Digital River 2002 Annual Report Download - page 57

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The changes in the net carrying amount of goodwill for the year ended December 31, 2002, by operating segment, are
as follows:
Software and
Digit al Com merce
S ervi ces Di vi si on
E-Business
Services Divisi on Total
Balanc e as of D e ce mbe r 31, 2001.......... $ 8,280,00
0
$ 2,993,00
0
$ 11,273,000
G oodw ill f r om a c quisitions a nd
e ar nouts................................................. 2,790,00
0
4,635,00
0
7,425,00
0
Balanc e as of D e ce mbe r 31, 2002.......... $ 11,070,000 $ 7,628,00
0
$ 18,698,000
Information regarding the Company’ s other intangible assets is as follows:
Year Ended December 31, 2002
Carryi ng am ou nt
G ross
Accum u lated
amort i zati on
Carrying amount
Net
Customer r e la tionships........................... $ 14,117,000 $ 8,171,00
0
$ 5,946,00
0
N on-c ompete a gr e ements...................... 3,150,00
0
2,399,00
0
751,00
0
T ec hnology/tra de name........................... 5,675,00
0
4,026,00
0
1,649,00
0
T otal.......................................................... $ 22,942,000 $ 14,596,000 $ 8,346,00
0
Year Ended December 31, 2001
Carryi ng
amoun t
Accum u lated
amort i zati on Net
Customer r e la tionships........................... $ 9,317,00
0
$ 4,728,00
0
$ 4,589,00
0
N on-c ompete a gr e ements...................... 3,050,00
0
1,610,00
0
1,440,00
0
T ec hnology/tra de name........................... 5,425,00
0
2,520,00
0
2,905,00
0
T otal.......................................................... $ 17,792,000 $ 8,858,00
0
$ 8,934,00
0
Estimated amortization expense for the remaining life of the intangible assets, based on intangible assets as of
December 31, 2002, is as follows:
2003 $ 4,727,00
0
2004 3,190,00
0
2005 429,00
0
3. Acquisitions and Purchases of Assets:
In March 2002, pursuant to an Asset Purchase Agreement between the Company and Innuity Acquisition Corp.
(“IAC”), the Company purchased certain assets for approximately $2,400,000 in cash and assumed approximately
$3,600,000 in merchant liabilities. Goodwill of $4,215,000 was recorded as a result of this agreement. The Company
will amortize intangible assets acquired, consisting of customer base, non-compete agreements and
technology/tradename over a three-year period. The agreement includes an opportunity for a cash earn-out based on
revenue generated from the IAC assets during the 12-month period following the close of the transaction. Such earn-
out amount, if any, will be recorded as additional goodwill.
In March 2002, pursuant to an Amended and Restated Asset Purchase Agreement (the “Agreement”) between the
Company and Beyond.com Corporation (“Beyond.com”), in exchange for 179,096 shares of the Company’ s Common
Stock, the Company purchased those assets and assumed those liabilities of Beyond.com related to its eStores business,
which manages online stores for clients. The Company will amortize intangible assets acquired, consisting of customer
r elationships and non-compete agreements, over a three-year period. The purchase was approved by the U.S.
Bankruptcy Court following Beyond.com’ s filing for Chapter 11 bankruptcy protection. Immediately following the
closing of the Agreement, the Company entered into a Post-Closing Amendment to the Agreement with Beyond.com
(the “Post-Closing Amendment”), pursuant to which, among other things, the Company agreed to increase the number
of shares to be delivered to Beyond.com under the Agreement to 222,842, in exchange for a release of certain potential
claims by Beyond.com against the Company. The Post-Closing Amendment is subject to approval by the U.S.
Bankruptcy Court. The Official Committee of Unsecured Creditors (“Committee”) of Beyond.com’ s bankruptcy
estate has objected to the Post-Closing Amendment, asserting that the increase in shares to be delivered to Beyond.com
under the Post-Closing Amendment is inadequate. The hearing on Beyond.com’ s motion to approve the Post-Closing
Amendment was originally set for June 7, 2002. The