Stamps.com 2014 Annual Report Download - page 73

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STAMPS.COM INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
We have accounted for the acquisition under the acquisition method of accounting in accordance with the provisions of FASB ASC Topic No.
805 Business Combinations (“ASC 805”). The total purchase price for ShipStation was approximately $66.2 million and was comprised of the
following (in thousands, except shares):
The performance linked earn-out payment of Stamps.com shares (or contingent consideration) to former equity members of Auctane LLC is
based on the achievement of certain financial measures within a future time period. There are two future periods in which the earn-out payment
will be calculated. The first earn-out period is based on the achievement of certain financial measures during the six months ended December
31, 2014. The second earn-out period is based on the achievement of certain financial measure during the twelve months ended December 31,
2015. The range of Stamps.com shares available for the performance linked earn-out for both periods is between 576,675 to 768,900 shares
provided a minimum threshold for the financial measures is achieved. The current portion of the contingent consideration represents the
estimated fair value of the first earn-
out. The fair value of the contingent consideration was determined based on a probability weighted method,
which incorporates management’s forecasts of financial measures and the likelihood of the financial measure targets being achieved using a
series of options that replicate the pay-off structure of the earn-out, and the value of each of these options was determined using the Black-
Scholes-Merton option pricing framework.
Under the acquisition method of accounting under ASC 805, the total estimated purchase price of the acquired company is allocated to the assets
acquired and the liabilities assumed based on their fair values. We have made significant estimates and assumptions in determining the allocation
of the purchase price. The following table is the allocation of the purchase price (in thousands, except years):
F-16
Table of Contents
Fair Value
Cash consideration
$
50,000
Fair value of performance linked earn-out of up to 768,900 shares of Stamps.com common stock (contingent
consideration)
16,242
Total purchase price
$
66,242
Fair Value
Fair Value
Useful
Life
Weighted
Average
Estimated
Useful Life
(In Years)
Cash and cash equivalents
$
1,117
Trade accounts receivable
254
Other assets
39
Property and equipment
187
Goodwill
50,544
Identifiable intangible assets:
Trademark
$
500
4
Developed technology
5,300
8
Non
-
compete agreement
400
4
Customer relationship
9,000
8
Total identifiable intangible assets
15,200
8
Accrued expenses and other liabilities
(835
)
Deferred revenue
(264
)
Total purchase price
$
66,242