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Acquisition Of Strive Talent, Inc. | 9 Months Ended
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May 31, 2021
Acquisition Of Strive Talent, Inc. [Abstract] |
Acquisition Of Strive Talent, Inc. | NOTE 2 – ACQUISITION OF STRIVE TALENT, INC. On April 26, 2021 (the Closing Date), through our wholly-owned subsidiary Franklin Covey Client Sales, Inc., we purchased all of the issued and outstanding stock of Strive Talent, Inc. (Strive), a San Francisco-based technology company which has developed and markets an innovative learning deployment platform. The Strive platform is expected to enable the seamless integration and deployment of our content, services, technology, and metrics to deliver behavioral impact at scale, primarily through the Company’s All Access Pass subscription. The aggregate consideration for the purchase of Strive may total up to $20.0 million and is comprised of the following: Approximately $10.6 million paid in cash on the Closing Date of the transaction, including $1.0 million placed in escrow for 18 months from the Closing Date to serve as the first source of funds to satisfy certain indemnification obligations of Strive. Approximately $4.2 million payable in equal cash payments on the first five anniversaries of the Closing Date. Approximately $1.0 million will be paid 18 months following the Closing Date to stockholders and option holders of Strive who are still employed by the Company or its affiliates as of such 18-month date, subject to certain exceptions. The bonus payments are forfeit by the individuals if they voluntarily terminate their employment with the Company prior to the 18-month anniversary of the purchase. These payments may be made in either cash or shares of our common stock at our sole discretion. A maximum of approximately $4.3 million may be earned by the former principal owner of Strive over a five-year period ending in May 2026. The total value of this consideration is contingent upon sales and growth of the All Access Pass subscription and subscription services revenues during the five-year period measurement ending in May 2026. The contingent earn out payments are conditional upon the continued employment of former principal owner of Strive over the first four years of the measurement period. These payments may be made in either cash or shares of our common stock at our sole discretion. As described above, included in the purchase agreement for the acquisition of Strive are additional contingent payments of up to $5.3 million subject to continued employment of the primary seller and certain employees. These payments are expensed as earned and may be settled by us, at our sole discretion, in shares of our common stock or cash. Based on the relevant accounting literature for business acquisitions, the initial purchase price of Strive is comprised of the following:
Cash paid at closing |  | $ | 10,554
Notes payable |  |  | 3,766
Total purchase price |  | $ | 14,320
We have included the operating results of Strive in our financial statements since the Closing Date. However, the acquisition of Strive had an immaterial impact on our results of operations for the quarter ended May 31, 2021. For the twelve months ended December 31, 2020, Strive had revenues of $1.3 million (unaudited) and an operating loss of $(1.1) million (unaudited). Strive does not meet the definition of a “significant subsidiary” as specified by Regulation S-X of the Securities and Exchange Commission. The major classes of assets and liabilities to which we have preliminarily allocated the purchase price were as follows (in thousands):
Cash acquired |  | $ | 345
Accounts receivable |  |  | 154
Prepaid and other current assets |  |  | 56
Property and equipment |  |  | 13
Intangible assets |  |  | 7,976
Goodwill |  |  | 7,000
Assets acquired |  |  | 15,544
Deferred revenue |  |  | (52)
Accrued liabilities |  |  | (135)
Deferred income tax liability |  |  | (1,037)
Notes payable, current portion |  |  | (836)
Notes payable, long-term |  |  | (2,930)
Liabilities assumed |  |  | (4,990)
|  | $ | 10,554
The preliminary allocation of the purchase price to the intangible assets acquired was as follows (in thousands):
|  |  |  |  | Weighted Average
Description |  |  | Amount |  | Life
Non-compete agreements |  | $ | 171 |  | 2 years
Content |  |  | 389 |  | 5 years
Customer relationships |  |  | 764 |  | 3 years
Tradename |  |  | 889 |  | 5 years
Internally developed software |  |  | 5,763 |  | 8 years
|  | $ | 7,976 |  |
The goodwill generated by the Strive acquisition is primarily attributable to the technology, content, and software development capabilities that complement our existing All Access Pass subscription and has not yet been allocated to our operating segments. None of the goodwill or intangible assets generated by the acquisition of Strive are expected to be deductible for income tax purposes. Acquisition costs totaled approximately $0.3 million and were recorded in selling, general, and administrative expense in the accompanying condensed consolidated statements of operations.

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