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Table of Contents
products’ stage of completion. The estimates used in valuing in-process research and development were based upon assumptions believed to be
reasonable but which are inherently uncertain and unpredictable. These assumptions may be incomplete or inaccurate, and unanticipated events
and circumstances may occur. Accordingly, actual results may vary from the projected results. The Company incurred costs of approximately
$1.2 million to complete the projects, of which approximately $120,000 was incurred during the year ended December 31, 2008 and an
additional $1.1 million was incurred during the year ended December 31, 2009. The Company completed one project in the beginning of the year
ended December 31, 2009 and the final project at the end of the year ended December 31, 2009.
A total of $1.2 million of the $3.9 million in acquired intangible assets was designated as existing technology. The value was calculated
based on the present value of the future estimated cash flows derived from projections of future revenue attributable to existing technology. This
$1.2 million is being amortized over its estimated useful life of three years.
A total of $900,000 of the $3.9 million in acquired intangible assets was designated as core technology. The value was calculated based on
the present value of the future estimated cash flows derived from estimated royalty savings attributable to the core technology. This $900,000 is
being amortized over its estimated useful life of five years.
During the year ended December 31, 2009, the Company made an additional $3.5 million payment in connection with the Company’
s 2008
acquisition of CP Secure in connection with the achievement of certain product acceptance criteria. This resulted in an increase in goodwill of
$3.5 million.
Infrant Technologies, Inc.
On May 16, 2007, the Company completed the acquisition of 100% of the outstanding shares of Infrant Technologies, Inc. (“Infrant”), a
developer of network attached storage products. The Company believes the acquisition will accelerate the Company’s participation in the
expanding market for network attached storage. The aggregate purchase price was $60 million, paid in cash. Under the terms of the acquisition
agreement, Infrant shareholders may receive a total additional payout of up to $20 million in cash over the three years following closure of the
acquisition if specific revenue targets are reached, of which $10 million was paid in November 2008. Additionally, the Company has accrued
$113,000 for compensation expense related to the second potential payout in the three months ended December 31, 2009. Any additional payout
will primarily be accounted for as additional purchase price and will be recorded as an increase in goodwill.
The results of Infrant’s operations have been included in the consolidated financial statements since the date of acquisition. The historical
results of Infrant prior to the acquisition were not material to the Company’s results of operations.
The accompanying consolidated financial statements reflect an initial purchase price of approximately $60.3 million, consisting of cash,
and other costs directly related to the acquisition as follows (in thousands):
In accordance with the purchase method of accounting, the Company allocated the total purchase price to tangible assets, liabilities and
identifiable intangible assets based on their estimated fair values. Goodwill was recorded based on the residual purchase price after allocating the
purchase price to the fair market value of tangible and intangible assets acquired less liabilities assumed. Purchased intangibles are amortized on
a straight-line basis over their respective estimated useful lives. Goodwill arises as a result of, among other factors, future
68
Purchase price
$
60,000
Direct acquisition costs
254
Total consideration
$
60,254