Note 5 - Acquisitions

9 Months Ended

Mar. 31, 2012

Schedule of Business Acquisitions, by Acquisition [Table Text Block]

5.     ACQUISITIONS

Transtem, LLC

On January 3, 2012, Mediware acquired substantially all of the assets, excluding certain contracts, of St. Louis-based Transtem, LLC (“Transtem”), a provider of software that manages the collection and transplantation of adult stem cells in cellular-based therapies and medical research in a growing field that includes cancer treatment and regenerative medicine. The acquisition expands Mediware’s blood and biologics management software product and service offerings.

The purchase price paid for Transtem consisted of an initial purchase price of $667,000 paid in cash.  The Company incurred insignificant legal, accounting and other professional fees related to this transaction, which were expensed.  The results of the Transtem operations are included in the accompanying financial statements from the date of acquisition.

The Company has accounted for the Transtem transaction as a business acquisition under applicable accounting guidance.  The assets acquired and liabilities assumed of Transtem were recorded as of the acquisition date, at their respective fair values.  The preparation of these estimated fair values required the use of significant assumptions and estimates.  These estimates were based on assumptions that the Company believes to be consistent with the assumptions that would be considered by market participants.

The following summarizes the assets acquired and liabilities assumed at the acquisition date, net of cash acquired (in thousands):

	Purchase Price Allocation
Intangible assets	$	830
Revenue in excess of billings		62
Accrued expenses		(225	)
Total purchase price	$	667

As of March 31, 2012, the Company has not completed the purchase price allocation between the various intangible assets.  Pro forma information for the acquisition of Transtem has not been presented as the acquisition is not significant.

CareCentric, Inc.

On April 11, 2011, Mediware acquired certain assets of the home medical equipment, home health, home infusion, and billings and collections business of CareCentric National LLC (“CareCentric”).

The acquisition expands Mediware’s position in the Alternate Care Solutions (ACS) market.  The CareCentric business has been integrated with Mediware’s existing ACS business line.

The purchase price paid for CareCentric consisted of an initial purchase price of $3,000,000, of which $2,084,000 was paid in cash.   The Company has recorded total working capital adjustments of $1,067,000 and received $151,000 from the seller as part of the final working capital adjustment.  The Company incurred $27,000 of legal, accounting and other professional fees related to this transaction, which were expensed.  The results of the CareCentric operations are included in the accompanying financial statements from the date of acquisition.   

The Company has accounted for the CareCentric transaction as a business acquisition under applicable accounting guidance.  The assets acquired and liabilities assumed of CareCentric were recorded as of the acquisition date, at their respective fair values.  The preparation of the valuation required the use of significant assumptions and estimates.  These estimates were based on assumptions that the Company believes to be consistent with the assumptions that would be considered by market participants.

The following summarizes the assets acquired and liabilities assumed at the acquisition date, net of cash acquired (in thousands):

	Purchase Price Allocation
Intangible assets subject to amortization	$	2,707
Goodwill		371
Accounts receivable		1,041
Prepaid expenses and inventory		82
Accounts payable		(120	)
Deferred revenue		(2,148	)
Total purchase price	$	1,933

Details of acquired intangibles and goodwill are as follows (in thousands):

	Amount Assigned		Weighted Average Amortization Period		Risk-Adjusted Discount Rate Used in Purchase Price Allocation
Amortizable Intangible Assets
Purchased technology	$	1,302		5.0 years		35.0%
Customer relationships		997		5.0 years		35.0%
Customer relationships		371		6.0 years		22.5%
Customer Backlog		26		1 month		22.5%
Tradename		11		4.0 years		35.0%
	$	2,707
Goodwill	$	371

The Company valued the purchased technology, customer relationships, contracted backlog and tradename using the excess earnings method, an income approach.  Utilizing this approach, the Company projected revenue and related expenses.  These projected income amounts were then reduced by the return on contributory assets and discounted to present value.  This method requires the use of certain estimates, including revenue growth rates, technology replacement rates, customer attrition, expenses, contributory asset charges and discount rates.  

Goodwill is expected to be deductible for tax purposes.

Pro forma information for the acquisition of CareCentric has not been presented as the acquisition is not significant.