Business Combinations and Asset Acquisitions

6 Months Ended

Jun. 30, 2012

Business Combinations and Asset Acquisitions [Abstract]

Business Combinations and Asset Acquisitions

(12)           Business Combinations and Asset Acquisitions

Accumed Systems, Inc.

On June 11, 2012, the Company acquired the assets related to the AccumedTM wrist positioning splint business from Accumed Systems, Inc. ("Accumed").  Under the terms of the agreement, the Company paid Accumed a total of $1,500,000 at closing and no additional payments are required to be made.  The Accumed wrist positioning splint product consists of a plastic molded brace that simplifies arterial access by holding the wrist and forearm in an appropriate, comfortable position.  This acquisition provides the Company with an additional product that is sold directly into the Company's existing customer base to generate incremental revenue.

The Company accounted for the transaction as a business combination in the second quarter of 2012.   In accordance with ASC 805 the purchase price is being allocated based on estimates of the fair value of assets acquired, as no liabilities were assumed.

The purchase price was allocated as follows:

Inventory and equipment	$	8,000
Purchased technology		740,000
Other intangibles		190,000
Goodwill		562,000
	$	1,500,000

The purchased technology and other intangible assets have an estimated useful life of 9 - 10 years.

Dr. Pedro Silva and Affiliates

On January 6, 2012, the Company entered into an agreement with Dr. Pedro Silva and his affiliates, whereby the Company paid $3,250,000 for the rights, patents and intellectual property relating to a two-lumen catheter for distal protection and material extraction used in the Company's Pronto catheters.  Upon payment, the existing License Agreement between N.G.C. Medical S.p.A.and the Company has been deemed paid-in-full, and no future royalties will be owed on any sale of a Pronto catheter after December 31, 2011.

The Company has accounted for the transaction as a non-business license acquisition in the first quarter of 2012.   In accordance with ASC 805, the purchase price was assigned to a license intangible asset equivalent to the cash amount paid on January 6, 2012, and is being amortized over a period of 10 years.  No goodwill was recognized as part of the transaction.

Northeast Scientific

On December 22, 2011, the Company entered into a license agreement with Northeast Scientific, Inc. (NES), a FDA-registered reprocessor of medical devices, whereby the Company acquired the exclusive rights to NES' reprocessing services for the ClosureFast radiofrequency catheter in the United States for a term of five years.  The ClosureFast catheter is owned and marketed by VNUS Medical Technologies, Inc., a subsidiary of Covidien, and is used in the treatment of varicose veins.  Under the reprocessing service, the customer sends its used ClosureFast catheters to NES, where they are inspected, cleaned, tested, repackaged, resterilized and shipped back to the customer. In exchange for the exclusive rights, the Company paid a total of $900,000 to NES and a former third party distributor on December 22, 2011.

The Company accounted for the transaction as a non-business asset acquisition in the fourth quarter of 2011.  In accordance with ASC 805 the purchase price was assigned to an intangible asset and no goodwill was recognized.  The Company is amortizing the license intangible asset on a straight-line basis over the five-year term of the agreement.

Zerusa Limited

On January 27, 2011, the Company entered into an asset purchase agreement of substantially all the assets of Zerusa Limited ("Zerusa"), a Galway, Ireland based medical device company engaged in the manufacture and distribution of the Guardian® hemostasis valves.  Under the terms of the agreement the Company paid Zerusa a total of 3,121,000 Euros ($4,272,000), consisting of 2,850,000 Euros ($3,882,000) paid in cash at January 27, 2011 and 271,000 Euros ($390,000) which was paid on September 2, 2011.  The final payment amount was subject to adjustment based upon the value of inventory transferred.  The Guardian hemostasis valves are designed to maintain hemostasis during interventional catheterization procedures through a novel sealing system which allows simple introductions and removal of interventional devices while providing the option to lock guidewires in place.

The Company accounted for the transaction as a business combination in the first quarter of 2011.   In accordance with ASC 805 the purchase price was allocated based on estimates of the fair value of assets acquired, as no liabilities were assumed.

The purchase price was allocated as follows:

Inventory and equipment	$	48,000
Purchased technology		1,000,000
Other intangibles		800,000
Goodwill		2,424,000
	$	4,272,000

The purchased technology and other intangible assets have an estimated useful life of 11 years.

Unaudited Supplemental Pro Forma Financial Information

The following unaudited supplemental pro forma information combines the Company's results with those of Accumed and Zerusa as if the acquisitions had occurred at the beginning of each of the periods presented.  This unaudited pro forma information is not intended to represent or be indicative of the Company's consolidated results of operations or financial condition that would have been reported for the periods presented had the acquisition been completed at the beginning of each of the periods presented, and should not be taken as indicative of the Company's future consolidated results of operations or financial condition:

	Three Months Ended June 30,				Six Months Ended June 30,
	2012		2011		2012		2011
Revenue	$	24,830,000	$	22,349,000	$	48,717,000	$	43,758,000
Net earnings	$	2,360,000	$	2,114,000	$	4,247,000	$	3,755,000
Net earnings per share
Basic	$	0.15	$	0.13	$	0.27	$	0.23
Diluted	$	0.15	$	0.12	$	0.26	$	0.22

Certain pro forma adjustments have been made to reflect the impact of the purchase transaction, primarily consisting of amortization of intangible assets with determinable lives and income taxes to reflect the Company's effective tax rate for the periods presented.