Goodwill and Intangible Assets

9 Months Ended

Sep. 30, 2011

7.	Goodwill and Intangible Assets

Goodwill

The following table presents goodwill by segment as of September 30, 2011 and December 31, 2010 and changes in the carrying amount of goodwill (in thousands):


	Total		Identity Management		ID Products
Balance at December 31, 2010	$	47,126	$	37,955	$	9,171
Goodwill acquired during the period		10,518		10,518		—
Goodwill measurement period adjustment		118		—		118
Currency translation adjustment		1,234		778		456

Balance at September 30, 2011	$	58,996	$	49,251	$	9,745

During the nine months ended September 30, 2011, the Company recorded goodwill of $10.5 million in connection with its acquisition of idOnDemand and polyright as described in Note 3 above. In addition, the Company also adjusted the goodwill by $0.1 million in connection with its acquisition of Smartag as a measurement period adjustment as described in Note 3 above. The goodwill related to the Bluehill acquisition and polyright acquisition is designated in a currency other than United States Dollars and is adjusted each reporting period for the change in foreign exchange rates between the balance sheet dates. In accordance with its accounting policy and ASC 350, the Company tests its goodwill and any other intangibles with indefinite lives annually for impairment and assesses whether there are any indicators of impairment on an interim basis. The Company performed its annual impairment test for all reporting units on December 1, 2010 and concluded that there was no impairment to goodwill during the year ended December 31, 2010. Management did not identify any impairment indicators during the nine months ended September 30, 2011.

Intangible Assets

The following table summarizes the gross carrying amount and accumulated amortization for the intangible assets resulting from the acquisitions:


(In thousands)	Order Backlog			Trade Secrets		Patents		Existing Technology			Customer Relationship		Trade Name		Total
Cost:
Amortization period		0.25-1 year			1 -2 years		12 years		6 -15 years			4 -15 years		1 -3 years and Indefinite

Balance at December 31, 2010	$	724		$	—	$	—	$	5,462		$	22,742	$	9,221	$	38,149
Acquired as a part of idOnDemand acquisition		17			300		790		2,700			390		60	$	4,257
Acquired as a part of polyright acquisition		246										1,290			$	1,536
Currency translation adjustment		(13	)		—		—		35			711		127	$	860

Balance at September 30, 2011	$	974		$	300	$	790	$	8,197		$	25,133	$	9,408	$	44,802

Accumulated Amortization
Balance at December 31, 2010	$	718		$	—	$	—	$	595		$	2,970	$	1	$	4,284
Amortization expense		122			75		27		500			2,183		25	$	2,932
Currency translation adjsutment		23			—		—		(4	)		90		—	$	109

Balance at September 30, 2011	$	863		$	75	$	27	$	1,091		$	5,243	$	26	$	7,325

Intangible assets, net at September 30, 2011	$	111		$	225	$	763	$	7,106		$	19,890	$	9,382	$	37,477

Intangible Assets, net at December 31, 2010	$	6		$	—	$	—	$	4,867		$	19,772	$	9,220	$	33,865

During the nine months ended September 30, 2011, the Company recorded intangible assets of $5.8 million in connection with its acquisition of idOnDemand and polyright as described in Note 3 above. The intangibles acquired in connection with acquisitions of polyright and Bluehill ID are designated in a currency other than United States Dollars and are adjusted each reporting period for the change in foreign exchange rates between the balance sheet dates.

Intangible assets of $37.5 million and $33.9 million as of September 30, 2011 and December 31, 2010, respectively, include intangible assets which are not subject to amortization of $9.3 million and $9.2 million as of September 30, 2011 and December 31, 2010, respectively. Intangible assets subject to amortization will be amortized over their useful lives as mentioned in the table above.

The following table illustrates the amortization expense included in the unaudited condensed consolidated statements of operations for the three and nine months ended September 30, 2011 and 2010 (in thousands):


	Three Months Ended September 30,				Nine Months Ended September 30,
	2011		2010		2011		2010
Cost of revenue	$	378	$	256	$	724	$	827
Selling and marketing		818		638		2,208		1,862

Total	$	1,196	$	894	$	2,932	$	2,689

As of September 30, 2011, the estimated future amortization expense of purchased intangible assets with definite lives for the next five years is as follows (in thousands):


2011 (remaining three months)	$	1,099
2012		4,397
2013		3,962
2014		2,990
2015		2,989
2016 and thereafter		12,732

Total	$	28,169

- Definition

The entire disclosure for the aggregate amount of goodwill and a description of intangible assets, which may include (a) for amortizable intangible assets (also referred to as finite-lived intangible assets), the carrying amount, the amount of any significant residual value, and the weighted-average amortization period, (b) for intangible assets not subject to amortization (also referred to as indefinite-lived intangible assets), the carrying amount, and (c) the amount of research and development assets acquired and written off in the period, including the line item in the income statement in which the amounts written off are aggregated, if not readily apparent from the income statement. Also discloses (a) for amortizable intangibles assets in total and by major class, the gross carrying amount and accumulated amortization, the total amortization expense for the period, and the estimated aggregate amortization expense for each of the five succeeding fiscal years, (b) for intangible assets not subject to amortization the carrying amount in total and by major class, and (c) for goodwill, in total and for each reportable segment, the changes in the carrying amount of goodwill during the period (including the aggregate amount of goodwill acquired, the aggregate amount of impairment losses recognized, and the amount of goodwill included in the gain (loss) on disposal of a reporting unit). If any part of goodwill has not been allocated to a reportable segment, discloses the unallocated amount and the reasons for not allocating. For each impairment loss recognized related to an intangible asset (excluding goodwill), discloses: (a) a description of the impaired intangible asset and the facts and circumstances leading to the impairment, (b) the amount of the impairment loss and the method for determining fair value, (c) the caption in the income statement or the statement of activities in which the impairment loss is aggregated, and (d) the segment in which the impaired intangible asset is reported. For each goodwill impairment loss recognized, discloses: (a) a description of the facts and circumstances leading to the impairment, (b) the amount of the impairment loss and the method of determining the fair value of the associated reporting unit, and (c) if a recognized impairment loss is an estimate not finalized and the reasons why the estimate is not final. May also disclose the nature and amount of any significant adjustments made to a previous estimate of an impairment loss.

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