Note 8 - Business Combination

6 Months Ended

Jun. 30, 2014

Business Combinations [Abstract]

Business Combination Disclosure [Text Block]

8.             BUSINESS COMBINATION

On May 22, 2013, Chyron and Hego completed the Business Combination whereby a wholly-owned subsidiary of Chyron acquired all of the issued and outstanding shares of Hego for a total purchase price of $24.6 million. 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 total purchase price of $24.6 million is comprised of 12.2 million shares of the Company's common stock valued at $16.6 million, contingent consideration of shares of the Company's 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 has had a material impact on the Company's financial position and results of operations and will continue to impact the Company until all contingencies have been settled. In the three and six months ended June 30, 2014 a benefit of $2.2 million and a charge of $0.4 million, respectively, have been recorded in order to adjust the contingent consideration to $6.2 million, its current fair value at June 30, 2014, 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 was achieved and 2,772,598 additional shares were issued in March 2014 at a stock price of $2.34 per share.

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

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

The components of the intangible assets acquired 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

On April 30, 2014 the Company completed its acquisition of Norway-based Zxy Sport Tracking AS (“Zxy”). Pursuant to the terms of the Share Purchase Agreement (“SPA”), the Company acquired 67% of the issued and outstanding shares of Zxy for a total purchase price of $5.5 million. Pursuant to the terms of the SPA, the Company issued 1,374,545 shares of ChyronHego Common Stock (“Common Stock”) at a value of $3.3 million and issued 549,818 warrants at a value of $0.7 million, based on a Black Scholes valuation model. The warrants give the holders the right to purchase one share of Common Stock at a price of $2.75 for a three year period from closing.

In addition, stockholders of Zxy will be entitled to a 15% earn-out, payable in cash, based on net revenues from all sales of Zxy products and services from the closing date through December 31, 2018 up to $3.0 million. If and when $3.0 million in earn-out has been achieved, the rate shall be reduced to 7.5% for the remainder of the earn-out period. The stockholders are entitled to a guaranteed minimum of earn-out of $110,000 in each of 2014, 2015 and 2016. The earn-out was valued at $1.5 million based on a discounted model measuring the likelihood of achieving certain revenue levels.

The following table summarizes the estimated allocation of the purchase price which is preliminary and subject to adjustment following the completion of the valuation process ( in thousands):

Net fair value of assets acquired	$	628
Intangible assets		2,600
Goodwill		3,025
		6,253
Deferred tax liability		(702	)
	$	5,551

The Company believes that the goodwill resulting from the Zxy acquisition reflects a transponder-based sports tracking technology that will strengthen our position in the sports analysis market across both the sports broadcast and professional sports markets. The Company believes that this preliminary estimate of goodwill will not be deductible for tax purposes.

The components and estimated useful lives of intangible assets acquired as of June 30, 2014 are stated below. Amortization is provided on a straight line method over the following estimated useful lives ( in thousands):

			Estimated Useful Life
Definite-lived intangibles:
Proprietary technology	$	2,300		15
Tradename		300		15
	$	2,600

Below are the unaudited proforma results of operations for the six months ended June 30, 2014 and 2013 as if the Company had acquired Zxy on January 1, 2013. Such proforma results are not necessarily indicative of the annual results of operations that would have been achieved if the acquisition occurred on the date assumed, nor are they necessarily indicative of future consolidated results of operations (in thousands except per share data):

	2014			2013
Net revenues	$	27,645		$	18,837
Net loss		(331	)		(3,227	)
Net loss per share - basic and diluted	$	(0.01	)	$	(0.15	)