Business Acquisition

9 Months Ended

Sep. 30, 2014

Business Combinations [Abstract]

Business Combination Disclosure

Business acquisitions

Acquisition of mVisum net assets

On January 13, 2014, the Company acquired certain assets and certain liabilities of mVisum, Inc. (“mVisum”), an innovative provider of alarm management technology solutions for health systems, for $3.5 million in cash. The acquisition enabled the Company to enhance its existing platform with complementary communications solutions for healthcare and other mission-critical environments.

The following table presents the fair value of the identifiable assets acquired and liabilities assumed as of the acquisition date:

(in thousands)	Fair value of net assets acquired
Accounts receivable	$	187
Intangibles
Developed technology	830
Non-compete agreement	260
Customer relationships	170
Trademarks and trade names	40
Goodwill	2,103
Total assets	3,590
Deferred revenue	(90		)
Net assets acquired	$	3,500

The estimated fair values of identifiable intangible assets were primarily determined using discounted cash flow models. The acquired intangible assets are amortized over their estimated useful lives of 4.0 to 7.0 years with a weighted average amortization period of 5.7 years.

The excess of the acquisition consideration over the fair values of the underlying net assets acquired was recorded as goodwill. Goodwill is largely attributable to the synergy of mVisum’s proprietary solutions with the Company’s existing customer base, dedicated sales force and cross selling opportunities with the Company’s other solutions. Goodwill is not amortized but instead is tested for impairment at least annually or more frequently if indicators of impairment are present. For federal income tax purposes, the entire purchase consideration, including goodwill, is deductible over fifteen years. The goodwill recorded from the acquisition of mVisum is attributed to the Product reporting unit.

The Company incurred $0.2 million of acquisition-related costs that were expensed as incurred. These costs are recorded as general and administrative expenses in the consolidated statement of operations. Additionally, in connection with the acquisition the Company established a retention bonus plan for mVisum with potential additional compensation over a two-year period of approximately $0.5 million, based on achievement of operating objectives and continued employment. Such amounts are not considered part of the purchase consideration and are being recorded as earned as compensation expense. The acquisition did not result in material contributions to revenue or net loss in the consolidated financial statements since the acquisition date. Additionally, pro forma financial information is not provided for consolidated revenue and net loss, since the acquisition was not material to the consolidated financial statements.

Acquisition of Prana Technologies assets

On  August 8, 2014, the Company acquired substantially all assets of Prana Technologies, Inc. (“Prana”) for $3.45 million in cash. The acquisition provides the Company with technology critical to cloud-based applications extending our communication and collaboration network to include physicians and other geographically dispersed users.  The Company believes this will advance its vision of integrating voice, text, and content-based workflows, on a range of devices and desktop solutions, across all care locations.

The following table presents the fair value of the identifiable assets acquired and liabilities assumed as of the acquisition date:

(in thousands)	Fair value of net assets acquired
Intangibles
Non-compete agreement	$	200
In-process research and development	940
Goodwill	2,310
Total assets acquired	$	3,450

The estimated fair values of identifiable intangible assets were primarily determined using discounted cash flow models. The non-compete intangible has an estimated useful life of two years and the in-process research and development is classified as an asset with an indefinite life. When the in-process research and development is applied in a generally-available product offering, expected in 2015, it will be assessed for classification as developed technology, and amortization will begin over the estimated useful life of such developed technology.

The excess of the acquisition consideration over the fair values of the underlying net assets acquired was recorded as goodwill. Goodwill is largely attributable to the synergy of Prana’s proprietary cloud technology expanding upon and being integrated with the Company’s other solutions. Goodwill is not amortized but instead is tested for impairment at least annually or more frequently if indicators of impairment are present. For federal income tax purposes, the entire purchase consideration, including goodwill, is deductible over fifteen years. The goodwill recorded from the acquisition of Prana is attributed to the Product reporting unit.

The agreement also included contingent payments to the selling stockholders payable based on certain employee retention requirements and the achievement of a post-acquisition quality milestone. The Company considered these contingent payments as a compensation expense due to the explicit and implied continuing employment requirements associated with earning such contingent payments. The company paid $0.8 million in compensation-related elements at the acquisition date, which is being amortized as $0.5 million and $0.3 million in the third and fourth quarters of 2014, respectively. These costs are recorded primarily as general and administrative expenses in the consolidated statement of operations. In addition, the Company expensed $0.1 million of acquisition-related costs in the third quarter.

The acquisition did not result in material contributions to revenue or net loss in the consolidated financial statements since the acquisition date, other than the compensation elements discussed above. Additionally, pro forma financial information is not provided for consolidated revenue and net loss, since the acquisition was not material to the consolidated financial statements.