Acquisition of DCC Labs

On May 6, 2016 we acquired a 100% share of DCC Labs, a privately-held Warsaw, Poland-based set-top and multiscreen device software developer and integrator for approximately $8 million. The purchase price consisted of $5.4 million paid in cash and $2.6 million paid in shares of our common stock, with $0.5 million in cash and all of the stock consideration initially held in escrow as security for the indemnification obligations of the former DCC Labs owners to SeaChange under the purchase agreement. We expect DCC Labs will contribute several million dollars of revenue annually to SeaChange.

The acquisition of DCC Labs enables us to optimize the operations of our In Home business, which is our developer of deployed software solutions including the SeaChange Nucleus home video gateway. In addition, the acquisition brings market-ready products, including an optimized television software stack for Europe’s Digital Video Broadcasting community and an HTML5 framework for building future-proof user interfaces for CPE devices.

Reduction in Workforce for our In Home Business

In conjunction with the DCC Labs acquisition, SeaChange commenced a workforce reduction within its In Home engineering and services organization, which will result in a charge of $1.0 million in severance and other restructuring costs during the second quarter of fiscal 2017. Once we complete our integration plan, any further reduction in workforce may result in additional restructuring charges.