3. Acquisitions

The Company records acquisitions pursuant to ASC 805 – Business Combinations. We allocate the fair value of purchase consideration to the tangible assets acquired, liabilities assumed and intangible assets acquired based on their estimated fair values. The excess of the fair value of purchase consideration over the fair values of these identifiable assets and liabilities is recorded as goodwill. Such valuations require management to make significant estimates and assumptions especially with respect to intangible assets. Significant estimates in valuing certain intangible assets include, but are not limited to, future expected cash flows from acquired intangible assets, useful lives and discount rates. Management’s estimates of fair value are based upon assumptions we believe to be reasonable, but which are inherently uncertain and unpredictable and, as a result, actual results may differ from estimates. During the measurement period, we may record adjustments to the assets acquired and liabilities assumed, with the corresponding offset to goodwill. Upon the conclusion of the measurement period, any subsequent adjustments are recorded to earnings.

Fluent Acquisition

To accelerate the Company’s strategy to apply its next generation data fusion technology to not only the risk management industry, but also as an advanced data analytics platform to the consumer marketing industry, on December 8, 2015 (the “Effective Date of Fluent Acquisition”), the Company completed the acquisition of Fluent, Inc. (the “Fluent Acquisition”), pursuant to the terms and conditions of the Fluent Merger Agreement, as defined below.

On November 16, 2015, the Company entered into an Agreement and Plan of Merger (the “Fluent Merger Agreement”) by and among the Company, Fluent Acquisition I, Inc., a Delaware corporation and wholly-owned subsidiary of the Company (“Fluent Merger Sub”), Fluent Acquisition II, LLC, a Delaware limited liability company and wholly-owned subsidiary of the Company (“Fluent Merger Co”), Fluent, Inc., a Delaware corporation (“Fluent Inc”), the sellers of the Company (each, a “Seller” and collectively, the “Sellers”), and Ryan Schulke, as the representative of each Seller.

On December 9, 2015, Fluent Merger Co, the surviving entity during the Fluent Acquisition, changed its name to Fluent, LLC (“Fluent”). IDI is the legal and accounting acquirer of the Fluent Acquisition. Fluent is a leader in people-based digital marketing and customer acquisition.

For accounting purposes, the Company recognized the Fluent Acquisition in accordance with ASC Topic 805 – Business Combinations. Under the acquisition method of accounting, the assets (including identifiable intangible assets) and liabilities of Fluent prior to the Fluent Acquisition were recorded at their respective fair values. Any excess of purchase price over the fair value of the net assets were recorded as goodwill. The Company’s financial statements issued after the Fluent Acquisition would reflect these fair values and would not be restated retroactively to reflect the historical financial position or results of operations of Fluent.

Pursuant to the Fluent Merger Agreement, the Company acquired 100% of the outstanding stock of Fluent from the Sellers for the following considerations: (i) 300,037 shares, as adjusted, of the Company’s Series B Non-Voting Convertible Preferred Stock, par value $0.0001 (the “Series B Preferred”), convertible into 15,001,850 shares of the Company’s common stock, par value $0.0005 (such shares of common stock, the “Conversion Shares”), with the fair value of $123.8 million, determined by multiplying the Company’s market stock price by the total shares of common stock, as converted, and (ii) approximately $99.3 million in cash. The following table summarizes the preliminary purchase price allocation and the fair value of the net assets acquired and liabilities assumed (marked to market), and the resulting amount of goodwill in the acquisition of Fluent (the legal and accounting acquiree) at the Effective Date of Fluent Acquisition.

(In thousands)
Assets acquired:
Cash and cash equivalents	$	6,013
Accounts receivable		20,250
Prepaid expenses and other current assets		691
Property and equipment		242
Intangible assets:
Customer relationships		30,875
Trademarks		16,357
Domain names		191
Developed technology		10,716
Databases		25,052
Non-competition agreements		728
Total intangible assets		83,919
Other non-current assets		763
Deferred tax assets		1,868
		113,746
Liabilities assumed:
Accounts payable and accrued expenses		10,792
Liability for employee incentive-based compensation plan		4,000
Deferred revenue		314
Deferred tax liabilities		32,111
		47,217
Goodwill		156,526
Total consideration	$	223,055
Including:
Cash consideration	$	99,289
Fair value of Series B Preferred issued		123,766
Total consideration	$	223,055

The intangible assets acquired are amortized on a straight-line basis over the estimated useful lives. The useful lives for customer relationships, trademarks, domain names, developed technology, databases and non-competition agreements are 7 years, 20 years, 20 years, 5 years, 10 years, and 5 years, respectively, and the weighted average useful life for these acquired intangible assets is 10 years.

Goodwill from the acquisition of Fluent principally relates to intangible assets that do not qualify for separate recognition, including the assembled workforce and synergies. Goodwill is not tax deductible for income tax purposes and was assigned to the Information Services and Performance Marketing reporting segments of $37,396 and $119,130, respectively.

