How frequently do you see a line item for “Gain on domain names repurchase agreement” on a company income statement?
EasyLink Services (NASDAQ: EASYE) has such a line item on its recently filed 10-Q. The company reported a one time gain of $1.9M from the transaction.
This caught my attention and I did a bit of research:
In December 2004 EasyLink signed a deal with outgoing executive Gerald Gorman in which EasyLink sold him a number of premium domains. These domains included Asia.com, Singapore.com, India.com, NewDelhi.com, and many others. Gorman paid the company $1M plus agreed to a conversion of some of his stock and a severance plan. Gorman was also required to pay EasyLink 15% of all revenue from the domains in years two and three, and 10% in years four and five.
EasyLink maintained and option to buy back the domains from Gorman for $4,500,000. My understanding of this $1.9M gain is that EasyLink agreed to cancel the option agreement early. This guarantees Gorman won’t have to sell the domains.
This is one of the more interesting domain name agreements I’ve seen. From the data provided it’s unclear who got the better deal.
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