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Acquisition of Silanis
 12 Months Ended
Dec. 31, 2015
Business Combinations [Abstract]  
Acquisition of Silanis

Note 4 – Acquisition of Silanis

On November 25, 2015, the Company completed its acquisition of Silanis Technology, Inc. (“Silanis”), a privately-held provider of electronic signature and digital transaction solutions used to sign, send, and manage documents. Pursuant to the arrangement agreement, we acquired all of the issued and outstanding shares of Silanis for an aggregate purchase price of $75,000. The aggregate purchase price may be subject to further adjustment as provided in the arrangement agreement.

Upon acquisition, Silanis became our wholly-owned subsidiary. The acquisition is accounted for as a business combination using the acquisition method accounting in accordance with FASB ASC Topic No. 805, Business Combinations, whereby the net assets acquired are recognized based on their estimated fair values on the acquisition date.

The results of operations of Silanis subsequent to the November 25, 2015 acquisition date have been included in the Consolidated Statements of Operations. Silanis revenue and net income (loss) included in the results of operations for the year ended December 31, 2015 were $541 and $(2,168), respectively.

Acquisition-related expense recognized during 2015 of approximately $2,374 is recorded in general and administrative expenses in the Consolidated Statements of Operations.

Aggregate Purchase Price Allocation

Total aggregate Purchase Price has been allocated to the tangible and intangible assets and to liabilities assumed based on their respective estimated acquisition-date fair values. The measurement period for purchase price allocations ends as soon as information on the facts and circumstances becomes available, but cannot exceed twelve months. If new information is obtained about facts and circumstances that existed as of the acquisition date that, if known, would have affected the measurement of the amounts recognized for assets acquired and liabilities assumed, the Company will adjust the amounts recognized in accordance with U.S. GAAP. The preliminary estimated purchase price allocation is summarized in the following table:

 

Tangible assets and liabilities

   

Cash

    $ 514   

Accounts receivable, net

      4,471   

Other current assets

      4,234   

Property and equipment

      416   

Current liabilities

      (16,896 ) 

Other non-current liabilities

      (8,070 ) 

Intangible assets

      30,000   

Goodwill

      60,331   
  

 

 

  

Net assets acquired

    $ 75,000   
  

 

 

  

Accounts receivable acquired were recorded at gross contractual amounts receivable which approximates fair value. We expect gross contractual amounts receivable at the acquisition date to be collected in a relatively short period of time.

Other assets acquired include unused investment tax credits of $340, future tax benefit of foreign net operating loss carryforwards of $7,004, future tax benefits of research and development expenses and other carryforwards of $4,217. A full valuation allowance of $11,561 has been recorded as realization of the tax assets has been deemed not to be more likely than not.

 

The excess of purchase consideration over net assets assumed was recorded as goodwill, which represents the strategic value assigned to Silanis, including expected benefits from synergies resulting from the acquisition, as well as the knowledge and experience of the workforce in place. In accordance with applicable accounting standards, goodwill is not amortized and will be tested for impairment at least annually, or more frequently, if certain indicators are present. Goodwill and intangible assets related to this acquisition are not deductible for tax purposes.

Based on preliminary estimates of the acquisition valuation, $30,000 of the purchase price has been allocated to identifiable intangible assets. The following table summarizes the major classes of intangible assets, as well as the respective estimated weighted-average amortization periods:

 

     Estimated
Fair Value		      Weighted-
Average
Amortization
Period
(Years)		  
     (000s)         

Identifiable Intangible Assets

      

Trademarks and tradenames

    $ 200         2.0   

Technology

      29,000         5.0   

Patents

      100         5.0   

Non-compete agreements

      300         5.0   

Customer Relationships

      400         5.0   
  

 

 

     
   $ 30,000      
  

 

 

     

Silanis was acquired on November 25, 2015. Due to the short period of time between the acquisition date and December 31, 2015, the complex process of determining all assets acquired and all liabilities assumed and the determination of the fair value thereof, the accounting for the business combination was not complete as of December 31, 2015, nor did any events occur subsequent to the balance sheet date that required a reassessment of the estimates recorded at December 31, 2015. The estimated fair values of all assets acquired and all liabilities assumed are based on preliminary estimates of fair values as of the acquisition date. Management believes the fair values recognized for the assets acquired and liabilities assumed are based on reasonable estimates and assumptions. The fair value of the acquired assets and liabilities assumed are provisional pending finalization of valuations for those assets and liabilities. Preliminary fair value estimates may change as additional information becomes available. There can be no assurance that the final determination will not result in material changes from these preliminary amounts. Amounts preliminarily allocated to tangible assets, assumed liabilities, intangible assets and goodwill may change significantly, and amortization methods and useful lives may differ from the assumptions that have been used in these preliminary estimates, any of which could result in a material change to the purchase price allocation and operating expenses.

Unaudited Pro Forma Financial Information

The following unaudited pro forma financial information presents the results of operations as if the acquisition had taken place on January 1, 2014. These amounts were prepared in accordance with the acquisition method of accounting under existing standards and are not necessarily indicative of the results of operations that would have occurred if the acquisition had been completed on the first day of 2014, nor are they indicative of our future operating results.

Income tax impacts resulting from pro forma adjustments were calculated utilizing the statutory income tax rate of 35% for the years ended December 31, 2015 and 2014.

 

These unaudited pro forma amounts include the following adjustments to historical results shown net of tax;

 

  •  

To reflect estimated amortization of acquired identifiable intangible assets of $6,060 and $6,060 for the year ended December 31, 2015 and 2014, respectively.

 

  •  

To reflect estimated amortization of fair value adjustment of acquired deferred revenue of $(4,000) and $0 for the year ended December 31, 2015 and 2014, respectively.

 

  •  

To reclassify non-recurring transaction expenses of $5,812 from 2015 to 2014.

 

  •  

To reverse benefit of certain refundable tax credits of $1,021 and $1,588 for the year ended December 31, 2015 and 2014, respectively.

 

     Year Ended December 31,  
     2015      2014  

Revenue

    $ 256,416       $ 212,595   

Net income

    $ 28,059       $ 14,729