3. Discontinued Operations

On June 12, 2012, the Company acquired PowerReviews, Inc. (“PowerReviews”), a provider of social commerce solutions based in San Francisco, California. The total consideration paid for this transaction was $150.8 million, including the issuance of 6.4 million shares of the Company’s common stock and assumption of vested and unvested options to purchase the common stock of PowerReviews equivalent to options to purchase 1.7 million shares of the Company’s common stock, but excluding the potential cash proceeds that may arise from the exercise of these assumed options. On January 10, 2013, the U.S. Department of Justice (“DOJ”) filed a complaint against the Company with the U.S. District Court for the Northern District of California, San Francisco Division (the “Court”), alleging that the Company’s acquisition of PowerReviews violated Section 7 of the Clayton Act, 15 U.S.C. Section 18 and seeking the Company’s divestiture of assets sufficient to create a competing business that can replace the competitive significance of PowerReviews in the marketplace. On January 8, 2014, the Court ruled that the Company’s acquisition of PowerReviews violated Section 7 of the Clayton Act, 15 U.S.C. Section 18. On April 24, 2014, the Company entered into a Joint Stipulation with the DOJ to resolve the DOJ’s claims in the antitrust action challenging the acquisition of PowerReviews and, together with the DOJ, the Company submitted a proposed order to the Court (the “Order”). Under the terms of the Joint Stipulation and the Order, the Company was required to divest all of the assets of the PowerReviews business. On June 4, 2014, the Company entered into a definitive agreement to divest PowerReviews, LLC, the successor to PowerReviews, to Wavetable Labs, LLC (“Wavetable”) for $30.0 million in cash, $4.5 million of which is to be held in escrow as partial security for the Company’s indemnification obligations under the definitive agreement. Any reduction in proceeds of the escrow would be recorded as an additional loss. The terms of this transaction were approved by the DOJ on June 26, 2014, and the transaction was completed on July 2, 2014. Wavetable subsequently changed its name to PowerReviews. As a result of the foregoing, PowerReviews revenues, related expenses and loss on disposal, net of tax, are components of “loss from discontinued operations” in the Condensed Consolidated Statements of Operations. As of April 30, 2014, on the Condensed Consolidated Balance Sheets, the assets and liabilities of the discontinued operations of PowerReviews were presented as ‘Assets held for sale’ and ‘Liabilities held for sale,’ respectively. The statement of cash flows is reported on a combined basis without separately presenting cash flows from discontinued operations for all periods presented.

The Company incurred a total loss on the disposal of the PowerReviews business of $10.7 million; of which, $9.2 million was recognized as an estimated loss on disposal of discontinued operations during the three months ended April 30, 2014. The additional $1.5 million loss was primarily caused by a decrease of $0.5 million in estimated cash proceeds and incremental transaction costs of $0.4 million. The Company recognized the additional loss of $1.5 million in the six months ended October 31, 2014.

Summarized results from discontinued operations were as follows (in thousands):


	Three Months Ended October 31,				Six Months Ended October 31,
	2014		2013		2014			2013
Revenues from discontinued operations	$	—	$	4,390	$	2,535		$	8,642

Income from discontinued operations before income taxes	$	—	$	673	$	303		$	1,119
Income tax expense		—		253		23			421

Net income from discontinued operations		—		420		280			698
Loss on disposal of discontinued operations, net of tax		—		—		(1,537	)		—

Net income (loss) from discontinued operations, net of tax	$	—	$	420	$	(1,257	)	$	698

The carrying amounts of the major classes of assets and liabilities of discontinued operations were as follows (in thousands):


	July 2,		April 30,
	2014		2014
ASSETS:
Restricted cash	$	104	$	—
Accounts receivable, net		1,097		1,036
Prepaid expenses and other current assets		48		49

Total current assets		1,249		1,085
Property and equipment, net		37		37
Goodwill		9,002		9,002
Acquired intangible assets, net		32,813		32,813

Total assets	$	43,101	$	42,937

LIABILITIES:
Accounts payable	$	76	$	221
Accrued expenses and other current liabilities		823		895
Deferred revenue		2,230		2,505

Total Liabilities	$	3,129	$	3,621

The Company recorded a loss on the disposal of discontinued operations of $1.5 million, net of tax, in the six months ended October 31, 2014 which was calculated as follows (in thousands):


Cash consideration	$	30,000
Less:
Basis in net assets as of July 2, 2014		39,972
Costs incurred directly attributable to the transaction		1,039

Loss before income taxes		(11,011	)
Income tax benefit		(282	)

Loss on disposal of discontinued operations, net of taxes		(10,729	)
Loss on disposal of discontinued operations, net of taxes, previously recognized		9,192

Loss on disposal of discontinued operations, net of tax, recognized in current period	$	(1,537	)

The carrying amount of assets held for sale in the condensed consolidated balance sheet was calculated as follows (in thousands):


	April 30,
	2014
Total assets of discontinued operations	$	42,937
Estimated loss on disposal of discontinued operations, net of tax		(9,192	)

Assets held for sale	$	33,745

As of October 31, 2014, there were no “assets held for sale” as the divestiture of the PowerReviews business was completed on July 2, 2014. The $4.5 million held in escrow is recorded as a receivable in “Prepaid expenses and other current assets” on the Condensed Consolidated Balance Sheet as of October 31, 2014. As of October 31, 2014, the Company has received no claims for indemnification under the definitive agreement.