Juno 2012 Annual Report Download - page 140
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Table of Contents
conditions. The contingent consideration will be measured based on three annual earnout periods ending June 30, 2013, 2014 and 2015 (each period, an
"Earnout Period" and together, the "Earnout Periods") and if earned, will be paid annually shortly after the closing of each Earnout Period. The range of
the amounts the Company could pay under the contingent consideration arrangement is between $0 and $27.5 million. The fair value of the contingent
consideration recognized at the Closing Date was estimated at $9.4 million using a Monte-Carlo simulation. The key assumptions used in calculating the
fair value of the contingent consideration included estimated probabilities of U.S. and other target market daily registrations; mean growth rates of 0% to
18% for U.S. registrations and 0% to 14% for other target market registrations, each with a standard deviation of 50%, during the Earnout Periods; an
estimated rate of conversion of new subscribers to pay accounts; and a discount rate of 19.5%. Changes to one or multiple inputs to the Monte-Carlo
simulation, including the discount rate, growth rates, volatility rates, the estimated number of daily registrations, and the estimated rate of conversion of
new subscribers to pay accounts, could significantly impact the estimated fair value of the contingent consideration. A 100 basis point increase or
decrease in the discount rate would have resulted in a decrease or increase in the fair value of the contingent consideration at the Closing Date by
$159,000 or $163,000, respectively.
At December 31, 2012, the fair value of the contingent consideration was estimated at $8.6 million using a Monte-Carlo simulation. The key
assumptions used in calculating the fair value of the contingent consideration included estimated probabilities of U.S. and other target market daily
registrations; mean growth rates of (59)% to 51% for U.S. registrations and (60)% to 51% for other target market registrations, each with a standard
deviation of 50%, during the Earnout Periods; an estimated rate of conversion of new subscribers to pay accounts; and a discount rate of 18.2%.
Changes to one or multiple inputs to the Monte-Carlo simulation, including the discount rate, growth rates, volatility rates, the estimated number of daily
registrations, and the estimated rate of conversion of new subscribers to pay accounts, could significantly impact the estimated fair value of the
contingent consideration. A 100 basis point increase or decrease in the discount rate would have resulted in a decrease or increase in the fair value of the
contingent consideration at December 31, 2012 by $94,000 or $96,000, respectively.
The total cost of the schoolFeed acquisition was estimated to equal approximately $16.9 million based on fair values estimated at the Closing Date.
The following table summarizes the components of the preliminary purchase price (in thousands):
In connection with the acquisition, the Company incurred $0.5 million in transaction-related costs in the year ended December 31, 2012, which are
recorded in general and administrative expenses in the consolidated statement of operations.
F-23
Cash consideration $ 7,500
Fair value of contingent consideration 9,397
Total fair value of consideration transferred $ 16,897