Quarterly report pursuant to Section 13 or 15(d)

Acquisition of TLL, LLC

Acquisition of TLL, LLC
3 Months Ended
Apr. 30, 2015
Business Combinations [Abstract]  
Acquisition of TLL, LLC
3. Acquisition of TLL, LLC

On February 2, 2015, pursuant to an Agreement and Plan of Merger (the “Merger Agreement”), dated as of December 22, 2014, we acquired 100% of the member interests in TLL, LLC (“Timeline Labs”), a privately-owned California-based software-as-a-service (“SaaS”) company that enables local broadcasters, national news organizations and other media companies and brands to analyze social media messages in real-time, find and broadcast social trends, and measure viewing audience engagement across television, mobile and personal computers.

We accounted for the acquisition of Timeline Labs as a business combination and the financial results of Timeline Labs have been included in our consolidated financial statements as of the date of acquisition. Under the acquisition method of accounting, the purchase price was allocated to SeaChange’s net tangible and intangible assets based upon their fair values as of February 2, 2015.

The preliminary allocation of the purchase price is as follows (amounts in thousands, except for share data):


Fair value of consideration:

Cash, net of cash acquired

$ 14,186   

Closing stock consideration


Deferred stock consideration


Contingent consideration





Total purchase price

$ 24,464   




Fair value of assets acquired and liabilities assumed:

Current assets


Other long-term assets


Finite-life intangible assets




Current liabilities





Allocated purchase price

$ 24,464   





Fair Value of Consideration Transferred

Upon completion of the acquisition, the Company made cash consideration payments to the former members of Timeline Labs in the amount of $14.2 million (“Closing Cash Consideration”), which includes $0.2 million of preliminary working capital adjustments. The Closing Cash Consideration included $1.4 million applied from an escrow that was funded by the Company in the fourth quarter of fiscal 2015. Additionally, the Company issued 344,055 shares of common stock to the former members of Timeline Labs and deposited 173,265 shares of common stock into escrow as of the acquisition date.

The Company is also obligated to issue shares of common stock at the six month and twelve month anniversaries of the acquisition date. The aggregate acquisition date fair value of the estimated shares for both anniversary date issuances is $6.7 million and is classified in the consolidated balance sheet as a current liability.

Contingent Consideration

A former holder of a specified series of interest of Timeline Labs is eligible to receive additional earn-out consideration, consisting of shares of our common stock, if defined performance criteria are achieved for fiscal 2016 and 2017 without a requirement to remain as an employee of the Company. As of April 30, 2015, we have included a liability of $0.5 million in our consolidated balance sheet, which represents the fair value of the estimated shares at full achievement of the defined performance criteria. Any future changes to this liability resulting from changes in probability of achievement or changes to the fair value will be included in our consolidated statements of operations and comprehensive loss in the period which the change occurs.

Additionally, the former holders of a specified series of interests of Timeline Labs are eligible to receive additional earn-out compensation, consisting of shares of our common stock, if defined performance criteria are achieved for fiscal 2016 and 2017, provided, that if such person was an employee of Timeline Labs as of the closing date, such person must remain an employee as of the date that all earn-out consideration would be paid, with any forfeited amounts to be reallocated to other eligible persons. As of April 30, 2015, we estimated the fair value of the aggregate liability of the employee portion of contingent consideration to be $2.7 million which we will be recognizing as the requisite service period is completed. For the three months ended April 30, 2015, we recorded a $0.5 million charge associated with this arrangement that has been included in the earn-outs and change in fair value of earn-outs in our consolidated statements of operations and comprehensive loss.

Intangible Assets

In determining the fair value of the intangible assets, the Company considered, among other factors, the intended use of the assets, the estimates of future performance of Timeline Lab’s products and analyses of historical financial performance. The fair values of identified intangible assets were calculated using income-based approaches based on estimates and assumptions provided by Timeline Labs’ and the Company’s management. The following table sets forth the components of the identified intangible assets associated with the Timeline Labs acquisition and their estimated useful lives:


     Useful life      Fair Value  
            (Amounts in thousands)  


     7 years       $ 620   

Customer contracts

     7 years         4,760   

Non-compete agreements

     2 years         170   

Existing technology

     5 years         1,170   



$ 6,720   




Acquired Goodwill

The preliminary purchase price allocation is subject to our final determination of fair value. We recorded the $17.5 million excess of the purchase price over the fair value of the identified tangible and intangible assets as goodwill, primarily due to expected synergies between the combined companies and expanded market opportunities. The goodwill is deductible for tax purposes.


Acquisition-related Costs

In connection with the acquisition, we incurred approximately $0.1 million in acquisition-related costs, including legal, accounting and other professional services for the three months ended April 30, 2015. The acquisition costs were expensed as incurred and included in professional fees – other, in our consolidated statements of operations and comprehensive loss.