Sale of Ancept Assets and Contingent Consideration

9 Months Ended

Sep. 30, 2012

Sale of Ancept Assets and Contingent Consideration [Abstract]

Sale of Ancept Assets and Contingent Consideration

4. Sale of Ancept Assets and Contingent Consideration

On January 15, 2012, ViewCast completed the sale of certain assets from Ancept Corporation (the “Ancept Assets”) related to the development and licensing of the VMp software products that provide the management of the life cycle phases of digital media pursuant to the terms of the Asset Purchase Agreement dated January 13, 2012, by and between ViewCast, Ancept Corporation, Genus Technologies LLC and its subsidiary. ViewCast’s wholly-owned subsidiary, Ancept Corporation, was renamed ViewCast Solutions, Inc. (“VSI”) and no longer operates this business. The Ancept Assets are classified as held for sale at December 31, 2011, and the assets and liabilities are included in the respective current assets and liabilities sections of the Consolidated Balance Sheet.

Upon the terms and subject to the conditions of the Purchase Agreement, the buyer has agreed to pay an earn-out payment as follows: until the earlier of paying VSI $650,000 or January 15, 2017 (the “Earn-Out Period”), the buyer shall pay VSI on a quarterly basis a percentage of the net license fees, subscription fees and similar revenues paid or payable to the buyer or otherwise earned by buyer with respect to the software sold from Ancept to the buyer (“Net Software License Revenue”). The buyer agreed to pay VSI (i) 20% of the Software License Revenue from sales opportunities in the pipeline on January 15, 2012 and from post-closing referrals from ViewCast plus (ii) 10% of Net Software License Revenue, up to a maximum of $400,000, generated from buyer’s customers not derived from ViewCast. Prior to January 15, 2014, the buyer may terminate the earn-out payment obligations by paying VSI $400,000 which amount shall not be reduced by any prior earn-out payments. On or after January 15, 2014 until the end of the Earn-Out Period, Buyer may terminate the earn-out payment obligations by paying Ancept $650,000 less any prior earn-out payments. The buyer also (i) assumed specified liabilities related to the Ancept Assets, and (ii) paid $47,026 in cash to VSI.

Proceeds from the sale totaled $592,976 comprised of the following: cash of $47,026, receivable for future earn out consideration of $227,531, and liabilities assumed by the buyer of $318,419. The carrying value of the reporting unit approximated the proceeds received on the date of the transaction; as a result, a loss of $2,047 was recorded on the sale. Management recorded the contingent earn out consideration at estimated fair value determined using discounted estimated future cash flows. Subsequent to the sale, proceeds received under the arrangement will be applied to the carrying value of the asset.

The following table provides a detail of the net assets held for sale as of December 31, 2011:

	December 31,
	2011
Assets:
Accounts receivable	$	67,086
Prepaid expenses		4,381
Goodwill		—
Property and equipment, net		17,415
Deposit		3,250
Intangible assets, net		—
Capitalized software development cost, net		442,775
Total assets		534,907
Liabilities related to assets held for sale		250,837
Net assets held for sale	$	284,070

The net loss from discontinued operations related to the Ancept for the three and nine months ended September 30, 2011 and 2012 are as follows:

	For the three months ended September 30,					For the nine months ended September 30,
	2011			2012		2011			2012
	(Unaudited)			(Unaudited)		(Unaudited)			(Unaudited)
Net revenue	$	302,351		$	—	$	838,046		$	22,255
Cost of revenue		190,050			—		677,626			39,057
Gross profit		112,301			—		160,420			(16,802	)
Operating expenses		251,580			—		888,908			62,745
Loss on sale of assets		—			—		—			2,047
Net loss from discontinued opertaions	$	(139,279	)	$	—	$	(728,488	)	$	(81,594	)