XML 34 R12.htm IDEA: XBRL DOCUMENT

Business Combinations

12 Months Ended

Mar. 31, 2019

Note 4 — Business Combinations

During the fiscal year ended March 31, 2018, the Company completed two acquisitions (asset purchase and stock purchase).

Wantickets

On May 5, 2017, LXL Tickets, a wholly owned subsidiary of the Company, entered into an Asset Purchase Agreement (“APA”) with Wantickets RDM, LLC (“Wantickets”) and certain other parties, whereby LXL Tickets purchased certain operating assets of Wantickets for total consideration of 666,667 shares of common stock of the Company valued at $3.3 million (or $5.01 per share). The asset purchase was intended to augment and diversify the Company’s music operating segment. The goodwill recorded for the Wantickets asset purchase was $1.3 million. Key factors that contributed to the recognition of Wantickets goodwill were the opportunity to consolidate and complement existing content operations, certain software and customer lists, and the opportunity to generate future synergies within the existing music business. As a result of the Wantickets asset purchase, the goodwill is deductible for tax purposes.

The Company accounted for the Wantickets asset purchase transaction as a business combination in accordance with ASC 805 “Business Combinations.” Significant other assets assumed were approximately $0.1 million in property and equipment, $0.4 million of trademark and trade names, $1.0 million in software associated with proprietary ticketing technology, and $0.5 million in domain names and customer relationships. For the years ended March 31, 2019 and 2018, the Company incurred approximately $0 and $4 thousand, respectively, in transaction costs associated with the Wantickets asset purchase.

The following table summarizes the fair value of the assets acquired from Wantickets (in thousands):

Asset Type	Fair Value
Property and Equipment	$	109
Trademark / Trade Name		431
Software		1,004
Customer Relationships		369
Domain Names		106
Goodwill		1,321
Purchase Consideration	$	3,340

During the quarter ended December 31, 2017, management of the Company made the decision to shut down the operations of LXL Tickets effective December 31, 2017 (see Note 4 - Dispositions). Pro forma financial information for the Wantickets asset purchase transaction is not presented due to the disposition of LXL Tickets during the year ended March 31, 2018.

Slacker, Inc.

On December 29, 2017, the Company acquired Slacker including its $50.1 million of gross assets for net consideration of $28.6 million consisting of (i) 6,126,788 shares of the Company’s common stock, valued at $20.1 million, (ii) 1,675,893 shares of the Company’s common stock issued to payoff certain debt of Slacker as of the transaction date, valued at $5.5 million, (iii) cash payment of $2.5 million and issuance of 175,000 shares of the Company’s common stock valued at $0.6 million to Slacker and its designees and (iv) the assumption of Slacker’s liabilities of approximately $21.5 million. The acquisition is intended to augment and diversify the Company’s music operating segment. The Company accounted for the acquisition as a business combination. The goodwill recorded for the Slacker acquisition was $9.7 million. Key factors that contributed to the recognition of the Slacker goodwill were the opportunity to consolidate and complement existing content operations, trained workforce, proprietary software and operating platform, and the opportunity to generate future synergies with the Company’s existing business. As a result of the acquisition of the stock of Slacker, the goodwill is not deductible for tax purposes.

The following table summarizes the fair value of consideration transferred in the Slacker acquisition (in thousands):

Consideration	Fair Value
Cash	$	2,525
Less cash acquired		(113	)
Net cash consideration		2,412
Equity at fair value		26,167
Net consideration	$	28,579

The following table summarizes the fair value of the assets assumed in the Slacker acquisition (in thousands):

Asset Type	Fair Value
Restricted cash	$	150
Accounts receivable		3,339
Prepaid expense and other assets		254
Deferred cost of sales		458
Property and equipment		400
Trademarks/trade names		4,637
Intellectual property		5,366
Customer relationships		6,570
Software		19,280
Goodwill		9,672
Deferred tax asset		1,181
Allowance for deferred tax asset		(1,181	)
Assumed current portion of long-term debt		(3,907	)
Assumed current liabilities		(17,640	)
Net consideration	$	28,579

Since the acquisition date, the amount of revenue for Slacker included in the Company’s consolidated statements of operations for the years ended March 31, 2019 and 2018 was $33.2 million and $7.1 million, respectively. The net loss for Slacker included in the Company’s consolidated statements of operations for the years ended March 31, 2019 and 2018 was ($6) million and ($4.1) million, respectively. The Company incurred approximately $0.4 million in transaction costs associated with the Slacker acquisition.

In the quarter ended December 31, 2018, the Company finalized its purchase price allocation for the acquisition of Slacker on December 29, 2017. As a result of obtaining the final valuation of the acquisition, the following changes have been recorded in the current period (in thousands):

Consideration	Final Fair Value			Preliminary Fair Value*			Change**
Cash	$	2,525		$	2,525		$	-
Less cash acquired		(113	)		(113	)		-
Net cash consideration		2,412			2,412			-
Equity at fair value		26,167			31,911			(5,744	)
Net consideration	$	28,579		$	34,323		$	(5,744	)

	Final Allocation			Preliminary Allocation*			Change**
Restricted cash	$	150		$	150		$	-
Accounts receivable		3,339			3,339			-
Prepaid expense and other assets		254			254			-
Deferred cost of sales		458			458			-
Property and equipment		400			400			-
Trademarks/tradenames		4,637			11,436			(6,799	)
Intellectual property		5,366			8,454			(3,088	)
Customer relationships		6,570			6,618			(48	)
Software		19,280			19,384			(104	)
Goodwill		9,672			5,377			4,295
Deferred tax asset		1,181			1,523			(342	)
Allowance for deferred tax asset		(1,181	)		(1,523	)		342
Assumed current portion of long-term debt		(3,907	)		(3,907	)		-
Assumed current liabilities		(17,640	)		(17,640	)		-
Net consideration	$	28,579		$	34,323		$	(5,744	)

(* Preliminary fair values recorded as of March 31, 2018.

**The fair value of equity consideration was changed by $5.7 million to reflect the lack of marketability from an 18-month lockout period. Changes in values of Tradenames and Intellectual property due to finalization of royalty rates.)

As a result of the Company finalizing its purchase price allocation for the acquisition of Slacker, amortization expense recorded in the consolidated statements of operations was reduced by $1.9 million in the third quarter of fiscal year ended March 31, 2019.

Supplemental Pro Forma Information (Unaudited)

The pro forma financial information as presented below is for informational purposes only and is not indicative of operations that would have been achieved from the acquisitions had they taken place at the beginning of the fiscal year ended March 31, 2018. Supplemental information on an unaudited pro forma basis, as if these acquisitions had been completed as of April 1, 2017, is as follows (in thousands, except per share data):

The following table presents the revenues and net loss of the combined company for the year ended March 31, 2018 as if the acquisition had been completed on April 1, 2017.

	Year Ended March 31,
	2018
Revenues	$	29,402
Net Loss		(35,470	)

The Company’s unaudited pro forma supplemental information is based on estimates and assumptions which the Company believes are reasonable and reflect amortization of intangible assets as a result of the acquisition. The pro forma results are not necessarily indicative of the results that would have been realized had the acquisitions been consummated as of the beginning of the periods presented. The pro forma amounts include the historical operating results of the Company, with adjustments directly attributable to the acquisitions.