Note 2 - Business Acquisitions

12 Months Ended

Dec. 31, 2012

Business Combination Disclosure [Text Block]

Note 2—Business Acquisitions

On March 2, 2011, we completed a Stock Purchase Agreement (the “Agreement”) with XtFt, the owner of substantially all of the assets and business of TechFront Desenvolvimento de Software S/S Ltda, a Brazilian company (“TechFront”). The Company acquired XtFt to obtain its game development expertise and existing and future intellectual properties. On July 14, 2011 XtFt’s name was changed to Quepasa Games.

We acquired all of the outstanding equity interests of XtFt.  The shares issued to XtFt’s owners were calculated contractually based on $3,700,000 of our common stock (348,723 shares) at $10.61 per share which was based on the average closing price per share for the 10 trading days prior to the date of closing the Agreement. The acquisition date value of the shares issued of $2,730,501 was calculated using the fair market value of the 348,723 shares, at $7.83, the closing price of our common stock on the acquisition date.    The prior owners of XtFt were eligible to receive a potential earn out fee of 250,000 shares of our common stock based on Quepasa Games achieving specific performance milestones.  Because the 2011 milestones were not met, the prior owners of XtFt forfeited one-third of the earn-out or 83,334 shares.  An additional cost of acquisition of $978,750 for the contingent earn out provision was calculated using the fair market value of the probable shares to be granted based on the terms of the Agreement at a price per share valued at the date of acquisition.

In connection with the Agreement, on February 1, 2011, we entered into a Secured Revolving Line of Credit Agreement (“Credit Agreement”) with TechFront and agreed to lend up to $500,000.  Advances under the Credit Agreement may be used to pay off certain Techfront loans specified in the Agreement.  The secured revolving line of credit shall become due and payable on February 1, 2017.  The Credit Agreement is secured by certain U.S. and Brazilian Trademarks of TechFront.  Prior to the acquisition date, $500,000 was advanced to TechFront under the Credit Agreement.  The collectability of this amount was deemed by management to be doubtful immediately upon the date of the first advance and therefore in substance was deemed to be an additional cost of the acquisition.

The purchase price was allocated first to record identifiable assets and liabilities at fair value and the remainder to goodwill as follows:

Property and equipment	$	119,760
Other assets		191,887
Total assets acquired		311,647
Accounts payable and accrued liabilities		(383,014	)
Total liabilities assumed		(383,014	)
Goodwill		4,280,618
Total purchase price	$	4,209,251

The Company incurred approximately $368,000 of broker commissions, legal and professional fees and travel costs during the acquisition of Quepasa Games that were expensed as incurred and classified as acquisition and restructuring costs during the year ended December 31, 2011.

On November 10, 2011, the Company, Merger Sub, and Insider Guides, Inc., closed the Merger.  Insider Guides Inc. operated the myYearbook.com platform. The Company and Insider Guides Inc. had similar focus on social discovery, social gaming, virtual goods and brand advertising and could capitalize on combined business strengths. As Merger consideration, the security holders of myYearbook received approximately $18 million in cash and approximately 17 million shares of the Company’s common stock (not including cash for fractional shares).  Following the Merger, Merger Sub changed its name to Insider Guides, Inc. which later merged into MeetMe.

The purchase price was allocated first to record identifiable assets and liabilities at fair value and the remainder to goodwill as follows:

Goodwill	$	70,646,036
Intangible assets		8,889,994
Cash and cash equivalents		7,315,783
Accounts receivable		7,207,685
Property and equipment		3,650,119
Other assets		1,257,263
Total assets acquired		98,966,880
Accounts payable, accrued and other liabilities		(3,878,238	)
Notes payable		(5,008,724	)
Total liabilities assumed		(8,886,962	)
Total purchase price	$	90,079,918

The Company incurred approximately $1.2 million of investment banking, legal and professional fees, proxy printing and filing fees and travel costs during the acquisition of Insider Guides, Inc. that were expensed as incurred and classified as acquisition and restructuring costs during the year ended December 31, 2011.

The amounts of  revenues and net losses from Insider Guides, Inc. and Quepasa Games included in the Company’s consolidated statement of operations for the year ended December 31, 2011, and the unaudited supplemental pro forma revenues and net income (loss) of the combined entity that give effect to the acquisitions had they occurred January 1, 2010 are as follows:

	(Unaudited)
	Revenues		Net Income (Loss)
Insider Guides, Inc. actual for the period November 10, 2011 to December 31, 2011	$	5,709,194	$	1,003,411
Quepasa Games actual for the period March 2, 2011 to December 31, 2011	$	1,154,489	$	(3,049,058	)
Supplemental unaudited consolidated pro forma information for the year ended December 31, 2010	$	30,944,817	$	(7,391,384	)

In preparing the unaudited pro forma information, various assumptions were made, and the Company does not purport this information to be indicative of what would have occurred had acquisition been made as of January 1, 2010, nor is it indicative of the results of future combined operations.