Atari 2009 Annual Report Download - page 109

ANNUAL FINANCIAL REPORT – REGISTRATION DOCUMENT
109
NOTE 23 – BUSINESS COMBINATION
On December 12, 2008 the Group acquired Cryptic Studios Inc., one of the world's leading developers, publishers and
operators of Massively Multiplayer Online (MMO) games. Located in the United States, this company has a range of
state-of-the art games based on leading-edge technology. Between December 12, 2008 and March 31, 2009 Cryptic
Studios did not generate any revenue and contributed €4.5 million to the Group‟s losses. If the acquisition had taken
place on April 1, 2008 the Group‟s revenue for the year ended March 31, 2009 would have totaled €136.4 million and net
loss for the year €233.2 million. These amounts were calculated using the Group‟s accounting principles and methods
and adjusting the results of Cryptic Studios for the additional depreciation, amortization and impairment that would have
been recognized if the related fair value adjustments and tax impact had been applied to property, plant and equipment
and intangible assets at April 1, 2008.
The net assets acquired under the business combination as well as the goodwill arising on the transaction are as follows:
(€ million)
Year ended
March 31, 2009
Cash payment 19.7
Earn-out payment 15.4
Costs directly attributable to the acquisition 3.6
Total acquisition cost
38.7
(€ million)Fair value
Carrying amount
in Cryptic’s
financial
statements
Cash and cash equivalents 2.6 2.6
Property, plant and equipment 0.7 0.7
Trademarks 0.7 -
Capitalized games 16.9 2.9
Other intangible assets and software 0.9 0.1
Other assets 0.2 0.2
Trade payables and other current liabilities (0.9) (0.9)
Employee-related liabilities (0.3) (0.3)
Non-current financial liabilities (7.1) (4.0)
Deferred tax liabilities (5.5) -
Total fair value of net assets acquired
8.2 1.3
Goodwill 30.5
Total acquisition cost
38.7
Acquisition price paid in cash (including acquisition costs) 23.3
Cash and cash equivalents of the acquired subsidiary (2.6)
Cash outflow for the acquisition
20.7
The acquisition cost for the business combination with Cryptic Studios was initially accounted for on a provisional basis.
In accordance with IFRS 3, any adjustments to this initial accounting will be made within twelve months of the acquisition
date.
As consideration for (i) the sale and transfer to the Company by Cryptic‟s shareholders of all of their Cryptic shares and
(ii) the cancellation of Cryptic stock options by their holders, the Company paid a cash amount of €23.3 million, net of
transaction costs. The related Stock Purchase and Transfer Agreement provides for an earn-out payment and a bonus.
The earn-out would amount to a maximum of approximately USD 27.5 million if the revenue generated by Champions
Online and Star Trek Online represents USD 7.5 million per game during a reference period of six months. If the revenue
targets are achieved, the earn-out payment will be made in cash, or in newly-issued Atari ordinary shares, or in cash and
shares, with the settlement procedures determined by the Company. At March 31, 2009 the maximum potential number
of new shares to be issued for the earn-out payment was 1.296.844.
The bonus will amount to a maximum of around USD 20 million, based on the assumption that the revenue generated by
Champions Online and Star Trek Online represents USD 32.3 million and USD 39.6 million respectively during a
reference period of twelve months. If the revenue targets are achieved, the bonus payment will be made in cash and in