NOTE 3 – ACQUISITION OF GERMANY, SWITZERLAND, AND AUSTRIA LICENSEE

On December 5, 2018, we purchased all of the equity of Leadership Institut GmbH, a Munich, Germany based company with wholly owned subsidiary companies in Switzerland and Austria. Leadership Institut GmbH previously operated as an independent licensee that provided our training and products to Germany, Switzerland, and Austria (GSA). We intend to transition the GSA licensee operation to a directly owned office similar to the fiscal 2017 transition of the licensee operation in China. The purchase price was $0.2 million in cash, plus $0.8 million in forgiveness of liabilities owed to the Company from the pre-existing relationship at the purchase date. There is no contingent consideration obligations or other additional consideration associated with the purchase of the former GSA licensee. We accounted for the acquisition of Leadership Institut Gmbh as a business combination in the second quarter of fiscal 2019. We also expect to incur additional costs for severance, legal, and other related acquisition expenses. These additional costs are expected to total approximately $0.8 million and will be expensed as incurred in selling, general, and administrative expense. The acquisition of the GSA licensee will provide us with the opportunity to operate a directly owned office in one of the world’s largest economic markets and is expected to provide significant future growth opportunities. The total purchase price consisted of the following (in thousands):



Cash paid at closing	$	159
Accounts receivable from GSA licensee		798
Total purchase price	$	957

The major classes of assets and liabilities to which we have preliminarily allocated the purchase price were as follows (in thousands):



Cash acquired	$	127
Accounts receivable, net		564
Inventories, net		80
Prepaid and other current assets		45
Intangible assets		741
Property and equipment		27
Other long-term assets		11
Assets acquired		1,595
Accounts payable		(208)
Accrued liabilities		(383)
Income taxes payable		(47)
Liabilities assumed		(638)
	$	957

The preliminary allocation of the purchase price to the intangible assets acquired was as follows (in thousands):



			Weighted Average
Description		Amount	Life
Reacquisition of license rights	$	360	3 years
Localized content		202	3 years
Customer relationships		179	3 years
	$	741

We have included the financial results of the former GSA licensee in our financial results since the date of acquisition. For the quarter ended February 28, 2019, the new direct office that serves the GSA region had $0.5 million of sales and a $0.2 million operating loss. During the second quarter of the prior year, we recognized $0.1 million of royalty revenue from the GSA licensee. For the twelve months ended August 31, 2018, the former GSA licensee had $3.3 million of sales and a $1.3 million pre-tax tax loss.