10-K Watch: DivX: So Goes Stage6, So Goes Veatros

(PaidContent.org)  This story was written by Joseph Weisenthal.

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Mounting costs and legal issues contributed to the shuttering of DivX (NSDQ: DIVX) video sharing site Stage6, the company again emphasized in its 10-K filing today. The filing provides a precise timeline of events related to the copyright infringement and legal battles with UMG that were discussed on the company's recent conference call. An interesting sidenote to the shutdown is the connection between Stage6 and Veatros, the video processing, search and discovery firm it acquired last year for up to $4.25 million. Ultimately, based on earnouts, it ended up paying just over $3 million.

That acquisition was not about buying an operating companyVeatros had already been wound downbut about acquiring a key patent license, which it booked as an intangible asset. It was expected that this license would have value in the eventual success of Stage6. With Stage6 shutting down, DivX re-evaluated the value of the Veatros asset in the context of its remaining core business: "Based on the Company's revised forecasts excluding the Stage6 future activities and discounting the cash flows attributable to our core consumer electronics business, the Company concluded that the carrying amount of the asset was not fully recoverable and an impairment charge equal to approximately $3 million was recorded in 2007 in the consolidated statements of income, as the acquired patented technology license was considered to have a recoverable value of approximately $60,000."


By Joseph Weisenthal