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 have provided 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:



	Fair Value
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.

Unaudited Supplemental Pro Forma information for the acquisition is as follows:


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 for the years ended December 31, 2013 and 2012 calculated as though the business combination occurred prior to the year ended December 31, 2012, were as follows:



	Year ended December 31,
	2013		2012
Revenue	$	49,592	$	46,630
Net income	5,179		26,603


3)	There were no material, nonrecurring pro forma adjustments directly attributable to the acquisition included in this supplemental Pro Forma information.

Goodwill

Changes in the carrying amount of the company's goodwill for the years ended December 31, 2013 and 2012 were as follows:



	2013		2012
Balance as of January 1,
Goodwill	$	3,472	$	1,153
Accumulated impairment losses	—		—
	3,472		1,153
Goodwill acquired during the year	—		2,319
Balance as of December 31,
Goodwill	3,472		3,472
Accumulated impairment losses	—		—
	$	3,472	$	3,472

Intangible Assets

Intangible assets as of December 31, 2013 and 2012 consisted of the following:



	Estimated	As of December 31,
	useful lives	2013			2012
Tradename	7 years	$	435		$	435
Patents and technological know-how	10 years	2,070			2,070
Proprietary software	3 to 15 years	2,961			2,961
In-process research and development	Indefinite	—			159
Other	5 years	208			49
		5,674			5,674
Accumulated amortization		(1,964		)	(1,416		)
		$	3,710		$	4,258

During the years ended December 31, 2013 and 2012, amortization of these intangible assets were $548 and $679, respectively.

The estimated future amortization expense of intangible assets is as follows:



Years ending December 31,
2014	$	559
2015	515
2016	477
2017	389
2018	374
Thereafter	1,396
	$	3,710