Acquisition of Visimid Technologies	6 Months Ended
Dec. 31, 2023
Acquisition of Visimid Technologies
Acquisition of Visimid Technologies	3. Acquisition of Visimid Technologies In July 2023, the Company acquired Liebert Consulting LLC, dba Visimid Technologies (“Visimid”), pursuant to a Membership Interest Purchase Agreement dated as of July 25, 2023 (the “Acquisition Date”). Part of the Company’s growth strategy is to identify appropriate opportunities that would enhance our profitable growth through acquisition. Visimid is an engineering and design firm specializing in thermal imaging, night vision and internet of things (“IOT”) applications. Visimid provides design and consulting services for Department of Defense (“DoD”) contractors, commercial and industrial customers, and original equipment manufacturers (“OEMs”) for original new products. Visimid’s core competency is developing and producing custom thermal and night vision cores. We believe that Visimid’s capabilities are aligned with our strategy to focus on engineered solutions. The Company’s unaudited condensed consolidated financial statements reflect the financial results of Visimid beginning on the Acquisition Date. The purchase price included $1 million in cash, $1,550,000 of restricted stock, $150,000 of assumed bank debt, and an earnout which is contingent upon the award and completion of a specific customer contract. Of the restricted stock payable as part of the purchase price, $150,000 (81,610 shares) was issued at closing, with the balance to be issued in four equal installments of $350,000 each, on January 1, 2024, July 1, 2024, January 1, 2025 and July 1, 2025. The number of shares is based on the average closing price of the Company’s Class A common stock, as reported by Bloomberg, for the five trading days prior to each stock issuance. The total purchase price, net of cash acquired and including the estimated potential earnout, is approximately $2.7 million, based on present values as of the Acquisition Date. Of this amount, $600,000 was paid at closing, $150,000 cash was paid in October 2023 per the terms of the purchase agreement, and the remaining cash and stock payments, including the estimated potential earnout, have been accrued and are included in Accrued liabilities and Accrued liabilities, noncurrent in the accompanying unaudited Condensed Consolidated Balance Sheet as of December 31, 2023. The estimated fair values of the assets acquired and liabilities assumed were recorded as of the Acquisition Date. The Company is in the process of finalizing third-party valuations of certain intangible assets; thus, the provisional measurements of intangible assets and goodwill are subject to change. As part of the preliminary valuation analysis, the Company identified intangible assets, including customer relationships, customer backlog, trade secrets and trademarks. The customer backlog, customer relationships, trade secrets and trademarks were determined to have estimated values of approximately $464,000, $122,000, $925,000 and $442,000, respectively, and estimated useful lives of 1 year for customer backlog, and 10 years for customer relationships, trade secrets and trademarks. The estimated fair value of identifiable intangible assets is determined primarily using the “income approach”, which requires a forecast of all future cash flows. The goodwill recognized is attributable primarily to expected synergies and the assembled workforce of Visimid. The goodwill is expected to be deductible for income tax purposes. As of December 31, 2023, an adjustment of $2.2 million was made to decrease the initially recognized amount of goodwill to reflect changes in the estimated fair value of the identifiable intangible assets purchased in the acquisition. For the three and six months ended December 31, 2023, the Company incurred approximately $13,000 and $97,000, respectively, in acquisition costs which are included in the unaudited Condensed Consolidated Statements of Comprehensive Income in the line item entitled “Selling, general and administrative.” This is in addition to the previously disclosed $140,000 in acquisition costs which were recorded during the three months ended June 30, 2023. Prior to the Acquisition, the Company had a preexisting relationship with Visimid. The Company contracted Visimid for engineering services and purchased infrared camera cores from Visimid on an arms’ length basis. The Company had also partnered with Visimid for the development of the Mantis camera.

Acquisition of Visimid Technologies

6 Months Ended

Dec. 31, 2023

3. Acquisition of Visimid Technologies

In July 2023, the Company acquired Liebert Consulting LLC, dba Visimid Technologies (“Visimid”), pursuant to a Membership Interest Purchase Agreement dated as of July 25, 2023 (the “Acquisition Date”).

Part of the Company’s growth strategy is to identify appropriate opportunities that would enhance our profitable growth through acquisition. Visimid is an engineering and design firm specializing in thermal imaging, night vision and internet of things (“IOT”) applications. Visimid provides design and consulting services for Department of Defense (“DoD”) contractors, commercial and industrial customers, and original equipment manufacturers (“OEMs”) for original new products. Visimid’s core competency is developing and producing custom thermal and night vision cores. We believe that Visimid’s capabilities are aligned with our strategy to focus on engineered solutions.

The Company’s unaudited condensed consolidated financial statements reflect the financial results of Visimid beginning on the Acquisition Date. The purchase price included $1 million in cash, $1,550,000 of restricted stock, $150,000 of assumed bank debt, and an earnout which is contingent upon the award and completion of a specific customer contract. Of the restricted stock payable as part of the purchase price, $150,000 (81,610 shares) was issued at closing, with the balance to be issued in four equal installments of $350,000 each, on January 1, 2024, July 1, 2024, January 1, 2025 and July 1, 2025. The number of shares is based on the average closing price of the Company’s Class A common stock, as reported by Bloomberg, for the five trading days prior to each stock issuance.

The total purchase price, net of cash acquired and including the estimated potential earnout, is approximately $2.7 million, based on present values as of the Acquisition Date. Of this amount, $600,000 was paid at closing, $150,000 cash was paid in October 2023 per the terms of the purchase agreement, and the remaining cash and stock payments, including the estimated potential earnout, have been accrued and are included in Accrued liabilities and Accrued liabilities, noncurrent in the accompanying unaudited Condensed Consolidated Balance Sheet as of December 31, 2023.

The estimated fair values of the assets acquired and liabilities assumed were recorded as of the Acquisition Date. The Company is in the process of finalizing third-party valuations of certain intangible assets; thus, the provisional measurements of intangible assets and goodwill are subject to change. As part of the preliminary valuation analysis, the Company identified intangible assets, including customer relationships, customer backlog, trade secrets and trademarks. The customer backlog, customer relationships, trade secrets and trademarks were determined to have estimated values of approximately $464,000, $122,000, $925,000 and $442,000, respectively, and estimated useful lives of 1 year for customer backlog, and 10 years for customer relationships, trade secrets and trademarks. The estimated fair value of identifiable intangible assets is determined primarily using the “income approach”, which requires a forecast of all future cash flows.

The goodwill recognized is attributable primarily to expected synergies and the assembled workforce of Visimid. The goodwill is expected to be deductible for income tax purposes. As of December 31, 2023, an adjustment of $2.2 million was made to decrease the initially recognized amount of goodwill to reflect changes in the estimated fair value of the identifiable intangible assets purchased in the acquisition.

For the three and six months ended December 31, 2023, the Company incurred approximately $13,000 and $97,000, respectively, in acquisition costs which are included in the unaudited Condensed Consolidated Statements of Comprehensive Income in the line item entitled “Selling, general and administrative.” This is in addition to the previously disclosed $140,000 in acquisition costs which were recorded during the three months ended June 30, 2023.

Prior to the Acquisition, the Company had a preexisting relationship with Visimid. The Company contracted Visimid for engineering services and purchased infrared camera cores from Visimid on an arms’ length basis. The Company had also partnered with Visimid for the development of the Mantis camera.