Acquisition of iTVX, Inc. ("iTVX")

6 Months Ended

Sep. 30, 2013

Business Combinations [Abstract]

Acquisition of iTVX, Inc (iTVX)

On August 16, 2013, we acquired iTVX, a provider of branded entertainment analytics, insight and research, for an estimated $2.7 million. iTVX is reported as a component of TV Essentials^® in our AMI Division and expands our product and service offerings. We made an initial payment of $0.7 million, of which approximately $333,000 was paid in cash and $375,000 was paid in shares of our common stock. The acquisition also includes contingent consideration which will be paid on January 29, 2016, and is based on future revenue achieved after the completion of approximately 2 years. The range of the undiscounted amounts we could pay under the contingent consideration arrangement are between $0.5 million and $7.0 million. The preliminary fair value estimate of the contingent consideration as of the acquisition date was $1.9 million. The contingent consideration payment will be paid in the form of cash (25% of the total contingent consideration) and shares of our common stock (75% of the total contingent consideration).

We estimated the fair value of the contingent consideration using a beta probability distribution approach. Acquisition related contingent consideration liabilities are classified as Level 3 liabilities, because we use unobservable inputs to value them, reflecting our assessment of the assumptions market participants would use to value these liabilities. Changes in the fair value of contingent consideration arrangements are recorded as income or expense in the consolidated statements of operations. As of September 30, 2013, the fair value of the estimated contingent consideration arrangement increased by $0.8 million to $2.7 million. The increase was a result of an increase in the value of our common stock price and has been included in selling and administrative expenses on our Condensed Consolidated Statements of Operations. The common stock portion of the contingent consideration arrangement has a fixed price of $21.795 per share, and any fluctuation in our common stock price above or below this amount will impact the fair value of the payment and our results of operations.

The preliminary fair value estimates for the assets acquired and liabilities assumed were based upon preliminary calculations and valuations and our estimates and assumptions are subject to change as we obtain the additional information to complete our analysis. The primary areas of those preliminary estimates that were not yet finalized related to contingent consideration, certain identifiable intangible assets and deferred taxes. In allocating the preliminary purchase price consideration based on estimated fair values, we recorded $1.1 million of acquired intangible assets with useful lives of 1 to 6 years, $1.7 million of goodwill, $0.1 million of net tangible assets and $0.3 million of deferred tax liabilities. The goodwill recorded in connection with this business combination is primarily related to the synergies to be achieved that are unique to our business.

The deferred tax liabilities acquired have been applied against our fully reserved deferred tax assets and, accordingly, we lowered our valuation allowance and recorded a tax benefit of $0.3 million for the three and six month period ended September 30, 2013.

For the three and six months ended September 30, 2013, we included $0.1 million in revenue and $0.1 million in net losses related to iTVX since the acquisition date as well as $0.8 million related to the adjustment for the contingent consideration as a result of the increase in our common stock price noted above. For the three and six months ended September 30, 2013, we incurred acquisition costs of $106,000 and $182,000, respectively, as well as amortization expense of $25,000 relating to the estimate of intangible assets acquired, which are included in selling and administrative expenses on our Condensed Consolidated Statements of Operations.