Rosetta Stone 2013 Annual Report Download - page 85
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Table of Contents
On April 1, 2013, the Company completed its acquisition of Livemocha (the “Livemocha Merger”). Livemocha is one of the world’s largest online
language-learning communities with over 16 million registered members. The acquisition of Livemocha’s technology platform will accelerate the Company’s
transition to cloud-based learning solutions and reinforce its leadership position in the competitive language-learning industry. The aggregate amount of
consideration paid by the Company was $8.4 million in cash.
The acquisition of Livemocha resulted in goodwill of approximately $5.2 million, none of which is deductible for tax purposes. This amount represents
the residual amount of the total purchase price after allocation to the assets acquired and liabilities assumed.
All expenditures incurred in connection with the Livemocha Merger were expensed and are included in general and administrative expenses. Transaction
costs incurred in connection with the Merger were $0.4 million during the year ended December 31, 2013. The results of operations for Livemocha have been
included in the consolidated results of operations for the period April 1, 2013 through December 31, 2013.
The Company has allocated the purchase price based on current estimates of the fair values of assets acquired and liabilities assumed in connection with
the Livemocha Merger. The table below summarizes the estimates of fair value of the Livemocha assets acquired, liabilities assumed and related deferred
income taxes as of the acquisition date.
The purchase price is allocated as follows (in thousands):
Cash
$191
Accounts receivable
227
Other current assets
93
Fixed assets
35
Accounts payable and accrued expenses
(956)
Deferred revenue
(743)
Net deferred tax liability
(1,161)
Net tangible assets acquired
(2,314)
Goodwill
5,185
Amortizable intangible assets
5,500
Purchase Price
$ 8,371
The acquired amortizable intangible assets and the related estimated useful lives consist of the following (in thousands):
Preliminary Estimated
Useful Lives
Preliminary Estimated
Value April 1, 2013
Online community
3 years
$1,800
Enterprise relationships
5 years
100
Technology platform
5 years
3,400
Tradename
2 years
200
Total assets
$5,500
In connection with the Livemocha Merger, the Company recorded deferred tax liabilities related to definite-lived intangible assets that were acquired. As a
result of this deferred tax liability balance, the Company reduced its deferred tax asset valuation allowance by $1.2 million. Such reduction was recognized as
an income tax benefit in the consolidated statements of operations for the year ended December 31, 2013.
Lexia
F-21