Business Combinations

12 Months Ended

Dec. 31, 2015

Business Combinations [Abstract]

Business Combination Disclosure [Text Block]

3. Business Combinations

The Company did not consummate any business combinations during the year ended December 31, 2015. The Company had two (2) business combinations completed prior to 2014 that had a continuing impact during the year ended December 31, 2015:

Soft-ex Communications Ltd.

On May 1, 2014, WidePoint Global Solutions, Inc. (“WGS”), a wholly-owned subsidiary of the Company entered into a Share Sale and Purchase Agreement (the “Agreement”), with Gutteridge Limited (“Gutteridge”), a wholly-owned subsidiary of Soft-Ex Holdings Limited (“SHL”), and the shareholders of Soft-Ex Holdings Limited, pursuant to which WGS purchased all of the outstanding equity of Soft-ex Communications Limited (“SCL”). Total purchase consideration paid was approximately $6.0 million, consisting of $5 million in cash and a $1.0 million (the “Note”) subordinated seller promissory note with a fair value of $1.0 million as of the acquisition date. In 2015, the Company repaid the Note at its original recorded fair value. There were no post-acquisition adjustments recorded as a result of this prior business combination during the year ended December 31, 2015.

WidePoint’s long term strategic objective of expanding its services and presence outside of the United States was launched with the acquisition of SCL. SCL is a leading supplier of telecom data intelligence services offered as a Software-as-a-Service (SaaS) solution that provides unique online data intelligence for Communication Service Providers (CSPs) and their enterprise customers for fixed, mobile, and IP/PABX communications. The addition of SCL complements the Company’s MMS offering and provides access to global CSPs and their customers and partners in over 90 countries throughout European and Middle Eastern markets.

SCL’s principal executive and administrative office headquarters is in Dublin, Ireland. SCL has two operating subsidiaries, Soft-Ex BV and Soft-Ex UK Limited, which maintain offices and operations in the Netherlands and the United Kingdom, respectively. SCL has been in business since 1989.

The Company utilized the assistance of a third party valuation expert to estimate the fair value of the assets acquired and the liabilities assumed and the related allocations of purchase consideration. The excess of purchase price over the net tangible and intangible assets has been recorded as goodwill.

Purchase Consideration

The following table sets forth the final fair value of consideration paid in connection with acquisition of SCL as of May 1, 2014:

	Fair Value
Cash consideration	$	5,000,000	(1)
Contingent subordinated unsecured loan note payable consideration		1,000,000	(2)
Net working capital escrow adjustment to consideration paid		(33,188)	(3)
Fair value of consideration paid	$	5,966,812

(1) The Company used operating cash on hand of $5.0 million, of which $4.35 million was released to the seller upon closing of the transaction and the remainder was delivered into escrow. Under the terms of the escrow agreement, the funds shall be released (subject to satisfaction of the terms of the escrow agreement) in two amounts with the first release of $0.15 million on or about May 1, 2015 and the second release of $0.5 million on or about August 1, 2015. The release of funds held in escrow is subject to adjustment based on final net working capital as described in (3) below.

(2) The Company issued a subordinated unsecured loan Note in the principal amount of $1.0 million to satisfy the remainder of the purchase price. This is a US dollar denominated obligation. 

(3) On October 21, 2014, a final determination of net working capital resulted in a deficiency of €26,670 ($33,188 USD) reduced total purchase consideration.

Transaction Costs

The Company incurred acquisition related due diligence, legal and accounting and transaction costs (including Irish stamp taxes and other processing costs) in connection with acquisition of SCL of approximately $250,300. These transaction-related costs were expensed as incurred and reflected in general and administrative expense in the consolidated statements of operations for the periods presented.

Fair Value of Assets Acquired and Liabilities Assumed

The following table summarizes the fair values of the assets acquired and liabilities assumed in connection with acquisition of SCL as of May 1, 2014:

Fair value of identifiable assets acquired and liabilities assumed:
Cash	$	920,372
Trade receivables		1,294,573
Other current assets		276,443
Property and equipment		333,650
Developed technology		663,936
Channel partners		2,628,080
Tradenames and trademarks		290,472
Other assets		1,687
Accounts payable and accrued expenses		(1,864,888)
Deferred tax liability		(447,811)
Capital lease obligation		(66,813)
Total identifiable net assets acquired	$	4,029,701
Goodwill		1,937,111
Total purchase price	$	5,966,812

Supplemental Unaudited Pro Forma Information

The accompanying unaudited pro forma condensed consolidated financial information were prepared in accordance with the acquisition method of accounting. The following unaudited pro forma condensed consolidated statements of operations of WidePoint for each of the two years ended December 31, 2014 and 2013 have been prepared as if the acquisition of SCL had occurred at January 1, 2013:

	YEARS ENDED
	DECEMBER 31,
	2014		2013
Revenues, net (a)	$	55,255,000	$	52,570,000
Net loss (a)	$	(8,822,000)	$	(1,160,000)
Basic (loss) earnings per share	$	(0.121)	$	(0.018)
Diluted (loss) earnings per share	$	(0.121)	$	(0.018)

(a) To reflect on a pro forma basis unaudited consolidated financial information for the two years ended December 31, 2014 and 2013 for WidePoint. Prior to fiscal 2014, SCL’s fiscal year end was April 30, 2014. During fiscal 2014 SCL changed its fiscal year end to December 31st. The unaudited financial information presented herein were derived from historical internally prepared financial statements for SCL and WidePoint’s Form 10-K audited financial statements. SCL’s financial statements are prepared in accordance with Irish GAAP, as such additional adjustments were made to convert SCL Irish GAAP presentation to a US GAAP presentation to align with WidePoint’s accounting policies. SCL’s reporting currency unit is the Euro. SCL’s US GAAP unaudited historical statement of operations for the two years ended December 31, 2014 and 2013 were translated into WidePoint’s reporting currency using an average USD/EURO rate of $1.3293, and $1.3279, respectively.

Avalon Global Solutions, Inc.

On December 30, 2011, the Company together with its wholly-owned subsidiary, WidePoint Solutions Corp. (WSC), entered into an Asset Purchase Agreement (“APA”) with Avalon Global Solutions (AGS), pursuant to which WSC acquired certain assets and assumed certain liabilities of AGS. Total purchase consideration paid was approximately $11.5 million, consisting of $3.5 million in cash, $4.0 million in bank loan proceeds, $1.0 million subordinated seller promissory note and a contingent subordinated seller promissory note (“contingent consideration”) with a fair value of $3.0 million as of the acquisition date. In 2012, the Company finalized it fair value accounting and determined the estimated fair value of contingent consideration to be approximately $2.15 million, which revised purchase consideration from $11.5 million to $10.7 million and thereby reduced goodwill in connection with this business combination by approximately $850,000. In 2013, the Company remeasured the fair value of contingent consideration at zero, which revised purchase consideration from $10.7 million to $8.5 million. During the year ended December 31, 2013, the Company recognized a non-cash contingent gain on change in fair value of approximately $1,250,000 and reflected in general and administrative expense in the consolidated statements of operations for the year ended December 31, 2013. There were no adjustments recorded as a result of this prior business combination during the year ended December 31, 2015.

See Note 4 for changes in fair value of assets and liabilities recorded in connection with material business combinations that are measured on a recurring basis.