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Airfone Acquisition
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12 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2013
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| Business Combinations [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Airfone Acquisition | 7. Airfone Acquisition On April 11, 2013, we consummated the acquisition from LiveTV, LLC (“LiveTV”) of LiveTV Airfone, LLC (“Airfone”) which had more than 1,000 subscribers for its airborne voice communication services and a Federal Communications Commission (“FCC”) license for 1 MHz of ATG spectrum in the nationwide 800MHz Commercial Air-Ground Radiotelephone band (“1 MHz FCC License”). The purchase price for the acquisition was $9.3 million. In connection with the acquisition, we also agreed to license certain intellectual property rights from LiveTV. The purchase price was funded from cash on-hand and of the $9.3 million purchase price, $1.0 million remained in escrow and is included in restricted cash along with a corresponding amount in accrued liabilities on our consolidated balance sheet as of December 31, 2013. This acquisition did not have a material impact on our financial statements. Accordingly, we have not presented pro forma disclosures.
The Airfone acquisition is being accounted for under the acquisition method of accounting and the results of operations are included in our financial statements from the date of acquisition. The allocation of the purchase price is a follows (in thousands):
In connection with our integration of Airfone, we determined that Airfone failed to remit to the Universal Services Administration Company (“USAC”) certain FCC-mandated Federal Universal Service Fund (“FUSF”) fees. We therefore have caused Airfone to correct its past filings and to remit to USAC approximately $1.1 million in FUSF and related fees covering the period from January 1, 2008 through December 31, 2012. We expect that an additional $0.1 million covering the period from January 1, 2013 through April 10, 2013 will be paid to USAC in 2014. We also determined that Airfone billed its customers for FUSF fees in amounts that exceed the total amount remitted or owed to USAC. Due to the difference between the total amounts collected and the amounts that have been or will be remitted to USAC, Airfone also owes refunds to its customers. We believe that the aggregate amount of any liability to Airfone customers for the period from January 1, 2008 through April 10, 2013 is approximately $2.5 million. In addition, Airfone may be subject to enforcement action by the FCC in connection with the delayed payments to USAC, which could result in, among other things, interest payments, penalties and fines. We have worked with LiveTV to determine and estimate the amounts due to USAC and Airfone’s customers and have recorded an accrual and a related receivable from LiveTV for our best estimate of the potential liability related to these matters. In accordance with the terms of the purchase agreement, LiveTV has and is expected to continue to reimburse us for any amounts due to USAC and Airfone’s customers which we pay, and to indemnify us for any additional amounts due to Airfone’s customers, USAC, interest, penalties and fines for which Airfone may be liable. The service customer relationships represent the fair value of the Airfone subscriber base we acquired as part of the Airfone acquisition. In previously issued interim financial statements our allocation of the purchase price related to this acquisition was preliminary and we presented a goodwill amount which represented the excess of the purchase price over the fair market value of the identifiable net assets acquired, and was equal to the then estimated liability to the USAC and Airfone’s customers as noted above. We have now gathered sufficient information to determine a final purchase price allocation, and the amount previously reported as goodwill is now reported as part of prepaid and other current assets, based on the finalization of the estimated liability and the clarification with LiveTV as to the responsibility of the parties for payment of the amounts due to USAC and Airfone’s customers related to this liability. |
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