Sale of Ancept Assets and Contingent Consideration

3 Months Ended

Mar. 31, 2013

Sale of Ancept Assets and Contingent Consideration

4. Sale of Ancept Assets and Contingent Consideration

On January15, 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 January13, 2012, by and between ViewCast, Ancept Corporation, Genus Technologies LLC and its subsidiary, (the “Purchase Agreement”).ViewCast’s wholly-owned subsidiary, Ancept Corporation, was renamed ViewCast Solutions, Inc. (“VSI”) and no longer operates this business.

Upon the terms and subject to the conditions of the Purchase Agreement, the buyer agreed to pay an earn-out payment as follows: until the earlier of paying VSI $650,000 or January15, 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 January15, 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 January15, 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 January15, 2014 until the end of the Earn-Out Period, Buyer mayterminate the earn-out payment obligations by paying Ancept $650,000 less any prior earn-out payments. The buyer also assumed specified liabilities related to the Ancept Assets and 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. At December 31, 2012, the Company recorded an impairment of earn-out receivable in the amount of $80,000.

The net loss from discontinued operations related to the Ancept for the three months ended March31, 2012 is as follows:

	FortheThree Monthsended March31,
	2012
	(Unaudited)
Net revenue	$22,255
Cost of revenue	39,057
Gross profit	(16,802)
Operating expenses	62,745
Loss on sale of assets	2,047
Net loss from discontinued operations	$(81,594)