The fair value of assets acquired and liabilities assumed from our acquisition of Fluent was based on a preliminary valuation and our estimates and assumptions are subject to change within the measurement period. The primary areas of the purchase price that are not yet finalized are related to the fair value of intangible assets, certain accrued liabilities, and income taxes. Measurement period adjustments will be applied to the period that the adjustment is identified in our condensed consolidated financial statements. As of March 31, 2016, the Company is still evaluating the purchase price allocation, with no change from the preliminary purchase price allocation disclosed in the Company’s 2015 Annual Report.

Pro forma disclosure for acquisition

The following table includes the pro forma results for the three months ended March 31, 2015 of the combined companies as though the acquisition had occurred on January 1, 2015.

	Pro forma
	Three Months Ended
(In thousands)	March 31, 2015
Revenue	$	32,105
Loss from continuing operations		(32,160	)
Net loss attributable to IDI		(22,198	)
Basic and diluted loss per share	$	(2.96	)

In preparation of the unaudited pro forma financial data, for the three months ended March 31, 2015, we included pro forma adjustments in relation to the additional acquired intangible assets amortization expenses, interest expenses, and share-based compensation expenses of $2,508, $1,828 and $31,663, respectively, and we also added back the related total net income tax benefit of $12,239.

The unaudited pro forma financial information is presented for information purposes only, and may not necessarily reflect our future results of operations or what the results of operations would have been had we owned and operated each company as of the beginning of the period presented.

TBO Merger with Tiger Media

To enable Tiger Media to enter into the big data and analytics sector, on March 21, 2015 (the “Effective Date of TBO Merger”), Tiger Media and TBO Acquisition, LLC, a Delaware limited liability company and a wholly-owned subsidiary of Tiger Media (“TBO Merger Sub”), completed a merger (the “TBO Merger”) with The Best One, Inc. (“TBO”), pursuant to the terms and conditions of the Merger Agreement and Plan of Reorganization, as amended (the “TBO Merger Agreement”) dated as of December 14, 2014.

For accounting purposes, the Company recognized the TBO Merger in accordance with ASC Topic 805-40, “Reverse Acquisitions.” Accordingly, Tiger Media has been recognized as the accounting acquiree in relation to the TBO Merger, with IDI Holdings, LLC (“IDI Holdings”), formerly known as TBO Merger Sub, being the accounting acquirer, and the Company’s condensed consolidated financial statements for the reporting period from January 1, 2015 through March 21, 2015 being those of IDI Holdings, rather than those of Tiger Media. The Company’s condensed consolidated financial statements for the period since March 22, 2015, the day after the TBO Merger was consummated, recognize Tiger Media and IDI Holdings as a consolidated group for accounting and reporting purposes, albeit with a carryover capital structure inherited from Tiger Media (attributable to the legal structure of the transaction).

Under the acquisition method of accounting, the assets (including identifiable intangible assets) and liabilities of Tiger Media prior to the TBO Merger were recorded at their respective fair values and added to those of IDI Holdings. Any excess of purchase price over the fair value of the net assets were recorded as goodwill. Financial statements of IDI issued after the TBO Merger reflect these fair values and are not restated retroactively to reflect the historical financial position or results of operations of Tiger Media.

Under the reverse acquisition, the accounting acquiree, the Company, issued equity shares to the owners of the accounting acquirer, IDI Holdings. The consideration transferred by IDI Holdings for its interest in the Company is based on the number of equity interests IDI Holdings would have had to issue to give the owners of the Company the same percentage equity interest in the combined entity that results from the reverse acquisition. The fair value of the number of equity interests calculated in that way can be used as the fair value of consideration transferred in exchange for the Company. Certain shareholders of IDI Holdings also had the right to receive additional shares subject to an earn-out (as mentioned in Note 10). The following table summarizes the purchase price allocation and the fair value of the net assets acquired and liabilities assumed (marked to market), and the resulting amount of goodwill related to the acquisition of Tiger Media (the accounting acquiree) at the Effective Date of TBO Merger.

(In thousands)
Assets acquired:
Cash and cash equivalents	$	3,569
Accounts receivable		1,808
Other current assets		326
Property and equipment		1,419
Intangible assets, net		4,280
Long-term deferred expenses		586
		11,988
Liabilities assumed:
Accounts payable		1,519
Accrued expenses and other payables		736
Acquisition consideration payable		464
Amounts due to related parties		124
Deferred revenue		80
		2,923
Non-controlling interests		425
Goodwill		35,472
Total consideration	$	44,112

Goodwill from the acquisition principally relates to the assembled workforce and synergies.

As all assets and liabilities related to the Advertising Business, as defined below, were disposed of in 2015 for $0, no pro forma financial information was disclosed.