Rosetta Stone 2012 Annual Report Download - page 90
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Table of Contents
The carrying amounts reported in the consolidated balance sheets for cash and cash equivalents, restricted cash, accounts receivable, accounts
payable and other accrued expenses approximate fair value due to relatively short periods to maturity.
On November 1, 2009, the Company acquired certain assets from SGLC International Co. Ltd. ("SGLC"), a software reseller headquartered in
Seoul, South Korea. As the assets acquired constituted a business, this transaction was accounted for under ASC topic 805,
("ASC 805"). The purchase price consisted of an initial cash payment of $100,000, followed by three annual cash installment payments if the acquired
company's revenues exceed certain targeted levels each of these years. The amount was calculated as the lesser of a percentage of the revenue generated
or a fixed amount for each year, based on the terms of the agreement.
Based on these terms, the minimum additional cash payment would have been zero if none of the minimum revenue targets were met, and the
maximum additional payment was $1.1 million, which amount was recorded as contingent consideration at its fair value of $850,000, resulting in a total
purchase price of $950,000 including the initial cash payment of $100,000 above. Together with the initial cash payment and the first contingent
payment made, we made additional payments of $300,000 and $350,000 in accordance with the terms of the purchase in 2012 and 2011, respectively.
See table below for a summary of the opening balances to the closing balances of the contingent purchase consideration (in thousands):
See table below for summary of the Company's financial instruments accounted for at fair value on a recurring basis, which consist only of short-
term investments that are marked to fair value at each balance sheet date, as well as the fair value of the accrual for the contingent purchase price of the
acquisition of SGLC in 2009:
F-13
Contingent purchase price accrual, beginning of period $ 300 $ 573
Minimum revenue target met, increase in contingent liability charged to expense in
the period — 77
Payment of contingent purchase liability (300) (350)
Contingent purchase price accrual, end of period $ — $ 300
Short-term
investments $ — $ — $ — $ — $9,711 $9,711 $ — $ —
Total $ — $ — $ — $ — $9,711 $9,711 $ — $ —
Contingent
purchase
price
accrual $ — $ — $ — $ — $300 $ — $ — $300
Total $ — $ — $ — $ — $300 $ — $ — $300