Quarterly report pursuant to Section 13 or 15(d)

Acquisitions

v3.10.0.1
Acquisitions
9 Months Ended
Sep. 30, 2018
Business Combinations [Abstract]  
Acquisition

Note 6. Acquisitions

Antenna Plus

On April 27, 2017, the Company completed the acquisition of substantially all of the assets of Antenna Plus.  Antenna Plus is a supplier of antenna-based solutions for mobile and automotive fleet applications for government, public safety, and IOT markets.  The acquisition provides leverage for the Company’s existing products into several new markets, including the fast-growing automotive fleet and industrial IOT space.

The transaction was completed pursuant to an Asset Purchase Agreement with MCA Financial Group, Ltd., acting as the court-appointed receiver for Antenna Plus.  Upon the closing of the transaction, the Company paid to Antenna Plus total consideration of approximately $6.3 million in cash, net of post-closing working capital adjustments.  In addition, the Company assumed certain contracts and other liabilities of Antenna Plus, as expressly set forth in the Asset Purchase Agreement.

The following table shows the allocation of the purchase price for Antenna Plus to the acquired identifiable assets, liabilities assumed and goodwill:

 

Consideration:

 

 

 

 

Cash

 

$

6,383,500

 

Working capital adjustments

 

 

(34,770

)

Fair value of total consideration transferred

 

$

6,348,730

 

Recognized amounts of identifiable assets acquired and liabilities assumed:

 

 

 

 

Accounts receivable

 

$

584,390

 

Inventory

 

 

432,770

 

Fixed assets

 

 

402,958

 

Intangible assets

 

 

2,600,000

 

Current liabilities

 

 

(121,879

)

Total identifiable net assets acquired

 

 

3,898,239

 

Goodwill

 

 

2,450,491

 

Total

 

$

6,348,730

 

Goodwill was primarily attributable to the anticipated synergies and economies of scale expected from the operations of the combined business.  The synergies include certain cost savings, operating efficiencies, and other strategic benefits projected to be achieved as a result of the acquisition.  Goodwill is expected to be deductible for tax purposes.

Sales associated with the acquired Antenna Plus assets was $1.8 million and $3.3 million for the three and nine months ended September 30, 2017, respectively.  Cost of goods sold associated with the acquired Antenna Plus assets was $0.8 million and $1.4 million for the three and nine months ended September 30, 2017, respectively.  Net income associated with the acquired Antenna Plus assets was $308,750 and $11,176 for the three and nine months ended September 30, 2017, respectively.  

Unaudited Pro Forma Information

The following unaudited pro forma financial information presents combined results of operations for each of the periods presented, as if Antenna Plus had been acquired as of the beginning of the fiscal year 2017.  The pro forma information includes adjustments to amortization and depreciation for intangible assets and property, plant and equipment acquired.  The pro forma data are for informational purposes only and are not necessarily indicative of the consolidated results of operations of the combined business had the acquisition actually occurred at the beginning of fiscal year 2017 or of the results of future operations of the combined business.  Consequently, actual results will differ from the unaudited pro forma information presented below:

 

 

 

Three Months Ended September 30,

 

 

Nine Months Ended September 30,

 

 

 

2017

 

 

2017

 

Pro forma sales

 

$

12,448,436

 

 

$

38,982,040

 

Pro forma income from operations

 

$

200,632

 

 

$

1,047,435

 

Pro forma net income

 

$

234,353

 

 

$

1,097,806

 

 

Skycross

On December 17, 2015, the Company executed and entered into an asset purchase agreement for certain North American assets of Skycross, Inc. (Skycross), a manufacturer of advanced antenna and radio-frequency solutions.  In addition to the $4.0 million paid up front, the purchase price also included a contingent consideration arrangement.  The $1.0 million of contingent consideration is payable upon the later of (i) the expiration of the Transition Services Agreement between the Company and Skycross which defined transition services to be provided by Skycross to the Company and (ii) the date on which the Company received copies of third party approvals with respect to each customer and program that was purchased.  The potential undiscounted amount of all future payments that could be required to be paid under the contingent consideration arrangement was between zero and $1.0 million.  The fair value of the contingent consideration was estimated by applying the income approach.  The income approach is based on estimating the value of the present worth of future net cash flows.  During the nine months ended September 30, 2018, the Company and Skycross came to an agreement that the Company would pay Skycross $375,000 to settle all outstanding balances between the parties, which included $1.0 million of deferred purchase price and $125,802 due to Skycross and $362,069 of accounts receivable from Skycross.  The settlement with Skycross resulted in the recognition of a gain on deferred purchase price liability of $388,733 during the nine months ended September 30, 2018 in the unaudited condensed statements of operations.