2K Sports 2003 Annual Report Download - page 40

agreed to make additional payments of up to $2,500 to the former
owners of Cat Daddy, based on a percentage of Cat Daddy’s profits
for the first three years after acquisition, which will be recorded as
compensation expense if the targets are met. In connection with the
acquisitions, the Company recorded goodwill of $1,267 and net
liabilities of $191.
In November 2002, the Company acquired all of the outstanding
capital stock of Angel Studios, Inc. (“Angel”), the developer of the
Midnight Club and Smuggler’s Run franchises. The purchase price
consisted of 235,679 shares of restricted common stock (valued at
$6,557), $28,512 in cash and $5,931 (net of $801 of royalties payable
to Angel) of prepaid royalties previously advanced to Angel. In con-
nection with the acquisition, the Company recorded identifiable intan-
gibles of $4,720 (comprised of intellectual property of $2,810, tech-
nology of $1,600 and non-competition agreements of $310), goodwill
of $37,425 and net liabilities of $1,145.
In April 2003, the Company entered into an agreement with Desti-
neer Publishing Corp. (“Destineer”), a publisher of PC games, under
which Destineer granted the Company exclusive distribution rights to
eight PC games and two console ports to be published by Destineer.
The Company agreed to make recoupable advances to Destineer of
approximately $6,700 and to pay Destineer with respect to product
sales under the distribution agreement. In addition, the Company
agreed to make a loan to Destineer of $1,000. Destineer granted the
Company an immediately exercisable option to purchase a 19.9%
interest in Destineer and a second option to purchase the remaining
interest for a price equal to a multiple of Destineer’s EBIT, exercisable
during a period following April 2005. The fair value of these options
was not significant. Pursuant to the requirements of FIN 46, since
Destineer is a variable interest entity and the Company is considered
to be the primary beneficiary (as defined in FIN 46), the results of
Destineer’s operations have been consolidated in the accompanying
financial statements.
The 2003 acquisitions did not have a material effect on the
Company’s fiscal 2003 results of operations.
2002 Transaction
In August 2002, the Company acquired all of the outstanding capital
stock of Barking Dog Studios Ltd. (“Barking Dog”), a Canadian-based
development studio. The purchase price consisted of 242,450 shares
of restricted common stock (valued at $3,801), $3,000 in cash, $825
of prepaid royalties previously advanced to Barking Dog and assumed
net liabilities of $70. In connection with the acquisition, the Company
recorded identifiable intangibles of $1,800, comprised of non-competi-
tion agreements of $1,600 and intellectual property of $200, and good-
will of $6,772. The acquisition of Barking Dog did not have a significant
effect on the Company’s fiscal 2002 results of operations.
2001 Transactions
In July 2001, the Company acquired all of the outstanding capital
stock of Techcorp Limited (“Techcorp”), a Hong Kong-based design
and engineering firm specializing in video game accessories. In con-
sideration, the Company issued 30,000 shares of the Company’s
restricted common stock (valued at $572), paid $100 in cash and
assumed net liabilities of approximately $2,856. In connection with
the acquisition, the Company recorded goodwill of $3,558.
In November 2000, the Company acquired all of the outstanding
capital stock of VLM Entertainment Group, Inc. (“VLM”), a company
engaged in the distribution of third-party software products. In
connection with this transaction, the Company paid the former stock-
holders of VLM $2,000 in cash and issued 875,000 shares of the
Company’s common stock (valued at $8,039) and assumed net liabili-
ties of approximately $10,627. In connection with this transaction,
the Company recorded intangible assets of approximately $20,693.
In connection with the sale of a subsidiary to Gameplay.com plc
(“Gameplay”) in October 2000, the Company agreed to acquire
Gameplay’s game software development and publishing business,
Neo Software Produktions GMBH (“Neo”). Such acquisition was
completed in January of 2001 and the Company assumed net liabili-
ties of $808, in addition to the prepaid purchase price of $17,266. In
connection with the acquisition, the Company recorded goodwill and
intangibles of $18,183.
TAKE-TWO INTERACTIVE SOFTWARE, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (continued)
(Dollars in thousands, except per share amounts)
38
The following table sets forth the components of the purchase price of the 2001 acquisitions:
Neo VLM Techcorp Total
Cost of the acquisition:
Value of business sold (Prepaid purchase price—Neo) or stock issued $17,266 $ 8,039 $ 572 $ 25,877
Cash — 2,000 100 2,100
Transaction costs 109 27 30 166
Total $17,375 $ 10,066 $ 702 $ 28,143
Allocation of purchase price:
Current assets $ 2 $ 9,852 $ 894 $ 10,748
Non-current assets 71 201 498 770
Liabilities (881) (20,680) (4,248) (25,809)
Goodwill 8,207 12,416 3,558 24,181
Customer lists — 8,277 — 8,277
Technology 8,037 — — 8,037
Trademarks 1,939 — — 1,939
Total $17,375 $ 10,066 $ 702 $ 28,143