Acquisitions

Videotel

On July 2, 2014, KVH Media Group Limited (KMG UK), an indirectly wholly owned subsidiary of KVH, entered into a Share Purchase Agreement with Nigel Cleave to acquire all of the issued share capital of Super Dragon Limited and Videotel Marine Asia Limited, for an aggregate purchase price of approximately $47,446, which excluded $1,719 of cash consideration that was considered deferred compensation under purchase accounting rules. The Company expensed approximately $189 related to the deferred compensation during the three months ended March 31, 2015. Videotel is a maritime training services company headquartered in London that produces and distributes training films and e-Learning computer-based training courses to commercial customers in the maritime market. Videotel also has sales offices in Hong Kong and Singapore. The acquisition was consummated on the same day. The purchase price was determined through arm’s-length negotiation and is subject to a potential post-closing adjustment based on the value of the net assets delivered at the closing.

The Share Purchase Agreement contains certain representations, warranties, covenants and indemnification provisions. The Share Purchase Agreement provides that 10% of the purchase price shall be held in escrow for a period of approximately 21 months after the closing in order to satisfy valid indemnification claims that KMG UK may assert for specified breaches of representations, warranties and covenants. The escrow and holdback amounts of approximately $6,000 were funded during the three months ended March 31, 2015.

In the Share Purchase Agreement, Mr. Cleave agreed to comply with certain confidentiality, non-competition and non-solicitation covenants with respect to the business of Videotel for a period of 18 months after the closing.

The total purchase price and the excess of the total purchase price over the estimated fair value of the net assets acquired are as follows:



Consideration transferred—cash			$	47,446
Book value of tangible net assets acquired	$	1,732
Fair value adjustments to deferred revenue	961
Fair value of tangible net assets acquired			2,693
Identifiable intangibles at acquisition-date fair value
Customer relationships	12,759
Proprietary content	9,814
Internally developed software	2,160
Favorable operating leases	791
Total intangible assets			25,524
Deferred income taxes			(3,922		)
Goodwill			$	23,151

The Company's fair value estimate of assets acquired and liabilities assumed is pending completion of several elements, including the finalization of valuations of the fair value of the assets acquired and liabilities assumed and final review by the Company's management. Included in the liabilities is an uncertain tax position liability of approximately $3,800 which was held on Videotel’s balance sheet as of the acquisition date and which the Company is continuing to evaluate. The final determination of the assets acquired and liabilities assumed will be based on the established fair value of the assets acquired and the liabilities assumed as of the acquisition date. The excess of the purchase price over the fair value of net assets acquired is allocated to goodwill. The final determination of the purchase price, fair values and resulting goodwill may differ significantly from what is reflected in the foregoing table.

The acquired finite-lived intangible assets from the Videotel acquisition were recorded at their estimated fair value of $25,524 on the acquisition date. Refer to Note 15 to the consolidated financial statements for the classification of Videotel intangible assets including their useful lives.

Since the acquisition on July 2, 2014, the Company has recorded approximately $16,300 of service revenue attributable to Videotel within its consolidated financial statements, of which $5,900 was recorded during the three months ended March 31, 2015.

Pro Forma Financial Information

The following table provides certain supplemental statements of operations information on an unaudited pro forma basis as if the Videotel acquisition had occurred on January 1, 2014:



	Three Months Ended March 31, 2014
Pro forma net revenues	$	42,633
Pro forma net loss	$	(446	)
Basic and diluted pro forma net loss per share	$	(0.03	)

The pro forma results presented above are for illustrative purposes only for the period presented and do not purport to be indicative of the actual results which would have occurred had the transaction been completed as of the beginning of the period, nor are they indicative of results of operations which may occur in the future.