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Business Combination, Goodwill and Intangibles | 12 Months Ended
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Dec. 31, 2012
Business Combinations [Abstract] |
Business Combinations, Goodwill and Intangibles Disclosure | Business Combinations, Goodwill and Intangibles Acquisition of video conferencing business On February 16, 2012, the Company completed the acquisition of the video conferencing business of Israel-based VCON Video Conferencing, Ltd. (“VCON”) through an asset purchase agreement. VCON was a pioneer in software based video conferencing solutions with product offerings that include group video conferencing endpoints, desktop video conferencing endpoints, video conferencing infrastructure solutions and software development kits. This acquisition and the combination of streaming and digital signage technologies will provide us with complementary technology opportunities allowing us to enter new growth markets. Pursuant to the asset purchase agreement, the Company paid consideration of $4,632 in cash. The fair values of assets acquired and liabilities assumed are based on the information that was available during the measurement period of twelve months from the date of acquisition. The fair value of identified assets and liabilities acquired and goodwill is as follows:
Inventory | $ | 40 |
Property and equipment | 34 |
Product warranty liability | (8 | )
Proprietary software | 2,247 |
Goodwill | 2,319 |
| $ | 4,632 |
The goodwill of $2,319 is composed of expected synergies in utilizing VCON technology in ClearOne product offerings, reduction in future combined research and development expenses, and intangible assets including acquired workforce that do not qualify for separate recognition. This goodwill balance is not deductible for tax purposes. Adjustments were made to the initial purchase price allocation and higher allocation to goodwill was made retroactive to the date of acquisition. The final fair value differed from the initial allocation as follows:
| Final Fair Value |  | Initial Allocation |  | Difference
Inventory | $ | 40 |  |  | $ | 320 |  |  | $ | (280 | )
Tradename | — |  |  | 500 |  |  | (500 | )
Patents and technology | — |  |  | 2,300 |  |  | (2,300 | )
Proprietary software | 2,247 |  |  | 500 |  |  | 1,747 |
In-process research and development | — |  |  | 200 |  |  | (200 | )
Goodwill | 2,319 |  |  | 786 |  |  | 1,533 |
The decrease in purchase price allocation to intangible assets also resulted in a decrease in amortization charges retrospectively starting with the first quarter of 2012. The decrease in amortization charges in the three month periods ended March 31, June 30 and September 30, 2012, were $25, $75 and $75, respectively. Unaudited Supplemental Pro Forma information
1) | Revenue and net loss from the video conferencing business from February 16, 2012 to December 31, 2012 were $1,319 and ($1,170), respectively.
2) | Revenue and earnings of the combined entity as though the business combination occurred as of January 1, 2011 were as follows:
| Year ended December 31,
| 2012 |  | 2011
Revenue | $ | 46,630 |  |  | $ | 47,583 |
Net income | 26,603 |  |  | 6,046 |
3) | There were no material, nonrecurring pro forma adjustments directly attributable to the acquisition included in this supplemental Pro Forma information.
Acquisition of digital signage business On September 6, 2011, the Company acquired substantially all the assets of MagicBox, Inc. through an asset purchase agreement. MagicBox’s content management and control technology, along with its industry-leading database integration software complemented ClearOne's StreamNet systems. MagicBox had complementary products to ClearOne for a broad spectrum of applications. StreamNet technology delivers low-latency HD distribution over IP which to ClearOne fits well with MagicBox's content creation, scheduling, database integration and digital signage domain expertise. Pursuant to the asset purchase agreement, the Company paid Magic Box, Inc. $980 in cash. The fair value of identified assets and liabilities acquired and goodwill was as follows:
Accounts receivable | $ | 81 |
Inventory | 117 |
Other current assets | 12 |
Accrued expenses | (4 | )
Property and equipment | 9 |
Proprietary software | 179 |
In-process research and development | 159 |
Goodwill | 427 |
| $ | 980 |
The goodwill of $427 is composed of expected synergies in utilizing MagicBox technology in ClearOne product offerings, reduction in future combined research and development expenses, and intangible assets including acquired workforce that do not qualify for separate recognition. The goodwill balance of $427 related to the MagicBox acquisition is deductible for tax purposes. The Company incurred $327 and $167 towards acquisition related expenses, all of which are categorized under General and Administrative expenses in the Consolidated Statements of Operations for years ended December 31, 2012 and 2011, respectively. Changes in the carrying amount of goodwill for the years ended December 31, 2012 and 2011 are as follows:
| 2012 |  | 2011
Balance as of January 1, |  |  |
Goodwill | $ | 1,153 |  |  | $ | 726 |
Accumulated impairment losses | — |  |  | — |
| 1,153 |  |  | 726 |
Goodwill acquired during the year | 2,319 |  |  | 427 |
Balance as of December 31, |  |  |
Goodwill | 3,472 |  |  | 1,153 |
Accumulated impairment losses | — |  |  | — |
| $ | 3,472 |  |  | $ | 1,153 |
Intangible Assets Intangible assets as of December 31, 2012 and 2011 consisted of the following:
| Estimated |  | As of December 31,
| useful lives |  | 2012 |  | 2011
Tradename | 7 years |  | $ | 435 |  |  | $ | 435 |
Patents and technological know-how | 10 years |  | 2,070 |  |  | 2,070 |
Proprietary software | 3 to 15 years |  | 2,961 |  |  | 394 |
In-process research and development | Indefinite |  | 159 |  |  | 559 |
Other | 5 years |  | 49 |  |  | 49 |
|  |  | 5,674 |  |  | 3,507 |
Accumulated amortization |  |  | (1,416 | ) |  | (817 | )
|  |  | $ | 4,258 |  |  | $ | 2,690 |
During the years ended December 31, 2012 and 2011, amortization of these intangible assets were $679 and $393, respectively. The estimated future amortization expense of intangible assets is as follows:
Years ending December 31, |
2013 | $ | 533 |
2014 | 528 |
2015 | 483 |
2016 | 446 |
2017 | 357 |
Thereafter | 1,752 |
| $ | 4,099 |

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