ACQUISITIONS

The Acquisition

As discussed in Note 1 to the consolidated financial statements, on September 16, 2013, the Company acquired, through a wholly owned subsidiary, 100% of the equity in AGS Capital from AGS Holdings. The Acquisition was consummated on December 20, 2013.

The contractual purchase price of $220.3 million, a seller note of $2.2 million, the settlement of $3.3 million in contingent consideration resulting in an additional seller note of $3.3 million issued in January 2014, and a working capital reduction of $5.3 million, resulted in an aggregate purchase price of $220.5 million. The contingent consideration of $3.3 million was based on certain financial performance metrics that were achieved between signing and closing.

The following summarizes the consideration paid for the Acquisition of AGS Capital (in thousands):



Contractual cash purchase price	$	220,300
Seller notes	5,531
Working capital adjustment	(5,340		)
Total consideration	$	220,491

During the Company’s continued review of the allocation of the purchase price to the identified tangible and intangible assets, the Company refined certain assumptions used in the calculation of the internally developed gaming software. As a result the Company reduced the value of the acquired internally developed gaming software by $1.5 million with a corresponding increase to goodwill in the first quarter of 2014.

As a result of an immaterial error correction (see Note 6), the Company reduced the value of the acquired gaming equipment, vehicles and other equipment, net by $1.6 million with a corresponding increase to goodwill. The decrease to the gaming equipment, vehicles and other equipment, net was a result of the removal of installation and delivery costs that were included in the fair value of the gaming machines in the valuation.

An allocation of the purchase price has been made to major categories of assets and liabilities based on management’s estimates. The allocation of the purchase price to the estimated fair values of the assets acquired and the liabilities assumed was as follows (in thousands):



At December 20, 2013
Currents assets	$	17,858
Gaming equipment, vehicles and other equipment, net	47,170
Goodwill	63,437
Intangible assets	97,512
Other long-term assets	1,616
Total assets	227,593
Total liabilities	7,102
Total equity purchase price	$	220,491

Our estimates of the fair values of depreciable tangible assets are as follows (in thousands):

Our estimates of the fair values of identifiable intangible assets are as follows (in thousands):



	Fair values at December 20, 2013		Average remaining useful life (in years)
Trade name - “American Gaming Systems”	$	12,126	Indefinite
Trade name - “Gambler’s Choice”	809		7
Customer agreements and relationships	60,112		7
Third party licenses	11,520		3 - 5
Internally developed gaming software	10,872		1 - 5
Purchased software	2,073		1 - 5
	$	97,512

C2 Gaming, LLC acquisition

As discussed in Note 1 to the consolidated financial statements, on May 6, 2014, a wholly owned subsidiary of the Company entered into an agreement to purchase 100% of the equity of C2 Gaming, LLC (“C2 Gaming”) for $23.3 million in cash, subject to terms outlined in the C2 Acquisition Agreement. The acquisition was initially funded by a $10.0 million draw on our Revolving Facility (as defined herein) and available cash on hand. The consideration paid for the acquisition of C2 Gaming consisted of the following (in thousands):



Paid at close	$	11,000
One-year payment	9,000
Contingent consideration	3,000
Working capital adjustment	273
Total consideration	$	23,273

The acquisition of C2 Gaming was consummated on May 6, 2014. The one-year payment of $9.0 million is due to the sellers on the one-year anniversary of the closing of the acquisition. The contingent consideration of $3.0 million is subject to the satisfaction of certain milestones, including the submittal and approval of video slot platforms to various jurisdictions as outlined in the C2 Acquisition Agreement. During the year ended December 31, 2014, the Company paid $0.5 million of the contingent consideration. As these milestones were considered to be probable of being met within one year, the remaining $2.5 million liability approximates fair value. The remaining purchase price is expected to be funded by existing cash or existing availability on the Revolving Facility.



At May 6, 2014
Current assets	$	545
Gaming equipment, vehicles and other equipment, net	534
Goodwill	13,744
Intangible assets	8,722
Total assets	23,545
Total liabilities	272
Total equity purchase price	$	23,273

Our estimates of the fair values of depreciable tangible assets are as follows (in thousands):

Our estimates of the fair values of identifiable intangible assets are as follows (in thousands):



	Fair values at May 6, 2014		Average remaining useful life (in years)
Colossal platform	$	1,559	5
Colossal titles	2,126		3
Colossal customer agreements and relationships	5,037		7
	$	8,722

Fair values at December 20, 2013

Average remaining useful life (in years)

Gaming equipment, vehicles and other