3. ACQUISITION

VENDSCREEN, INC.

On January 15, 2016, the Company executed an Asset Purchase Agreement with VendScreen, Inc. (“VendScreen”), a Portland, Oregon based developer of vending industry cashless payment technology, by which it acquired substantially all of VendScreen’s assets and assumed specified liabilities, for a cash payment of $5.6 million. The purchase price was funded using $2.6 million in cash, and the balance of $3.0 million from a term loan which was converted from a line of credit.

The acquisition expanded the Company’s capability with interactive media (touchscreen) and content delivery through VendScreen’s cloud-based content delivery platform, device platform and products, customer base, vendor management system (VMS) integration, and consumer product information including nutritional data. In addition to new technology and services, the acquisition added a West Coast operational footprint, with former VendScreen employees able to offer expanded customer services, sales and technical support. On the date of the acquisition, VendScreen had approximately 150 customers with approximately 6,000 connections. Of those 150 customers approximately 50% were new customers of USAT.

In December 2016, the Company finalized the opening balance sheet of VendScreen relating to facts existing at the opening balance sheet date and recorded a reduction of goodwill for $211 thousand and increased finance receivables for the same amount within the measurement period. The final goodwill amount related to VendScreen opening balance sheet is $3.8 million.

The following table summarizes the purchase price allocation to reflect the fair values of the assets acquired and liabilities assumed at the date of acquisition.


($ in thousands)

Consideration:
Fair value of total consideration paid in cash	$	5,625

Recognized amounts of identifiable assets acquired and liabilities assumed:

Financial Assets:
Accounts receivable	$	3
Finance receivables		839
Other current assets		20
Deferred income taxes		18
Fair value of financial assets		880
Property & equipment		81
Identifiable intangible assets:
Developed technology		639
Customer relationships		149
Brand		95
Noncompete agreements		2
Fair value of intangible assets		885
Financial liabilities
Accrued liabilities		(50)
Total identifiable net assets		1,796
Goodwill		3,829
Total Fair Value	$	5,625

Of the $885 thousand of acquired intangible assets, $639 thousand was assigned to Developed Technology that is subject to amortization over 5 years, $149 thousand was assigned to Customer Relationships which are subject to amortization over 10 years; $2 thousand was assigned to a non-compete agreement that is subject to amortization over 2 years, and $95 thousand was assigned to the Brand that is subject to amortization over 3 years. All of the intangible assets are amortizable for income tax purposes.

The Company incurred $109 thousand and $842 thousand of acquisition / non-recurring expenses consists in connection with the acquisition and integration of the VendScreen business for the fiscal years ended June 30, 2017 and 2016, respectively. These costs were included within Selling, general and administrative expenses on the Consolidated Statement of Operations.

The acquired business contributed net revenues of $1.2 million during the fiscal year ended June 30, 2016. ASC 805, Business Combinations, requires the disclosure of additional information including the amounts of earnings of the acquiree since the acquisition date included in the consolidated income statement, and the revenue and earnings of the combined entity as though the business combination that occurred during the current year had occurred at the beginning of the prior annual reporting period (supplemental pro forma information). The disclosure of such information was impractical and is not provided as (1) the acquiree had been integrated into the Company’s operation such that discreet financial information of the acquiree could not be determined, and (2) the financial records of the acquiree were not adequate to allow the preparation of supplemental pro forma information.