'advance' ... Posted by: seeclear Date: Friday, December 18, 2009 4:06:34 PM
In reply to: None Post # of 18050
Understanding CYSG... Acquisitions..(Nic's Fave - Cash and Shares)
Acquisitions
Pooling of Interests Method
In June 2000, the Company completed a merger with Positive Developments, Inc.
("PDI"), a designer of software solutions for supply chain applications, by
exchanging 400,000 shares of its common stock (40,000 of which were held in
escrow, until released in July 2001) for all of the common stock of PDI.
Also in June 2000, the Company completed a merger with Communication Services
International, Incorporated ("CSI"), a designer and installer of wireless
communications and cabling networks, by exchanging 1,317,647 shares of its
common stock (50,000 of which were held in escrow, pending resolution of any
claims) for all of the common stock of CSI. During the quarter ended June 30,
2001, the Company filed a claim against the sellers for shares held in escrow.
The claim was settled in the fourth quarter, resulting in 30,055 shares being
returned to the Company treasury.
Prior to these mergers, PDI's fiscal year ended on December 31, and CSI's fiscal
year ended on February 28. In recording the business combinations, PDI's and
CSI's prior period financial statements have been restated to a year ended
September 30, to conform to Vertex's fiscal year end. These mergers constituted
tax-free reorganizations and have been accounted for as pooling of interests
under Accounting Principles Board Opinion No. 16 "Business Combinations". The
Company's financial statements were previously restated to include the results
of PDI and CSI for all periods presented.
Purchase Method
On September 27, 1999, the Company acquired all of the stock of Portable
Software Solutions Limited ("PSS"), Portable Software Solutions (Maintenance)
Limited ("Maintenance") and Trend Investments Limited ("Trend", and together
with PSS and Maintenance, the "PSS Group"). The PSS Group was a provider of
handheld terminal solutions to mobile workers in the U.K., primarily in the door
to-door insurance and dairy industries. The total purchase price was
approximately $10.1 million, including approximately $5.9 million in cash, two
notes payable of approximately $800,000 each and 1,591,984 common shares. The
shareholders of the PSS Group were entitled to additional incentive payments
based upon target average annual pre tax profits of the PSS Group for the two
years ending December 31, 1999 and 2000. No incentive payments were earned based
on the PSS Group profits.
On September 22, 1999, the Company acquired all of the outstanding capital stock
of ICS International AG ("ICS"), a provider in Germany of integrated high-end
wireless data capture solutions to industrial users and one of the few multi-
national European providers of such solutions. The total consideration paid to
ICS was $5,161,700 of which $3,570,000 was paid in cash at the closing and the
balance was in the form of three notes payable of $531,000 each. In addition,
the Company purchased ICS's headquarters building located in Neu Anspach near
Frankfurt, Germany for $1,593,000 of which $372,000 was paid in cash and the
remainder was financed through mortgages, the principal amounts of which were
$1,221,000.
Effective March 1, 2000, the Company acquired all of the outstanding capital
stock of Data Control Systems ("DCS"), a provider of "light-directed" warehouse
management systems located in New Jersey. The Company paid the shareholders
$14,250,000 in cash. The purchase price was also subject to a working capital
adjustment, which amounted to an additional $120,000 paid to the shareholders.
Effective April 1, 2000, the Company acquired all of the outstanding common
stock of Auto-ID, Inc. ("Auto-ID"), a reseller of bar coding equipment. As
consideration, the Company issued 100,000 shares of its common stock, which at
the date of the transaction had a fair market value of $6 per share.
Effective June 30, 2000, the Company acquired all of the outstanding common
stock of Societe Italiana Servizi Italservice S.r.l. ("SIS"), a provider of
after-market computer maintenance and software support services. Total
consideration paid was $1,750,000 and was subject to an additional incentive
payment based upon targeted profits for the fiscal year ended December 31, 2000,
up to a maximum of $270,000. No incentive payments were earned based on the SIS
profits.
