Acquisition Of Red Tree, Inc.

9 Months Ended

May 31, 2014

Acquisition Of Red Tree, Inc. [Abstract]

Acquisition Of Red Tree, Inc.

NOTE 5 – ACQUISITION OF RED TREE, INC.

On April 10, 2014, we acquired the assets of Red Tree, Inc. (Red Tree), a company that provides training, consulting, and coaching designed to help organizations effectively manage and engage the “Millennial Generation” in their workforces.  We determined that this acquisition met the definition of an acquisition of a business under the applicable accounting guidance.  The purchase price totaled $0.5 million in cash, which was paid at the closing of the purchase agreement.  During the calendar year ended December 31, 2013, Red Tree had revenues of $1.3 million (unaudited) and a net loss of $0.1 million (unaudited).  The acquisition of Red Tree had an immaterial impact on our consolidated financial statements during the quarter ended May 31, 2014 and was determined to be “not significant” as defined by Regulation S-X.

The following table summarizes the preliminary estimated fair values of the assets acquired from Red Tree (in thousands):

Inventory	$	7
Intangible assets		405
Goodwill		50
Cash paid	$	462

Through the acquisition of Red Tree, we acquired customer lists and content that we believe will be synergistic with our existing offerings.  Based on the preliminary purchase allocation, acquired intangible assets consisted of the following (in thousands):

Category of			Estimated Useful
Intangible Asset	Amount		Life
Tradename	$	31	5 years
Customer relationships		142	5 years
Content		232	5 years
	$	405

The former owners of Red Tree are related to one of our Named Executive Officers and are currently employed by us.

The final purchase price allocation is subject to further analysis of various items, including the fair value calculations related to identified intangible assets.  To date, our acquisition costs have been insignificant and are included with our selling, general, and administrative expenses in this report.  The goodwill generated from this transaction is primarily attributable to the methodologies and processes acquired, and the goodwill is expected to be deductible for income tax purposes.  A reconciliation of our consolidated goodwill from August 31, 2013 through May 31, 2014 is as follows (in thousands):

		Goodwill Amount
Balance at August 31, 2013	$	16,135
Acquisition of Red Tree		50
Final CoveyLink earn out payment		3,456
Impairments		-
Balance at May 31, 2014	$	19,641