Business Combination

6 Months Ended

Jun. 30, 2013

Business Combinations [Abstract]

Business Combination

Note 5 . Business Combination

On July 19, 2012, I/P consummated the Merger with the Legal Parent, as also described in Note 1. The consideration consisted of various equity instruments, including: shares of common stock, preferred stock, options and warrants. The purpose of the Merger was to increase the combined company's intellectual property portfolio and array of products, to gain access to capital markets, and for other reasons. Upon completion of the Merger, (i) all then outstanding 6,169,661 common stock shares of I/P, par value $0.0001 per share, were exchanged for 18,617,569, shares of the Company’s common stock, par value $0.01 per share, and (ii) all then outstanding shares of Series A Convertible Preferred Stock of I/P, par value $0.0001 per share, were exchanged for 6,673 shares of the Legal Parent’s Series A Convertible Preferred Stock, par value $0.01 per share, which shares were convertible into 20,136,445 shares of common stock of the Legal Parent. In addition, the Legal Parent issued to the holders of I/P capital stock an aggregate of 15,959,838 warrants to purchase an aggregate of 15,959,838 shares of the Company’s common stock with an exercise price of $1.76 per share. The Company recorded such warrants as a derivative long-term liability in the total amount of $ 21,954. In addition, all outstanding and unexercised options to purchase I/P common stock, whether vested or unvested, were converted into 41,178 options to purchase the Company’s common stock. Immediately following the completion of the Merger, the former stockholders of I/P owned approximately 55.04% of the outstanding common stock of the combined company (or 67.61% of the outstanding shares of the Company’s common stock, calculated on a fully diluted basis), and the Legal Parent’s stockholders prior to the Merger owned approximately 44.96% of the outstanding common stock of the combined company (or 32.39% of the outstanding shares of its common stock calculated on a fully diluted basis). For accounting purposes, I/P was identified as the accounting “acquirer”, as it is defined in FASB Topic ASC 805. The total purchase price of $75,654 was allocated to the assets acquired and liabilities assumed of the Legal Parent. Registration and issuance cost, in the total amount of $463, was recorded against the additional paid-in capital.

	Allocation of purchase price
Current assets, net of current liabilities	$	2,586
Long-term deposit		8
Property and equipment		124
Technology		10,133
Goodwill		65,965
Total assets acquired, net		78,816
Fair value of outstanding warrants granted by Legal Parent prior to the Merger, classified as a long-term derivative liability		(3,162)
Total liabilities assumed, net		(3,162)
		75,654
Measurement of consideration:
Fair value of vested stock options granted to employees, management and consultants, classified as equity		7,364
Fair value of outstanding warrants granted by the Legal Parent prior to the Merger, classified as equity		10,079
Fair value of Vringo shares of common stock and vested $0.01 options granted to employees, management and consultants		58,211
Total estimated purchase price	$	75,654

The fair values of the identified intangible assets were estimated using an income approach. Under the income approach, an intangible asset’s fair value is equal to the present value of future economic benefits to be derived from ownership of the asset. Indications of value are developed by discounting future net cash flows to their present value at market-based rates of return. The goodwill recognized as a result of the acquisition is primarily attributable to the value of the workforce and other intangible asset arising as a result of operational synergies, products, and similar factors which could not be separately identified. The useful life of the intangible assets for amortization purposes was determined considering the period of expected cash flows used to measure the fair value of the intangible assets adjusted as appropriate for the entity-specific factors including legal, regulatory, contractual, competitive economic or other factors that may limit the useful life of intangible assets. Goodwill recognized is not deductible for income tax purposes. Had the acquisition taken place on Inception, the revenue in the consolidated statement of operations and the consolidated net loss would have been as follows: 

	Cumulative from Inception to June 30, 2013				Six month period ended June 30, 2012				Three month period ended June 30, 2012
		Revenue	Net Loss		Revenue		Net Loss		Revenue		Net Loss
Total amount	$	2,235	$	(64,914)	$	206	$	(15,369)	$	100	$	(7,430)

The pro forma adjustment consists of amortization of acquired technology. The amortization, net, for the period from Inception through June 30, 2013 would have been $1,853. The amortization for the three and six month period ended June 30, 2012 would have been $422 and $844 , respectively. The above pro forma disclosure excludes the possible impact of valuation of equity and derivative instruments valued in connection with the Merger.