On February 1, 2013, we acquired substantially all of the assets and business of a small technology company that provided products and services for environmental monitoring, wireless remote control and monitoring, wireless sensor networks, and connected device consulting. We acquired the company’s assets to expand our technical capabilities and the markets we serve. Total consideration was $1.1 million, comprised of $0.2 million in cash and 73,587 shares of our common stock having a fair value at the time of issuance of $0.9 million and the assumption of certain liabilities. The issued shares of common stock are subject to various time-based selling restrictions.

  

The following table sets forth the allocation of the purchase price and a summary of estimated useful lives (dollars in thousands):

 

On December 2, 2013, we acquired substantially all the assets, products and technologies of a small technology company that provided remote monitoring and management of bulk storage tanks. The acquisition expands the scope and scale of our capabilities in supply chain and remote monitoring markets. Total consideration was $2.8 million in cash (of which $0.2 million will be paid on December 2, 2014).

 

The following table sets forth the preliminary allocation of the purchase price and a summary of estimated useful lives (dollars in thousands):

The gross amount of leases receivable in the table above was $0.4 million. Based on the nature and financial strength of the lessees, we expect to fully collect all amounts due pursuant to the lease agreements. The allocation to intangible assets is preliminary, pending completion of our final determination of their fair value.

 

The total purchase consideration for both of the 2013 acquisitions was allocated to identifiable assets purchased and liabilities assumed based on fair value. The fair values of intangible assets other than goodwill acquired in the two acquisitions were estimated using common valuation techniques. The fair value of acquired software was estimated using a cost approach based on assumptions of our historical software development costs. The fair value of trademarks was based on an income approach with key assumptions including estimated royalty rates to license the trademarks from a third party. The valuation of customer relationships utilized an income approach and discounted cash flows taking into consideration the number of customer relationships acquired and estimated customer turnover. Amortization expense related to the two acquisitions was less than $0.3 million from the date of their respective acquisitions.

 

No portion of the purchase price was allocated to goodwill in the February 2013 acquisition. The $1.5 million excess of the total consideration over the fair value of the net assets acquired in December 2013 was recorded as goodwill. Goodwill represents expected synergies between us and the acquired business and the value that the acquisition provides to support and widen our M2M platform capabilities in the supply chain and remote monitoring markets. Goodwill is expected to be fully deductible for tax purposes.

 

The results of operations and cash flows are included in the accompanying consolidated financial statements from the date of acquisition and include $0.4 million of revenue and approximately $0.2 million net loss before income taxes. Each of the 2013 acquisitions included the addition of five employees. Total transaction costs related to the acquisitions were $0.1 million and recorded as general and administrative expense as incurred.

 

 

On October 1, 2012, we acquired substantially all of the assets of a small technology business. The acquired assets consisted primarily of technology and intellectual property, including a portfolio of patents. The acquisition supports and widens our M2M platform capabilities in real-time monitoring of critical assets and events. Total consideration was $4.4 million, comprised of $2.0 million in cash, $1.9 million promissory note payable to the sellers, 41,521 shares of our common stock having a fair value at the time of issuance of $0.5 million and the assumption of certain liabilities.

 

The following table sets forth the allocation of the purchase price and a summary of estimated useful lives (dollars in thousands):

						Useful
		Fair Value				Lives
Inventory		$	46			n/a
Customer list			1,241			7
Patents			748			12
Software			215			3
Other intangible assets			211			5
Goodwill			2,580			Indefinite
Deferred revenue			(665	)		n/a
Net assets acquired		$	4,376

 

Total consideration was allocated to identifiable assets purchased and liabilities assumed based on estimated fair value. The fair values of intangible assets other than goodwill were estimated using common valuation techniques. The valuation of customer relationships utilized an income approach and discounted cash flows taking into consideration the number of customer relationships acquired and estimated customer turnover. The valuation of patents was also based on an income approach with key assumptions including estimated royalty rates to license the patents from a third party and the remaining term of the patents. The fair value of acquired software was estimated using a cost approach based on assumptions of our historical software development costs. Amortization charges were approximately $0.4 million and $0.1 million and for the years ended December 31, 2013 and 2012, respectively.

 

The excess of the total consideration over the fair value of the net assets acquired was recorded as goodwill. The $2.6 million portion of the purchase price allocated to goodwill represents expected synergies of the combined businesses and the value that the acquisition provides to support and widen our M2M platform capabilities in real-time monitoring of critical assets and events. Goodwill is expected to be fully deductible for tax purposes.

 

The results of operations and cash flows are included in the accompanying consolidated financial statements from the date of acquisition and include $1.4 million and $0.4 million of revenue and approximately $0.8 million and less than $0.1 million of net loss before income taxes for the years ended December 31, 2013 and 2012, respectively. Total transaction costs related to the acquisitions were less than $0.1 million and recorded as general and administrative expense as incurred. In addition, interest expense on the seller-financed note payable was less than $0.1 million during both the years ended December 31, 2013 and 2012.