RE: RE: RE: Double From Here? (the flip side) For the sake of completeness, I should point out the flip side of this transaction.
If the energy division fails to meet the performance targets over the next 3 yrs in any given year (ie fails to earn a minimum of $5.5 million in the year), then no earn-out bonus is payable for that year. For example, if Bertram fails to make a total of $5.5 million this year, then Energold will be able to release the $6.6 million (set aside in Q1) back to earnings. (This is highly unlikely, but theoretically possible)
If, for some reason, Bertram fails to meet its performance targets in any of the 3 years, EGD will end up having purchased $30 million in assets (according to the auditors in Q4!) for $15 million.
So it's a pretty decent deal for EGD no matter how you slice it.
I hate to complicate things, but I should remind everyone of 2 other things --
1) EGD had already taken a $3 million charge in Q4 against the earn-out bonuses (making the total set aside $9.6 million over the past 2 quarters) and
2) The 1 year periods that the earn-out bonuses are based on run from May 1 to April 30, which is not in sync with EGD's fiscal year, so a little calculation is required to line up the expensed amounts with the appropriate period.
All comments welcome,,
GL all.