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DigiNotar
 12 Months Ended
Dec. 31, 2012
DigiNotar [Abstract]  
DigiNotar

Note 3 – DigiNotar

On January 10, 2011, we purchased all of the intellectual property of DigiNotar Holding B.V. and its subsidiaries and acquired 100% of the stock of DigiNotar B.V. and DigiNotar Notariaat B.V., each a private company organized and existing in The Netherlands (collectively, “DigiNotar”), for aggregate consideration of €10,000 ($13,253 at an exchange rate of 1.32 US Dollars per Euro) comprised of assumed debt of €64 and cash. Both transactions were effective January 1, 2011. We funded the transactions from our existing cash balances.

The consideration was allocated to assets acquired and liabilities assumed based on their respective fair values as of the acquisition date as follows:

 

         

Current assets

   $ 2,039  

Property and equipment

     589  

Goodwill

     2,632  

Intangible assets

     10,139  

Deferred income tax liabilities - current

     (414 ) 

Other current liabilities

     (1,217 ) 

Deferred income tax liabilities - non-current

     (515 ) 
   

 

 

  
    $ 13,253  
   

 

 

  

 

Acquired identifiable intangible assets are amortized over their respective useful lives ranging from two to seven years.

Purchase consideration includes contingent consideration held in escrow payable upon the achievement of certain one year operating targets. The contingent consideration was recorded as a current asset at its estimated fair value of $861. As a result of events described below, the contingent consideration was re-measured as of September 30, 2011 resulting in an increase of $1,085 recorded in our statement of operations as discontinued operations.

In July 2011, DigiNotar B.V. detected an intrusion into its Certificate Authority (CA) infrastructure, which resulted in the fraudulent issuance of public key certificate requests for a number of domains. On September 14, 2011, the Dutch Independent Post and Telecommunications Authority (OPTA) Commission terminated DigiNotar B.V.’s registration as a certification service provider that issues qualified certificates. As a result of the termination of its registration as a certification service provider, DigiNotar B.V. filed for bankruptcy on September 19, 2011 and the Haarlem District Court, The Netherlands declared DigiNotar B.V. bankrupt on September 20, 2011. The court appointed a bankruptcy trustee to manage all the affairs of DigiNotar B.V. as it proceeds through the bankruptcy process. The trustee took over the management of business activities of DigiNotar B.V. and responsibility for the administration and liquidation of DigiNotar B.V. The foregoing events described in this paragraph are referred to as the “DigiNotar Events”.

As a result of the DigiNotar Events, the loss on operating activities, the loss on the disposal and the related assets and liabilities related to DigiNotar B.V. are reflected as discontinued operations. The income (loss) from discontinued operations, net of tax, for the years ended December 31, 2012 and 2011 was as follows:

 

                 
   

Year ended December 31,

  
    2012     2011  

Loss from operations

   $ —     $ (1,595 ) 

Loss on disposal

     (630 )      (4,523 ) 
   

 

 

    

 

 

  

Loss from discontinued operations

   $ (630 )    $ (6,118 ) 
   

 

 

    

 

 

  

DigiNotar revenues of $1,764 for the year ended December 31, 2011 are included in the loss from operations shown above.

The loss on disposal for the year ended December 31, 2012 consists of professional fees of $690 net of tax benefit of $60. For the year ended December 31, 2011, loss on disposal includes the following:

 

                         
    Amount     Tax     Net  

Impairment of goodwill

   $ 2,873     $ (251 )    $ 2,622  

Impairment of intangibles

     2,307       (201 )      2,106  

Other assets and liabilities

     (1,459 )      204       (1,255 ) 

Provision for doubtful account

     952       0       952  

Professional fees

     1,253       (110 )      1,143  

Contingent consideration

     (1,085 )      40       (1,045 ) 
   

 

 

    

 

 

    

 

 

  

Total loss on disposal

   $ 4,841     $ (318 )    $ 4,523  
   

 

 

    

 

 

    

 

 

  

 

At December 31, 2012 and 2011, remaining assets and liabilities related to DigiNotar have been classified as assets of discontinued operations and liabilities of discontinued operations, respectively, in the consolidated balance sheets and consist of the following:

 

                 
    As of December 31,  
    2012     2011  

Contingent consideration due from escrow

   $ 1,851     $ 1,813  

Due from DigiNotar net of allowance for doubtful account of $952

     423       414  

Income taxes receivable

     377       318  
   

 

 

    

 

 

  

Assets of discontinued operations

   $ 2,651     $ 2,545  
   

 

 

    

 

 

  

Due to DigiNotar

   $ 1,301     $ 1,275  

Accrued professional fees

     34       317  
   

 

 

    

 

 

  

Liabilities of discontinued operations

   $ 1,335     $ 1,592  
   

 

 

    

 

 

  

Assets of discontinued operations and certain portions of liabilities of discontinued operations are denominated in local currencies and are subject to currency fluctuation.