Note 3 - Acquisition

12 Months Ended

Mar. 31, 2014

Business Combinations [Abstract]

Business Combination Disclosure [Text Block]

Note 3 Acquisition 

SCC

On November 20, 2012, the Company completed the acquisition of SCC, a leading provider of end-to-end e-commerce services. Total consideration included: $24.5 million in cash at closing, which is net of a preliminary working capital adjustment, 17.1 million shares of the Company’s common stock plus performance payments (contingent consideration) up to an additional $5.0 million in cash (undiscounted) and 6.3 million shares of the Company’s common stock contingent upon SCC’s achieving certain financial metrics for the 12 months ending December 31, 2012. The contingent cash payment is comprised of up to a maximum of $1.25 million, of which $1.0 million was paid in early calendar 2013, and up to a maximum of $3.75 million, of which $3.0 million (before interest of five percent per annum) will be paid in equal, quarterly installments beginning in October 2013 and ending on February 29, 2016. The contingent share payment of up to a maximum of 2,215,526 shares was to be issued in early calendar 2013, of which 1,770,097 shares were issued, and up to a maximum of 4,071,842 shares could have been issued in late calendar 2013, of which 590,036 were issued in July 2013. The determination of the remaining contingent cash and share payments was finalized in the first quarter of fiscal 2014. The working capital adjustment was also finalized in the first quarter of fiscal 2014 in accordance with the Merger Agreement, pursuant to which the Company received $836,000, which reduces the amount of cash consideration paid and decreases goodwill.

The combined fair value of the contingent consideration was estimated to be $7.4 million based upon Level 3 fair value valuation techniques (unobservable inputs that reflect the Company’s own assumptions). A financial model was applied to estimate the value of the contingent consideration that utilized the income approach and option pricing theory to compute expected values and probabilities of reaching the various thresholds in the Merger Agreement. Key assumptions included (1) a discount rate of 14%, (2) EBITDA operating results of between $6.0 and $10.0 million and (3) specific to the option pricing - interest rate of 0.15%, expected term of 0.11 years, dividend yield of 0.0% and volatility of 0%. The estimated fair value of the contingent consideration could change if different assumptions are used.

The goodwill of $30.6 million arising from the acquisition consists largely of the synergies and economies of scale expected from combining the operations of the Company and SCC. All goodwill was assigned to the Company’s SCC reporting unit which is included in the E-commerce and Fulfillment Services and is not deductible for tax purposes. This transaction qualified as an acquisition of a significant business pursuant to Regulation S-X and financial statements for the acquired business were filed with the SEC. 

The purchase price was allocated based on of the fair value of assets acquired and liabilities assumed as follows (in thousands):

Consideration:
Cash	$	23,657
Common stock		21,250
Contingent payment obligation		3,981
Contingent common stock obligation		3,383
Fair value of total consideration transferred	$	52,271
The SCC purchase price was allocated as follows:
Accounts receivable	$	11,732
Prepaid expenses and other assets		624
Property and equipment		7,075
Purchased intangibles		22,250
Goodwill		30,647
Accounts payable		(6,106	)
Accrued expenses and other liabilities		(4,056	)
Deferred tax liability		(9,895	)
	$	52,271

Net revenue of SCC, included in the Consolidated Statements of Operations and Comprehensive Income (Loss) for the year ended March 31, 2014 was $87.0 million.  SCC provided operating income of $1.9 million to the consolidated Company’s operating income for the year ended March 31, 2013.

Acquisition-related costs (included in general and administrative expenses in the Consolidated Statements of Operations and Comprehensive Income (Loss)) for the year ended March 31, 2013 were $3.5 million.

The following summary, prepared on a condensed pro forma basis presents the Company’s unaudited consolidated results from operations as if the acquisition of SCC had been completed as of the beginning of fiscal 2012. The unaudited pro forma presentation below does not include any impact of transaction costs or synergies.

	Years ended March 31,
	2013		2012
Net sales	$	97,608	$	60,794
Cost of sales		80,364		50,899
Gross profit		17,244		9,895
Operating expenses		15,540		16,767
Income from operations	$	1,704	$	(6,872	)