4. Acquisitions

12 Months Ended

Jun. 30, 2012

Acquisitions

4. Acquisitions

WatchPoints Acquisition

On September 29, 2011, in furtherance of its business plan, the Company, through its wholly-owned subsidiary, Project Oda, Inc., purchased certain assets of Mobile Messaging Solutions, Inc.'s Watchpoints business. The consideration for such transaction consisted of $2,500 in cash and 100,000 shares of the Company's common stock with a fair value of $16.00 per share on the date of the transaction. The Watchpoints business is involved in developing, selling, maintaining and improving an interactive broadcast television application utilizing audio recognition technology. The assets purchased, and the related value allocated to each, include intellectual property ($4,209) and certain computer-related equipment ($11). The intellectual property included patent filings for audio verification technology and the provision of value-added programming/services based on such verification and trademarks for the “Watchpoints” name. The value allocated to the intellectual property is being amortized over the expected useful life of the Company's software product. The Company also paid Kai Buehler, the CEO of Watchpoints, a $300 finder's fee, which was recorded to selling, general and administrative expenses in the year ended June 30, 2012, and appointed him as a full-time Senior Vice President of the Company.

This acquisition was considered to be an asset acquisition and has been deemed to be a defensive acquisition and the fair value of the intellectual property acquired of $4,209 is being amortized over the estimated useful life of the Company's Viggle software of three years on a straight-line basis.  Amortization expense of the intellectual property for the years ended June 30, 2012 and June 30, 2011 was $1,052 and $0, respectively.

TIPPT Media Inc.

The Company made an acquisition of  65% of TIPPT Media Inc., a Delaware corporation (“TIPPT”), in December 2011 and during the months following the acquisition determined that the TIPPT business did not fit into the Company's long term strategy.  Accordingly, in May 2012 the Company sold 50% of its 65% interest to TIPPT LLC.  Below is a summary of both of these transactions.

On December 23, 2011, the Company obtained a sixty-five (65%) percent ownership interest in TIPPT, which will sell coupons and/or discount codes on behalf of third parties by engaging individuals with a public profile to promote products via internet-based social networking and microblogging websites and other similar internet-based methods of electronic communications.   In consideration for its investment in TIPPT, the Company paid $2,000 in cash, forgave the repayment of a $250 promissory note owed to the Company by TIPPT LLC, a Delaware limited liability company, and the minority stockholder of TIPPT, and agreed to issue a warrant to purchase 500,000 shares of the Company's common stock at an exercise price equal to 115% of the 20-day trading average of the Company's common stock if certain performance conditions were met within four months of the closing of the transaction. The Company believed it was probable that the performance conditions would be met and thus the fair value of the warrants were recorded.  The shares of common stock exercisable under the warrant were valued at $2,378 using the Black Scholes valuation model.

In connection with the transaction, the Company entered into a five-year Line of Credit Agreement, pursuant to which the Company may provide advances to TIPPT to finance its working capital obligations, in an aggregate principal amount not to exceed $20,000, with an interest rate not to exceed 4% per annum.  The facility is secured by the remaining 35% of the common shares of TIPPT owned by TIPPT LLC, subject to release under certain circumstances described in the loan agreement in the event the shares are converted into common shares of the Company.  The credit facility may be drawn for approved expenses in accordance with the budget approved at the time of the commitment, as updated quarterly.  In addition, the Company entered into a Stockholders Agreement with TIPPT LLC regarding, among other things, restrictions on the transfer of shares in TIPPT and the potential exchange under certain circumstances of all or a portion of the 35% interest in TIPPT held by TIPPT LLC into the Company's common stock .

The Company determined that immediately before the transaction , the activities of TIPPT did not constitute a business.  Therefore, the Company accounted for the TIPPT transaction as an asset acquisition in accordance with ASC 350,Goodwill and Other Intangible Assets.

The total estimated purchase price for the TIPPT assets is composed of the following:

Cash	$	2,000
Forgiveness Promissory Note	250
Fair Value of Common Stock Warrant	2,378
Total Purchase Price	$	4,628

The purchase price had been allocated to the assets acquired (identifiable intangible assets) as of the closing date of December 23, 2011 based on their estimated fair values.

