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Business Combination Business Combination
 3 Months Ended
Mar. 31, 2014
Business Combinations [Abstract]  
Business Combination
Business Combination

On March 7, 2014, the Company completed the acquisition of Sabine, Inc. ("Sabine") through a stock purchase agreement ("SPA"). Sabine manufactures, designs, and sells Sacom professional wireless microphone systems for live and installed audio. It also makes FBX Feedback Exterminator for reliable automatic feedback control. With the addition of Sabine, ClearOne will have reliable and exclusive access to the wireless microphones that are a critical component of ClearOne’s complete microphone portfolio.

Pursuant to the SPA, the Company (i) paid initial consideration of $8,129 in cash, which is subject to a final working capital adjustment, (ii) accrued for possible additional earn-out payments over the next three years, estimated to be $573, and (iii) issued 150,000 shares of restricted common stock of the Company, valued at $1,679 (determined on the basis of the closing market price of the Company's stock on the acquisition date). The purchase price was paid out of cash on hand. The SPA contains representations, warranties and indemnifications customary for a transaction of this type.

The estimated fair values of assets acquired and liabilities assumed are provisional and are based on the information that was available as of the acquisition date to estimate the fair value of assets acquired and liabilities assumed. The Company believes that such information provides a reasonable basis for estimating the fair values of assets acquired and liabilities assumed, but the Company is waiting for additional information necessary to finalize those fair values. The measurement period for purchase price allocation ends as soon as information on the facts and circumstances becomes available, but will not exceed twelve months from the date of acquisition. Adjustments in the purchase price allocation may require a recasting of the amounts allocated to intangible assets and possible allocation to goodwill, retroactive to the period in which the acquisition occurred. Therefore, the provisional measurements of fair value reflected are subject to change and such changes could be significant.

The following table summarizes the consideration paid for the acquisition:
 
Consideration
Cash
$
8,129

Common stock
1,679

Contingent consideration
573

Total
$
10,381



The fair value of identified assets and liabilities acquired was as follows:
 
Fair value
Cash
$
125

Accounts receivable
298

Inventories
844

Prepaid and other
116

Intangibles
3,180

Property, plant and equipment
292

Goodwill
6,399

Trade accounts payable
(416
)
Accrued liabilities
(402
)
Stock registration costs
(55
)
Total
$
10,381



The fair value of accounts receivable acquired is $298 which is net of an allowance for doubtful accounts of $2.

The goodwill of $6,399 related to the acquisition of of Sabine is composed of expected synergies in utilizing Sabine 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 $6,399 related to the acquisition of Sabine is deductible for tax purposes.

The Company incurred $341 towards acquisition related expenses, all of which are categorized under General and administrative expenses in the Consolidated Statement of Operations for the period ended March 31, 2014.

Supplemental Pro Forma Information:

1) Revenue and net loss from the Sabine business from March 8, 2014 to March 31, 2014 was $84 and $163 respectively.
2) Revenue and earnings of the combined entity as though the business combination occurred as of January 1, 2013 were as follows:
 
Three months ended March 31,
 
2014
 
2013
Revenue
$
12,977

 
$
12,163

Earnings
249

 
750

Basic and diluted earnings per common share
$
0.03

 
$
0.08



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

See Note 10. Subsequent Events for information regarding the Spontania acquisition.