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15. Business Combinations/Disposition On June 29, 2001, the Company acquired substantially all of the assets (including the intangibles and goodwill) of Cool Springs Associates, Inc. d/b/a EI for $2,000,000 in cash and a warrant to purchase 300,000 shares of the CompanyÕs common stock, valued at approximately $637,000. EI, headquartered in Nashville, Tennessee, was a private company that implemented customer profitability methodologies exclusively licensed to it by First Manhattan Consulting Group, Inc. and incorporated these methodologies into an application service provider-delivered CRM profitability model offered primarily to mid-tier financial institutions and small banks. The Company agreed to pay to EI an additional cash payment within 75 days after the end of each twelve-month period ending June 29, 2002, June 29, 2003 and June 29, 2004 equal to 50% of the net income (as defined in the Asset Purchase Agreement dated June 29, 2001 by and among the Company, EI and certain stockholders of EI) recognized by the Company that would be attributable to the operation of the former business of EI by the Company. Such cash payments would not exceed (i) $100,000 for the period ending on June 29, 2002, (ii) $200,000 for the period ending June 29, 2003 and (iii) $300,000 for the period ending on June 29, 2004. The Company will not make any additional cash payments due to the discontinuance of the operations of EI. The acquisition was accounted for under the purchase method and, accordingly, the purchase price was allocated to assets acquired and liabilities assumed based on their estimated fair value at June 29, 2001, as follows (in thousands):
The purchase price was comprised of the following (in thousands):
The unaudited pro forma consolidated information for the year ended March 31, 2002 and 2001, determined as if the EarningsInsights acquisition had occurred on April 1 of each period would have resulted in the following (in thousands, except per share data):
The unaudited pro forma information is presented for illustrative purposes only and is not necessarily indicative of results of operations in future periods or results that would have been achieved had the Company and the acquired company been combined during the specified periods. On March 29, 2002, the Company announced its decision to discontinue the operations of EI. Consequently, the Company incurred a charge of $1.9 million, net of income tax benefit, relating to the write-off of EI long-lived assets and an accrual for estimated losses during the phase-out period. The disposition of the EI operation represents the disposal of a business segment under APB No. 30. Accordingly, results of this operation have been classified as discontinued, and interim quarterly periods have been restated. For the fiscal year ended March 31, 2002, EI incurred a $797,000 loss, net of income tax benefit. The closing of EI resulted in the termination of four employees. Revenue relating to the discontinued business was $90,000 during fiscal 2002. All long-lived assets were written-off except for various computer equipment, which was appraised and written down to its estimated net realizable value. The Company expects to liquidate or utilize these assets in its existing business within six months. The Company will not make any additional cash payments as defined in the Asset Purchase Agreement dated June 29, 2001 due to the discontinuance of the operations of EI. |
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