Note 4 - Acquisition of Controlling Interest in Repreve Renewables, LLC

6 Months Ended

Dec. 25, 2011

Mergers, Acquisitions and Dispositions Disclosures [Text Block]

4. Acquisition of Controlling Interest in Repreve Renewables, LLC

In April 2010, the Company entered into an agreement with two other unaffiliated entities to form Repreve Renewables, LLC (“Renewables”) and received a 40% ownership interest for its four million dollar contribution.  Renewables is a development stage enterprise formed to cultivate, grow and sell biomass crops, including crop feedstock intended for use as a fuel in the production of energy as well as to provide value added processes for cultivating, harvesting or using biomass crops.  Renewables has the exclusive license to commercialize FREEDOM™ Giant Miscanthus (“FGM”).  FGM is a miscanthus grass strain used to convert sunlight to biomass energy.  Renewables’ success will depend in part on its ability to license individual growers to produce FGM and to sell feedstock to those growers.  The Company’s investment in Renewables is anticipated to provide a unique revenue stream and support its strategy to grow the REPREVE® brand and product portfolio.

On October 6, 2011, the Company and one other existing Renewables shareholder each acquired an additional 20% ownership interest for $500 from the third Renewables shareholder.  The additional ownership interest purchased by the Company was financed with available cash.  Using the amounts paid per membership unit in the October 6th transaction as a basis, the Company determined that the acquisition date fair value of Renewables was $2,500.  This resulted in the Company’s previously held 40% equity interest being valued at $1,000.  As a result of remeasuring its existing 40% interest to this estimated fair value, the Company recorded a loss of $3,656 during the three months ended December 25, 2011.

Fair value of consideration transferred	$	500
Fair value of the previously held equity interest		1,000
		1,500
Fair value of the non-controlling interest		1,000
Total fair value of Renewables	$	2,500

Fair value of previously held equity interest	$	1,000
Less: investment in Renewables		4,656
Loss on previously held equity interest in Renewables	$	(3,656	)

The total fair value of  Renewables has been allocated to the tangible assets, liabilities and intangible assets acquired as follows:

Cash	$	144
Inventory		45
Other current assets		197
Biomass foundation and feedstock		1,611
PP&E		114
Intangible assets		536
Total assets		2,647
Current liabilities		(147	)
Total net assets acquired	$	2,500

The intangible assets acquired, and their respective estimated average remaining useful lives, over which each asset will be amortized on a straight line basis, are as follows:

	Amortization  Period	Estimated Value
Non-compete agreements	5 years	$	243
License to grow FGM	8 years		261
Sub-licenses	4 years		32
Total		$	536

Renewables' revenues were nil for the three months ended December 25, 2011 and the six months ended December 25, 2011.  For the three months ended December 25, 2011 and the six months ended December 25, 2011, Renewables' operating expenses were $512 and $1,020, respectively.  Renewables’ operating losses are funded through contributions from its members.

The acquisition of the additional 20% ownership interest has given the Company a 60% ownership interest in Renewables.  The Company’s consolidated financial statements include the financial position and results of operations of Renewables.  As Renewables is a development stage enterprise, has no revenues and limited operating activities, the results of Renewables’ operations are shown within Other Operating Expenses, net in the Condensed Consolidated Statement of Operations.