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Acquisition | 9 Months Ended
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Sep. 30, 2020
Acquisition |
Acquisition | 6. Acquisition: On April 30, 2020, pursuant to a Stock Purchase Agreement dated April 20, 2020, CLIMB Channel Solutions (Canada) Inc. (“Buyer”), a newly-formed indirectly wholly-owned subsidiary of the Company completed the purchase of Interwork Technologies Inc., a Delaware corporation (“Interwork US”) and Interwork Technologies Inc., a corporation incorporated under the laws of the Province of Ontario, Canada (“Interwork Canada”). Buyer acquired Interwork US and Interwork Canada for an aggregate purchase price of $5 million Canadian dollar (equivalent to $3.6 million USD), subject to certain working capital adjustments, paid at closing plus a potential post-closing $1.1 million Canadian dollar (equivalent to $0.8 million USD) earn-out. The allocation of the purchase price was based upon the estimated fair value of Interwork US and Interwork Canada’s net tangible and identifiable intangible assets as of the date of the acquisition. The transaction was accounted for under the purchase method of accounting. The Company incurred acquisition related costs of approximately $0.3 million and $1.0 million during the three and nine months ended September 30, 2020, respectively. These expenses relate to costs incurred in conjunction with the acquisition of Interwork US, Interwork Canada and CDF Group Limited (see Note 19) and are reflected in the accompanying three and nine months ended September 30, 2020 Condensed Consolidated Statements of Earnings. The financial position and operating results of Interwork US and Interwork Canada are included in the Company’s condensed consolidated financial statements from the date of acquisition. The Company recorded net revenue for Interwork US and Interwork Canada of approximately $2.6 million and $6.3 million during the three and nine months ended September 30, 2020. The impact of the acquisition’s preliminary purchase price allocations on the Company’s consolidated balance sheet and the acquisition date fair value of the total consideration transferred were as follows. The Company is in the process of obtaining third-party valuations of certain intangible assets; thus the provisional measurements of intangible assets, goodwill and deferred income taxes are subject to change:
(in thousands) |  |  |
Cash |  | $ | 1,009
Trade accounts receivable |  |  | 9,534
Other current assets |  |  | 628
Intangible assets |  |  |
Vendor relationships (14-year weighted average useful life) |  |  | 3,797
Non-compete (1-year useful life) |  |  | 8
Goodwill |  |  | 3,857
Other assets |  |  | 117
Accounts payable and other current liabilities |  |  | (15,051)
Deferred income tax liabilities |  |  | (389)
Taxes payable |  |  | (600)
Net assets |  | $ | 2,910
(in thousands) |  |  |
Supplementary information: |  |  |
Cash paid to sellers |  | $ | 2,150
Contingent earn-out |  |  | 760
Total purchase consideration |  | $ | 2,910
Cash paid to sellers |  |  | 2,150
Cash acquired in acquisition |  |  | (1,009)
Net cash paid for acquisition |  | $ | 1,141
Intangible assets are comprised of approximately $3.8 million of vendor relationships with a weighted average amortization period of 13.7 years, representing the expected period of benefits, of which $2.3 million is deductible for Canadian income tax purposes. Goodwill, which was allocated to the Climb Channel Solutions segment, is the excess of the consideration transferred over the net assets recognized and represents the expected revenue and cost synergies of the combined company and assembled workforce. Goodwill recognized as a result of the acquisition is not deductible for income tax purposes. The purchase consideration includes approximately $0.8 million of potential earn-out consideration if certain targets are achieved, payable in cash. As of September 30, 2020, the Company reassessed the earn-out liability and increased the fair value of the earn-out liability by less than $0.1 million, with the adjustment recognized within selling, general and administrative expenses during the three and nine months ended September 30, 2020. The earn-out liability is included in accounts payable and accrued expenses as of September 30, 2020 as payment would be due in the third quarter of 2021. The preliminary allocation of the purchase price for the acquisition was allocated based on information that is currently available. The Company's estimates and assumptions underlying the initial allocations is subject to the collection of information necessary to complete its allocations within the measurement period, which is up to one year from the acquisition date.

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