows:

Revenue milestones	Additional shares
$15.5 million in 2013		2,772,598
$16.0 million in 2014		1,584,342
$16.5 million in 2015		1,742,776
Total		6,099,716
Or, alternatively, if $33.0 million for 2013 and 2014 combined		6,099,716

At December 31, 2013, the 2013 revenue milestone has been achieved and the respective additional shares will be issued in early 2014.

The following table summarizes the allocation of the purchase price (in thousands):

Net fair value of assets acquired	$	107
Intangible assets, net of tax		9,930
Goodwill		16,321
		26,358
Deferred tax liability		(1,766	)
	$	24,592

The Company believes that the goodwill resulting from the Business Combination reflects the unique proprietary image and player tracking technology that strengthens our product and services offerings internationally and provides access to new and existing customers. The Company believes that this goodwill will not be deductible for tax purposes.

The components of the intangible assets acquired as of December 31, 2013 are stated below (in thousands):

Definite-lived intangibles:
Customer relationships	$	6,400
Proprietary technology		800
Other intangibles		830
Indefinite-lived intangibles:
Tradename		1,900
	$	9,930

Below are the unaudited proforma results of operations for the years ended December 31, 2013 and 2012 as if the Business Combination had occurred on January 1, 2012. Such proforma results are not necessarily indicative of the annual results of operations that would have been achieved if the Business Combination occurred on the date assumed, nor are they necessarily indicative of future consolidated results of operations (in thousands except per share data):

	December 31,
	2013			2012
Net sales	$	53,281		$	45,024
Net loss		(8,282	)		(28,010	)
Net loss per share - basic and diluted	$	(0.28	)	$	(0.96	)

In future periods, the combined business may incur charges to operations to reflect costs associated with integrating the two businesses that the Company cannot reasonably estimate at this time.

On September 1, 2013, Sportsground AB, a 51% owned subsidiary of the Company, purchased 100% of the equity of Granvideo AB ("Granvideo"). Granvideo is based in Sweden and operates in the high quality video broadcast market for web and TV. The purchase price was $1.04 million consisting of a note payable to the former shareholder of Granvideo with a principal amount of $1.2 million, recorded at a discounted value of $1.04 million to account for the fact that the note is not interest bearing. The Company made principal payments on the note of $0.06 million on September 1, 2013 and $0.1 million on November 15, 2013 and is required to make four equal annual principal payments of $0.26 million on December 31 from 2014 to 2017. The principal balance at December 31, 2013 was $0.9 million. The cost of the acquisition was allocated to the assets acquired and liabilities assumed based on their fair values which totaled $0.5 million, resulting in $0.5 million of goodwill. Proforma information for this transaction is not included because the results of the acquired operations would not have materially impacted the Company's consolidated operating results.

ChyronHego AB, a wholly owned subsidiary of the Company, was a beneficial owner of approximately 60% of Hego Trac AB. In October 2013, Chyron Hego AB purchased the remaining 40% of the outstanding capital stock of Hego Trac AB. Pursuant to the terms of the purchase agreement, we issued 413,324 shares of our common stock and warrants to purchase up to 206,661 shares of our common stock at $1.59 per share. The total purchase price of $0.8 million is comprised of the value of the common stock issued of $0.6 million and the value of the warrants of $0.2 million, estimated using a Black-Scholes option valuation model. In accordance with ASC 810, changes in ownership interests that do not result in a change in control are considered equity transactions. Accordingly, the difference between carrying value of the minority interest and the fair value of the consideration paid has been recorded in additional paid in capital.