Note

Business Acquisition

In fiscal

2010,

the Company entered into an agreement with a private software company to invest

$1.5

million in exchange for a

36%

equity interest therein. In the

third

quarter of fiscal

2017,

the C

ompany entered into a new agreement to invest an additional

$3.6

million for an additional

64%

of equity in the company. The Company paid

$1.8

million in cash at closing and is obligated to pay an additional

$1.8

million in cash

three

years subsequent to closing (discounted to

$1.6

million on the purchase date). In addition, the agreement provides for the former owners to receive a

30%

share of operating profits of the business over the next

three

years so long as they remain employed by the Company

. The Company has accrued for such profit sharing as an expense based on results of operations since the date of acquisition.

The acquisition has been accounted for as a business combination and the financial results of the company have been included in our consolidated financial statements

since the date of acquisition. Under the acquisition method of accounting, the purchase price was allocated to net tangible and intangible assets based upon their estimated fair values as of the acquisition date.

The table below presents the allocation of t

he purchase price to the acquired net assets (in thousands):

Cash	$	509
Accounts receivable		273
Inventories		243
Other current assets		18
Deferred software development costs		2,520
Intangible Assets		1,220
Goodwill		1,634
Fixed assets		47
Deferred tax liability		(1,090	)
Accounts payable & current liabilities		(80	)
Purchase Price (1)	$	5,294

(

)

$1,833

1,555

(

$1.8

million discounted at

) =

$3,388

purchase price divided by

64%

$5.294

million.

Pro-forma financial information has

not

been presented for this acquisition because it is

not

considered material to the Company

’s financial position or results of operations.