Business Combination

9 Months Ended

Jun. 30, 2011

Business Combination

Business Combination

6. Business Combination

On January 18, 2011, the Company entered into a Purchase and Sales Agreement (the “P&S Agreement”) with Multis Limited (“Multis”) to acquire the integration business of Multis in exchange for a cash payment of approximately $505,000.  Multis is a contract manufacturer, and its integration business had been manufacturing certain of the Company’s products since fiscal year 2006.  This acquisition was accounted for as a business combination under Accounting Standards Codification (“ASC”) 805. As such, the purchase price was allocated to the fair value of the acquired assets. Because the Company was the only customer of Multis’ integration business, there were no acquired customer relationships.  The only asset acquired was an assembled workforce, which does not represent an intangible asset under ASC 805 and there were no acquired liabilities.  As such, the entire purchase price was allocated to goodwill. The Company expects that the goodwill recorded will be fully deductible for tax purposes. This acquisition enabled the Company to have a turn-key ability to meet its growing international requirements, as well as eliminate the time and expenses associated with trans-Atlantic shipments.  Additionally, this acquisition provided the Company with a cost effective alternative to establishing a similar operation independently.

The Company also entered into a lease agreement (the “Lease Agreement”) with Multis on January 18, 2011 to lease approximately 20,000 square feet of manufacturing and warehousing space in Galway, Ireland.  The payments due to Multis under the Lease Agreement are at current market rates for similar properties near Galway, Ireland.  As such, these payments are not additional cash consideration paid in connection with this acquisition.  Both the P&S Agreement and the Lease Agreement were effected through the Company’s newly created and wholly owned Irish subsidiary, NEI Ireland Limited (“NEI Ireland”).