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Acquisitions

12 Months Ended

Jul. 31, 2020

Note 5—Acquisitions

Ringsouth Europa, S.L.

On December 11, 2019, the Company’s subsidiary, net2phone, Inc. acquired 100% of the outstanding shares of Ringsouth Europa, S.L. (“Ringsouth”), a regional provider of cloud communications services to businesses in Spain. The acquisition expands net2phone’s business into Spain. Ringsouth’s operating results from the date of acquisition, which were not significant, are included in the Company’s consolidated financial statements.

The acquisition date fair value of the consideration consisted of the following:

(in thousands)
Cash paid	$	450
Contingent consideration		375
Total fair value of consideration	$	825

The contingent consideration includes two potential payments to the seller of $0.4 million each, based on monthly recurring revenue targets to be achieved over a 36-month period and 48-month period. The second potential payment is not contingent upon meeting the target for the first payment. The fair value of the contingent consideration was estimated using discounted cash flow models and Monte Carlo simulations. This fair value measurement was based on significant inputs not observable in the market and therefore represents a Level 3 measurement. There was no change in the estimated fair value of the contingent consideration in the period from the acquisition date to July 31, 2020, although the balance changed due to foreign currency translation adjustments.

The impact of the acquisition’s purchase price allocations on the Company’s consolidated balance sheet was as follows:

(in thousands)
Trade accounts receivable	$	142
Other current assets		21
Property, plant and equipment		84
Goodwill		1,437
Non-compete agreement (4-year useful life)		50
Customer relationships (7-year useful life)		130
Tradename (2-year useful life)		30
Deferred income tax assets		118
Other assets		10
Trade accounts payable		(302	)
Accrued expenses		(136	)
Other current liabilities		(408	)
Other liabilities		(351	)
Net assets acquired	$	825

The goodwill was assigned to the net2phone segment and was attributable primarily to Ringsouth’s assembled workforce and expected synergies from the business combination. The goodwill is expected to be deductible for income tax purposes.

The Company’s pro forma results of operations as if the Ringsouth acquisition occurred on August 1, 2018 were not materially different from the actual results of operations.

Versature Corp.

On September 14, 2018, the Company acquired 100% of the outstanding shares of Versature Corp., a UCaaS provider serving the Canadian market, for cash of $5.9 million. The acquisition expanded the Company’s UCaaS business into Canada. Versature’s operating results from the date of acquisition, which were not significant, are included in the Company’s consolidated financial statements.

The impact of the acquisition’s purchase price allocations on the Company’s consolidated balance sheet and the acquisition date fair value of the total consideration transferred were as follows:

(in thousands)
Trade accounts receivable	$	370
Prepaid expenses		65
Property, plant and equipment		1,826
Non-compete agreement (5-year useful life)		600
Customer relationships (20-year useful life)		3,003
Tradename (20-year useful life)		490
Other assets		486
Trade accounts payable		(81	)
Accrued expenses		(523	)
Other liabilities		(710	)
Net assets excluding cash acquired	$	5,526

Supplemental information:
Cash paid	$	5,943
Cash acquired		(417	)
Total consideration, net of cash acquired	$	5,526

The Company’s pro forma results of operations as if the Versature acquisition occurred on August 1, 2018 were not materially different from the actual results of operations.