The fair value of assets acquired of TIPPT  at the date of acquisition were as follows;

Assets acquired:

Intellectual Property Contracts $ 4,628

As noted above, on May 14, 2012, the Company sold to TIPPT LLC a 50% ownership interest in TIPPT for $500, payable by a Purchase Money Note with interest accruing at 4% per annum and maturing on December 31, 2016.  The Company retained a 15% ownership interest in TIPPT.  As part of the transaction, the Company's obligation to provide advances to TIPPT under the $20,000 line of credit was terminated.  Instead TIPPT issued an Amended and Restated Promissory Note to the Company pursuant to which TIPPT agreed to pay the Company $1,201, which represents $701 that was outstanding under the line of credit on April 30, 2012 and an additional $500 that the Company agreed to loan to TIPPT.  In addition, as part of the transaction, the Company terminated the stockholders agreement and entered into an Amended and Restated Stockholders Agreement (the “Stockholders Agreement”) with TIPPT LLC to provide the Company with certain stockholder protections regarding the Company's remaining interest in TIPPT.  The Company's representatives on the TIPPT board of directors, Mr. Sillerman, Ms. Scardino, and Mr. Nelson, resigned from the TIPPT board of directors.  The Company is entitled to a board observer on the TIPPT Media Inc. board.  The warrant to purchase 500,000 shares of the Company's common stock to TIPPT LLC was never issued.

As part of the Company's review of the fair value of its intangible assets for the twelve months ended June 30, 2012, the Company has 1) derecognized the $2,378 of contingent consideration attributable to the Company's warrant that was to be issued to TIPPT LLC because the warrant was never issued; and 2) performed a review of the fair value of the remaining $2,250 carrying value of such agreement.  The Company has taken an impairment charge for the full carrying value of such agreement.  Accordingly, the carrying value as of June 30, 2012 is zero.  Also, based on the limited financial resources of TIPPT and TIPPT LLC, the Company has fully reserved the $500 Purchase Money Note and the $1,201 relating to the Amended and Restated Promissory Note described above.

The Company has included the operating results of TIPPT in its consolidated financial statements since the date of acquisition.  As of June 30, 2012, the Company has written down to zero the carrying value of all of the TIPPT assets and has taken a charge of $3,511 which is included in selling, general, and administrative expense.

Loyalize Acquisition

On December 31, 2011, in furtherance of its business plan, the Company, through a newly created wholly owned subsidiary, FN(x) I Holding Corporation,  now known as Loyalize Inc (“FN(x)I” or “Loyalize”), purchased from Trusted Opinion Inc. (“Trusted Opinion”), substantially all of its assets, including certain intellectual property and other assets relating to the “Loyalize” business owned by Trusted Opinion, pursuant to an asset purchase agreement executed by the Company and FN(x) I on such date (the “Asset Purchase Agreement”) .  In consideration for its purchase of the such assets, the Company agreed to pay Trusted Opinion $3,000 in cash and agreed to deliver 137,519 of the Company's common shares as follows:  32,627 shares delivered directly to Seller within three business days of delivery of the financial statements and 104,892 shares (the “Escrowed Shares”) delivered within three business days of closing to American Stock Transfer and Trust Company LLC, as escrow agent, to be held until December 31, 2012 to secure certain representations, warranties and indemnities given by Trusted Opinion under the Asset Purchase Agreement.  The Company valued the 137,519 common shares as of the date of closing at $1,719 based on the $12.50 per share closing price of its common stock on the date of closing.  In addition to certain minor purchase price adjustments to be made post-closing, the Company is obligated to also fund as a purchase price adjustment the difference, if any, by which $1,839 exceeds the calculated value (computed based on the average closing price of the Company's common shares during the 20 days prior to December 31, 2012) of the 137,519 shares on December 31, 2012, either in cash or in common shares of the Company, at the Company's option.  Such additional consideration shall not be payable until claims which remain subject to determination and secured by all the Escrowed Shares are no longer outstanding.  The additional consideration shall be eliminated to the extent final claims exceed the value of the shares then remaining in escrow.

The Company accounted for the purchase of Loyalize using the acquisition method, and accordingly the consideration paid has been allocated to the fair value of assets acquired and liabilities assumed.

The total purchase price is composed of the following:

Cash	$	3,185
Fair Value of Common Stock		1,719
Fair Value of Common Stock Guarantee		120
Total Initial Purchase Price	$	5,024

Details of the fair values of assets acquired and liabilities assumed from Trusted Opinion are as follows:

Assets acquired:

Other Receivable	$	92
Equipment		33
Intellectual Property		80
Capitalized Software		2,350
Goodwill		2,953
		5,508

The goodwill recorded in the transaction is deductible for tax purposes.

Less liabilities assumed:

Deferred Revenue		(484	)
Net assets acquired	$	5,024

As of June, 30, 2012, the fair value of the intangibles is $80 and the goodwill is $2,953.

The following table presents the unaudited pro forma results of the Company for the years ended June 30, 2012 and 2011 as if the Trusted Opinion acquisition occurred on July 1, 2010. These results are not intended to reflect the actual operations of the Company had the acquisition occurred on July 1, 2010.

	Years ended June 30
	2012			2011
Revenue	$	1,740		$	102
Operating (Loss)		(98,186	)		(22,812	)
Loss Per Share (basic and diluted)		(1.34	)		(0.45	)