Business Combinations

6 Months Ended

Jun. 30, 2015

Business Combinations [Abstract]

Business Combinations

Note 2. Business Combinations

On April 30, 2015, we acquired 100% of the outstanding equity of NT OBJECTives, Inc. (NTO). We acquired NTO to expand our web application security offerings. We acquired NTO for total consideration of $6.0 million. We made an initial payment of $3.4 million in cash and issued $0.1 million (9,091 shares) of our common stock upon the closing of the acquisition and are obligated to make two additional payments of $1.5 million each, less the amount of any indemnity claims and net working capital adjustments, on the first and second anniversary dates of the closing. The net present value of these two additional payments, or $2.5 million, is included in the total purchase consideration paid. We expensed the related acquisition costs of $0.4 million in general and administrative expense.

The following table summarizes the consideration paid for NTO and the preliminary allocation of purchase price to the estimated fair value of the assets acquired and liabilities assumed at the acquisition date:

Consideration (in thousands):
Cash	$	3,404
Stock consideration		99
Net present value of deferred cash payments		2,496
Fair value of total consideration transferred	$	5,999
Recognized amounts of identifiable assets acquired and liabilities assumed (in thousands):
Net working capital	$	(584	)
Intangible assets		2,090
Total identifiable net assets assumed		1,506
Goodwill		4,493
Net purchase price	$	5,999

The fair values of identifiable intangible assets were based on valuations using the income approach. The estimated fair values and useful lives of the identifiable intangible assets are as follows:

	Amount		Weighted-average life
	(in thousands)		(years)
Developed technology	$	1,950	6
Customer relationships		100	4
Non-compete agreements		40	2
Identifiable intangible assets	$	2,090

The excess of the purchase price over the tangible assets, identifiable intangible assets and assumed liabilities was recorded as goodwill. We believe the amount of goodwill is the expected synergistic benefits of being able to leverage the integration of our existing products and services with the acquired products to both NTO and our customer bases. The goodwill was allocated to our one reportable segment. The acquired goodwill and intangible assets will not be deductible for tax purposes. These preliminary amounts are subject to subsequent adjustment as we obtain additional information to finalize certain components of working capital.

Revenues for NTO were immaterial and the net loss for NTO was $1.2 million from the acquisition date through June 30, 2015. Pro forma results of operations have not been included, as the acquisition of NTO was not material to our results of operations for any periods presented.

In May 2015, we entered into loan agreements with certain retained employees of NTO. The terms of these agreements require the employees to pay us the total amount borrowed, with accrued interest at 1.7% per annum, within 18 months of the agreement date. The loan agreements are secured by restricted stock awards granted to the employees. The aggregate amount of these loans was $0.5 million and is classified as other assets on the consolidated balance sheet.