2. Acquisitions

Acquisition of RMG

On April 8, 2013, the Company acquired RMG for a total purchase price of $27,516,010. The amount paid for RMG was comprised of (i) 400,001 shares of Company common stock valued at $9.98 per share on March 31, 2013, (ii) $10,000 in cash, and (iii) $10,000 deposited into an escrow account. Additionally, the Company paid, on behalf of RMG, all indebtedness of RMG under RMG's credit agreement at a discounted amount equal to $23,500,000, paid with $21,000,000 of cash and $2,500,000 of shares of Company common stock.

The acquisition was accounted for as an acquisition of a business and, accordingly, the results of its operations have been included in the Company’s consolidated results of operations from the date of acquisition.

The Company engaged an independent specialist to assist the Company in calculating the fair value of the assets and liabilities acquired. The allocation of the total purchase price to the net tangible and identifiable intangible assets was based on the fair value at the acquisition date. The excess of the purchase price over the net tangible and identifiable intangible assets was allocated to goodwill, which is deductible for tax purposes. Qualitatively, goodwill represents the market position and the collective expertise of Reach Media with respect to advertising services. The purchase price allocation was preliminary as of December 31, 2013 pending the final determination of the fair value of certain acquired assets and assumed liabilities. The purchase price allocation was finalized as of March 31, 2014.

The valuation of the identifiable intangible assets was performed using the following methodologies:

The fair values were based on significant inputs that were not observable in the market and thus represent Level 3 measurements under the fair value hierarchy. The significant unobservable inputs include the discount rate of 19.5% which was based on the estimated weighted cost of capital.

The purchase price allocation was as follows:

Intangible assets acquired consist of the following:

The primary tangible assets acquired were cash of $819,052, accounts receivable of $4,813,553, and property and equipment of $514,280. The primary liabilities assumed were accounts payable of $2,220,858, accrued liabilities of $1,075,736, and revenue share liabilities of $2,721,121.  

Acquisition of Symon  

On April 19, 2013, the Company acquired Symon for $43,685,828 in cash. The acquisition was accounted for as an acquisition of a business and, accordingly, the results of its operations have been included in the Company’s consolidated results of operations from the date of acquisition.

The Company engaged an independent specialist to assist Company in calculating the fair value of the assets and liabilities acquired. The allocation of the total purchase price to the net tangible and identifiable intangible assets was based on the fair value at the acquisition date. The excess of the purchase price over the net tangible and identifiable intangible assets was allocated to goodwill (which is not deductible for tax purposes). Qualitatively, goodwill represents the market position and the global operating experience of Symon. The purchase price allocation was preliminary as of December 31, 2013 pending the final determination of the fair value of certain acquired assets and assumed liabilities. The purchase price allocation was finalized as of March 31, 2014.

The valuation of the identifiable intangible assets was performed using the following methodologies:

The fair values were based on significant inputs that were not observable in the market and thus represent Level 3 measurements under the fair value hierarchy. The significant unobservable inputs include the discount rate of 21.0% which was based on the estimated weighted cost of capital.

The purchase price allocation was as follows: 

Intangible assets acquired consist of:

The primary tangible assets acquired were cash of $5,666,273, accounts receivable of $6,423,976, inventory of $3,477,488, and property and equipment of $918,768. The primary liabilities assumed were accounts payable of $1,171,922, accrued liabilities of $1,160,240, deferred revenue of $6,200,000, and deferred tax liabilities of $10,377,893.