Rosetta Stone 2014 Annual Report Download - page 76

Table of Contents
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The Company finalized its allocation of the purchase price for Livemocha as of March 31, 2014. The purchase price was 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):
Estimated Useful
Lives
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 statement of operations for the year ended December 31, 2013.
Lexia Learning Systems, Inc.
On August 1, 2013, the Company completed its acquisition of Lexia Learning Systems, Inc. (the “Lexia Merger” and "Lexia"). Lexia is one of the most
trusted and established companies in the literacy technology market. The transaction marked the Company’s first extension beyond language learning and
took the Company deeper into the Education Technology industry. The aggregate amount of consideration paid by the Company was $21.1 million in cash,
net of working capital and deferred revenue adjustments, including a holdback of $3.4 million with 50% of such holdback paid within 30 days of the
Company filing its Form 10-K for the year ended December 31, 2013 and 50% of such holdback to be paid on the 18 month anniversary of the acquisition.
The Company paid $1.7 million of the holdback in April of 2014 and paid the remaining $1.7 million in February 2015.
The acquisition of Lexia resulted in goodwill of approximately $9.9 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 Lexia Merger were expensed and are included in general and administrative expenses. Transaction
costs incurred in connection with the Lexia Merger were $0.1 million during the year ended December 31, 2013. The results of operations for Lexia have
been included in the consolidated results of operations for the period since August 1, 2013.
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