Let me take a shot at this Mike.

First of all, the board should be focused on the cost of the goodwill value of this purchase which is $245,000.  This amount will be amortized over some period of time to be discussed with our outside auditors, but let’s say it is only 3 years.  Given the performance of the manuals, assuming absolutely no changes in volume after we buy them, the ROI is roughly 2-ish years. 

The $100,000 on inventory is meaningless as it fits very neatly into what we spend on building inventory of our own books today.  If this agreement included no inventory because they had sold out of all the books, we’d go right on producing inventory and selling it like we do with every other title.  If the inventory was very large, say on the order of $1 million, then the board would need to be very concerned about our ability to sell off the inventory within the period of time each book aligns with its respective FCC question pool.  This is not the case.

The additional costs that are being contemplated such as legal review of an agreement and the shipping costs of the books are all ‘cost of doing business’ and again should not be a concern of the board within the scope of this opportunity, especially given the small amount of money these expenses entail.

In terms of business performance, on a macro level, here is 2019-2021 for which we do have numbers from the first round of talks with them:

2019      ARRL     Tech      24,029 units

              GW        Tech      7,362 units

              ARRL     Gen       10,805 units

              GW        Gen       2,925 units

              ARRL     Extra     5,577 units

              GW        Extra     1,262 units

              ARRL     TOTAL   40,411

              GW        TOTAL   11,549

2020      ARRL     Tech      21,823 units

              GW        Tech      10,112 units

              ARRL     Gen       10,044 units

              GW        Gen       3,928 units

              ARRL     Extra     6,494 units

              GW        Extra     1,629 units

              ARRL     TOTAL   38,361

              GW        TOTAL   15,669

2021      ARRL     Tech      21,911 units

              GW        Tech      5,658 units

              ARRL     Gen       10,369 units

              GW        Gen       3,492 units

              ARRL     Extra     8,026 units

              GW        Extra     2,017 units

              ARRL     TOTAL   40,306

              GW        TOTAL   11,167

He did not provide 2022 and 2023 actuals preferring to only make those available during due diligence.  As you can see, on average, he’s around 11,000 books versus our 40,000 and there is evidence of the market performing with zero-sum characteristics.  We have no reason to believe that there is any risk to continuing with this trend.

I’m not going to suggest for a minute that Gordon West has the historical or legacy value of a name like Hiram Percy Maxim.  As discussed at the A&F meeting, this opportunity was originally pursued to buy market share and associated earnings.  There is no intent to turn this into protecting someone’s legacy.  That said, and I’m sure you know this from your Marketing experience, the BRAND Gordon West will far outlive the MAN Gordon West.  If that’s what our intention is.  And it is.  We will be working to get much greater visibility to Gordon, have him be more engaged at the club level regarding them conducting courses for licensing, being involved with our future live license training sessions, and moving forward with the assurance that the book content is not dependent on Gordon.  Eric Nichols, who we have worked with in the past as an author, will be providing most/all of the content for the manuals going forward.  So we are managing the short term risks pretty well with a view to the longer term by treating the name Gordon West as a BRAND. 

I don’t think life insurance at his age and with his limited involvement in the current books is warranted or could even be underwritten.  Corporate Keyman policies are usually written based on some multiple of salary.  Gordon is not an employee.  If the board felt like this is something we need to investigate, we certainly can, but I believe I would have a tough time giving compelling data to an underwriter that would support such a policy.

As I understand it, all of us are headed into uncharted waters for this organization.  We have written agreements to acquire the rights to publish a newsletter (NCJ), and the rights to provide archival access to another amateur radio magazine on our CD’s (Ham Radio), but I cannot find anything that shows that the CEO brought a business opportunity to the board and have it approved.  Given the size and scope of our book business, I view this as a very small purchase, that is low risk, that will provide in excess of $100,000/annum to our bottom line, and that gives us the opportunity to use the potential of this “Instructor Series” of books legs into other aspects of education under the Gordon West brand.

I hope this information is helpful.  And I reiterate: confidentiality is an absolute on this as we are under and NDA.

Thanks

David