|12 Months Ended|
Dec. 31, 2016
|Pro forma financial information|
On November 14, 2016, Fusion NBS Acquisition Corp. (FNAC), a subsidiary of the Company, entered into a Stock Purchase and Sale Agreement (the Apptix Purchase Agreement) with Apptix, ASA (the Seller), pursuant to which FNAC acquired all of the issued and outstanding capital stock of Apptix, Inc., a wholly-owned subsidiary of the Seller (Apptix). Apptix provided
cloud-based communications, collaboration, virtual desktop, compliance, security and cloud computing solutions to approximately 1,500 business customers across the U.S.
The purchase price paid by FNAC for Apptix was $28.1 million, including an adjustment for the closing date cash on hand. The purchase price was paid with (i) $23,063,484 in cash, and (ii) 2,997,926 shares of Fusions common stock (the Seller Shares), valued at $1.21 per share. The cash portion of the purchase price was funded through a new senior secured facility entered into simultaneous with the Apptix acquisition (see note 14).
Fusion has agreed, on or prior to November 14, 2017, at its expense (i) to file a registration statement under the Securities Act of 1933, as amended (the Securities Act) to register resale of the Seller Shares on behalf of the Seller (and, if applicable, distribution of the Seller Shares to the shareholders of the Seller), (ii) to cause the registration statement to become effective no more than 90 days following the date it is filed (120 days under certain circumstances), and (iii) to maintain the effectiveness of the registration statement for up to two years. Notwithstanding the foregoing, the Seller has agreed to use its reasonable efforts to obtain an agreement from certain of its shareholders, not to sell any such Seller Shares, including under the registration statement, prior to November 14, 2017.
Upon acquisition, Apptixbecame a wholly-owned subsidiary of FNAC. The acquisition was accounted for as a business combination. The preliminary allocation of the purchase price as of the acquisition date is as follows:
The customer relationship intangible assets have estimated useful lives of 5 to 15 years, and the non-compete agreement has a useful life of one year.
The results of operations of Apptixare reflected in the Companys consolidated statement of operations effective November 14, 2016. The following table provides certain pro forma financial information for the Company for the year ended December 31, 2016 as if the acquisition of Apptixhad been consummated effective as of January 1, 2016 (in millions):
Technology for Business
On March 31, 2016, the Company completed the acquisition of substantially all of the assets of Technology for Business Corporation (TFB), a provider of contact center solutions, for an estimated purchase price of $1.3 million consisting of $277,281 in cash and a royalty fee equal to ten percent of the collected monthly recurring revenues derived from sales of the cloud version of the proprietary call center software and maintenance services. The estimated royalty fee of $1,111,606 was recognized as a non-current liability in the condensed consolidated balance sheet and will be paid on a quarterly basis, commencing as of the first full calendar quarter following the second anniversary of the closing date of this acquisition. The aggregate purchase price was allocated to the fair value of the assets acquired as follows:
The acquisition of the assets of TFB did not have a material effect on the Companys results of operations or financial condition.
Technology Opportunity Group
On November 18, 2016, the Company entered into an agreement with Technology Opportunity Group and an affiliated company (collectively, TOG) in which the Company agreed to assume TOGs obligations to provide services to a list of specified customers of TOG. In exchange for the transfer of these customer contracts, the Company will make a cash payment to TOG in an amount equal to twice the customers gross monthly revenue. The required payment wil be paid out in 18 equal monthly installments, commencing with the customers first full month of billing by the Company. The required monthly payment is subject to adjustment in the event that the monthly revenue from the customer increases or decreases by specified amounts. In connection with this agreement, the Company recognized a payable to TOG and corresponding goodwill in the amount of $0.4 million. This acquisition did not have a material effect on the Companys results of operations or financial condition.
In a two-step transaction completed in December 2015 and February 2016, FNAC acquired all of the outstanding equity securities of Fidelity Access Networks, LLC, Fidelity Connect LLC, Fidelity Voice Services, LLC, Fidelity Access Networks, Inc., and Fidelity Telecom, LLC (hereinafter collectively referred to as Fidelity). Fidelity provides customers with a suite of cloud based services,including cloud voice, cloud connectivity, cloud computing and cloud storage.
The purchase price paid to Fidelity shareholders was $29.9 million, consisting of $28.4 million in cash and 696,508 shares of Fusions common stock valued at $1.5 million (based upon thevolume weighted average price of the common stock over a ten trading day period ending four trading days prior to the closing date).The acquisition was funded through borrowings under a credit facility of approximately $27.5 million and cash on hand of approximately $0.9 million. At closing, $1.5 million of the cash portion of the purchase price was placed into escrow to protect the Company against any breaches in the sellers representations, warranties and covenants in the purchase agreement, to be released in accordance with the terms of the related escrow agreement.
The allocation of the purchase price as of the acquisition date is as follows:
The amount of goodwill recognized is primarily attributable to the expected contributions of Fidelity to the overall corporate strategy in addition to synergies and acquired workforce of the acquired business. None of the goodwill or intangible assets recognized is expected to be deductible for income tax purposes. The intangible assets subject to amortization consist of customer relationships and non-compete agreements, with an estimated useful life of 14 and 5 years, respectively. During the year ended December 31, 2016, $0.4 million of the foregoing escrowed portion of the purchase price was remitted back to the Company, resulting in a decrease in the purchase price and a corresponding reduction in goodwill. Also during the year ended December 31, 2016, the Company increased goodwill by $0.5 million due to changes in the estimated fair values of assets and liabilities at acquisition.
The results of operations of Fidelity are reflected in the Companys consolidated statement of operations effective December 8, 2015. The following table provides certain pro forma financial information for the Company for the year ended December 31, 2015 as if the acquisition of Fidelity had been consummated effective as of January 1, 2015 (in millions):
In September 2015, the Company acquired the customer base, technology platform, infrastructure and certain other assets of RootAxcess (Root Axcess), for an aggregate purchase price of $1.2 million, payable in either cash or in a mix of cash and, at our election, in up to $300,000 in shares of Fusions common stock. Of the $1.2 million purchase price, $0.7 million is being held by the Company against potential claims arising from breaches of representation and warranties and is currently included in due to RootAxcess seller on the consolidated balance sheet.
The aggregate purchase price was allocated to the fair value of the assets acquired as follows:
All of the forgoing acquisitions are included as part of the Business Services business segment (See Note 12).
The entire disclosure for a business combination (or series of individually immaterial business combinations) completed during the period, including background, timing, and recognized assets and liabilities. The disclosure may include leverage buyout transactions (as applicable).
Reference 1: http://www.xbrl.org/2003/role/presentationRef