Note 10 — Acquisition

On June 6, 2014, the Company completed the acquisition of all outstanding shares of NetNearU. The purchase price for NetNearU is estimated to be approximately $59.9 million in cash consideration (subject to certain minor working capital post-closing adjustments). The preliminary net cash outlay for the acquisition, after taking into account estimated cash acquired of $4.1 million, was approximately $55.8 million.

The Company accounts for business combinations pursuant to the authoritative guidance for business combinations (ASC 805). Accordingly, the Company allocated the purchase price of the acquired company to the net tangible assets and intangible assets acquired based upon their estimated fair values. Under the authoritative guidance for business combinations, acquisition-related transaction costs and acquisition-related restructuring charges are not included as components of consideration transferred but are accounted for as expenses in the period in which the costs are incurred. Merger-related transaction costs incurred by the Company during the first quarter of fiscal year 2015 were approximately $0.4 million, which were recorded in SG&A expenses.

The preliminary estimated purchase price allocation of the acquired assets and assumed liabilities based on the estimated fair values as of June 6, 2014 is as follows:


	(In thousands)
Current assets	$	8,482
Property and equipment		1,087
Identifiable intangible assets		24,310
Goodwill		34,330

Total assets acquired		68,209

Current liabilities		(5,305	)
Other long-term liabilities		(2,981	)

Total liabilities assumed		(8,286	)


Total purchase price	$	59,923

Amounts assigned to identifiable intangible assets are being amortized on a straight-line basis over their estimated useful lives and are as follows:


	Fair value (In thousands)		Estimated weighted average life
Technology	$	10,970		7
Customer relationships		10,950		9
Non-compete agreements		2,130		2
Trade name		260		2

Total identifiable intangible assets	$	24,310		8

The intangible assets acquired in the NetNearU business combination were determined, in accordance with the authoritative guidance for business combinations, based on the estimated fair values using valuation techniques consistent with the market approach and/or income approach to measure fair value. The remaining useful lives were estimated based on the underlying agreements and/or the future economic benefit expected to be received from the assets.

NetNearU has developed a comprehensive network management system for WiFi and other Internet access networks that the Company expects to use to extend the Company’s Exede^® broadband services to a wider subscriber base in multiple markets, including commercial airlines, live events, hospitality, enterprise networking and government broadband projects. NetNearU’s primary operations currently support government applications with the potential for future expansion into commercial applications. These current benefits and additional opportunities were among the factors that were taken into account in setting the purchase price and contributed to the recognition of preliminary estimated goodwill, which was recorded within the Company’s government systems segment. The intangible assets and goodwill recognized are not deductible for federal income tax purposes.

The consolidated financial statements include the operating results of NetNearU from the date of acquisition. Pro forma results of operations have not been presented because the effect of the acquisition was insignificant to the financial statements for all periods presented.