4. Acquisitions

On March 7, 2014, the Company acquired all of the outstanding capital stock of Ionia Corporation, or “Ionia,” a Boston, Massachusetts based systems integrator, for a cash purchase price of $7.5 million plus contingent retention-based bonuses totaling up to $4.0 million, which are expected to be paid over a two-year period from the date of acquisition. The operating results, which are comprised of approximately $0.6 million and $0.8 million of revenue for the three and six months ended June 30, 2014, respectively, as well as $1.6 million and $2.1 million of expenses during the three and six months ended June 30, 2014, are included in the condensed consolidated financial statements beginning on the acquisition date.

The acquisition has been accounted for as a business combination. The assets acquired and the liabilities assumed were recorded at their estimated fair values as of the acquisition date. The Company retained an independent third party valuation firm to calculate the fair value of the intangible assets with estimates and assumptions provided by Company management. The excess of the purchase price over the tangible net assets and identifiable intangible assets was recorded as goodwill.

The purchase price was allocated as follows (in thousands):


	Amount
Cash	$	67
Current assets		296
Other assets		26
Deferred revenue		(70	)
Other liabilities		(864	)
Customer backlog		120
Trade name and trademark		10
Customer relationships		1,340
Documented know-how		280
Goodwill		6,295


Total purchase price	$	7,500

The pro forma results of operations for the quarter ended June 30, 2013 and 2014 assuming the Company had acquired Ionia on January 1, 2013, do not differ materially from those reported in the Company’s condensed consolidated statement of income for that quarter.

The stock purchase agreement included a contingent, retention-based bonus program provision requiring the Company to make additional payments to employees, including former Ionia stockholders now employed by the Company, on the first and second anniversaries of the acquisition, contingent upon their continued employment and achievement of certain bookings goals. The range of the contingent, retention-based bonus payments that the Company could pay is between $0 to $4.0 million. The Company has concluded that the arrangement is a compensation arrangement and is accruing the maximum payout ratably over the performance period, as it believes it is probable that the criteria will be met.

The goodwill recorded in connection with this transaction is primarily related to the expected synergies to be achieved related to the Company’s ability to leverage its Xively platform, customer base, sales force and Internet of Things business plan with Ionia’s technical expertise and customer base. All goodwill and intangibles acquired are not deductible for income tax purposes.

The Company incurred approximately $100,000 of acquisition-related costs which are included in general and administrative expense for the three and six months ended June 30, 2014.

During the second quarter of 2014, the Company finalized its purchase price accounting related to the Ionia acquisition and recorded both a deferred tax liability and a corresponding increase in goodwill of approximately $0.7 million related to the amortization of intangible assets which cannot be deducted for income tax purposes.