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Table of Contents




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.
The Company allocated the purchase price based on current estimates of the fair values of assets acquired and liabilities assumed in connection with the
Lexia Merger. The table below summarizes the estimates of fair value of the Lexia assets acquired, liabilities assumed and related deferred income taxes as of
the acquisition date.
The Company finalized its allocation of the purchase price for Lexia as of June 30, 2014. The purchase price was allocated as follows (in thousands):
Cash
$ 263
Accounts receivable
2,404
Other current assets
105
Fixed assets
255
Accounts payable and accrued expenses
(899)
Deferred revenue
(1,223)
Net deferred tax liability
(4,210)
Net tangible assets acquired
(3,305)
Goodwill
9,938
Amortizable intangible assets
14,500
Purchase price
$ 21,133
The acquired amortizable intangible assets and the related estimated useful lives consist of the following (in thousands):



Enterprise relationships
10 years
$ 9,400
Technology platform
7 years
4,100
Tradename
5 years
1,000
Total assets
$ 14,500
In connection with the Lexia 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 $4.2 million. Such reduction was recognized
as an income tax benefit in the consolidated statement of operations for the year ended December 31, 2013.
F-24