Effective September 30, 2000, the Company acquired all of the outstanding common
stock of Renaissance Software Inc. ("RSI"), a developer of supply chain and
warehouse management systems. As consideration, Vertex issued 3,571,144 shares
of common stock (263,000 of which are held in escrow), which at the date of the
transaction had a fair market value of $13.42 per share. In addition, Vertex
reserved 535,644 shares for issuance upon exercise of RSI stock options. The
vested portion of these options (included in the total consideration paid for
RSI) was estimated to have a total fair market value of $6,217,000. The Company
engaged an independent valuation firm to assist in the identification and
determination of the fair market value of the acquired RSI intangible assets. A
portion of the RSI purchase price was identified, using proven valuation
procedures and techniques, as in-process Research and Development (R&D)
projects. The revenue projections used to value the in-process R&D were based on
estimates of relevant market sizes and growth factors, expected trends in
technology and the nature and expected timing of new product introductions by us
and our competitors. At the date of the acquisition, the products under
development had not reached technological feasibility and had no alternative
future use. Accordingly, $7,500,000 was expensed as in-process R&D in fiscal
2000. The value assigned to in-process R&D was comprised of various research and
development projects. These projects included the introduction of new
technologies as well as revisions or enhancements to certain existing
technologies, and were expected to begin generating net cash inflows in fiscal
2001. There was risk associated with the completion of the projects, and there
was no assurance that each would attain either technological feasibility or
commercial success.
In October 2000 the Company purchased the assets and business of three former
European service and maintenance divisions of Genicom International
(collectively referred to as "ESSC") for approximately $2 million in cash at
closing and a deferred cash payment of $500,000 due on September 1, 2001. The
Company paid $125,000 in December 2001, however the $375,000 balance has not
been paid and is included in Notes Payable. At September 30, 2002, 5,357,143
shares of Vertex common stock collateralize the remaining $375,000 obligation.
In December 2000, the Company completed a merger with Applied Tactical Systems,
Inc. ("ATS"), a provider of connectivity software for SAP installations
worldwide, by exchanging 3,000,000 shares of its common stock (210,000 of which
are held in escrow, to be released upon the first issuance of the combined
companies audited financial statements) for all of the common stock of ATS. Such
shares had a fair market value of approximately $8.30 per share at the date of
the transaction. In addition, Vertex reserved 153,600 shares for issuance upon
exercise of ATS stock options. The vested portion of these options (included in
the total consideration paid for ATS) was estimated to have a fair market value
of approximately $620,000. (See Note 16 - Settled Litigation)
In February 2001, the Company purchased from Pitney Bowes its Transportation
Management Software and certain engineering assets (the Transcape Division, or
"Transcape"). Consideration for Transcape was 1,356,852 shares of the Company's
Series A preferred stock, which on the date of acquisition, was estimated to
have a fair market value of approximately $10.4 million. A portion of the
Transcape purchase price was identified, using proven valuation procedures and
techniques, as in-process Research and Development (R&D) projects. The revenue
projections used to value the in-process R&D were based on estimates of relevant
market sizes and growth factors, expected trends in technology and the nature
and expected timing of new product introductions by us and our competitors. At
the date of the acquisition, the product under development had not reached
technological feasibility and had no alternative future use. Accordingly,
$3,600,000 was expensed as in-process R&D in fiscal 2001. The value assigned to
in-process R&D was comprised of one research and development project that would
introduce new web-enabling technologies, and was expected to begin generating
net cash inflows in fiscal 2002. There was risk associated with the completion
of the project, and there was no assurance that it would attain either
technological feasibility or commercial success.
Also in February 2001, the Company acquired all of the capital stock of Binas
Beheer B.V. ("Binas"). The total purchase price was $570,000, paid for with
approximately $300,000 in cash and by the issuance to the Binas shareholders of
42,686 shares of our common stock, which at the date of the transaction had a
fair market value of $6.34 per share.
In September 2001, the Company acquired all of the outstanding stock of DynaSys,
a software developer of advance supply chain planning and scheduling
applications. Total consideration paid was $565,000, which included 134,979
shares of Vertex common stock, which had an estimated fair market value of
$217,000 on the date of acquisition.
In October 2001, the Company acquired Euronet Consulting S.r.l. ("Euronet"),
an Italian software applications consulting firm. The value of the
transaction was approximately $940,000. The Company acquired all of the
outstanding shares of Euronet for 684,620 shares of Vertex common stock,
which at the date of acquisition had a fair market value of approximately
$625,000, and additional shares of common stock issued later in the year:
approximately 232,000 shares with an estimated fair market value of $.44
per share in February 2002 and approximately 760,000 shares with a fair
market value of $.27 per share in April 2002.
This is how Nicolas Toms ..."ROLLS"...SC
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