5.	Acquisitions

Mechanical Power Conversion, LLC

On December 21, 2018, the Company completed the acquisition of certain assets and assumption of certain liabilities from Mechanical Power Conversion, LLC (“E&M”), a privately held company operating as E&M Power and engaged in the design and manufacture of advanced power emulators (AC and DC) and custom power electronic products, based in Binghamton, New York. The addition of new products from E&M is expected to drive the Company’s revenue potential and increase its product portfolio. Future activity of this business will be recorded via D&V Electronics USA, operating as the Company’s registered DBA (Doing Business As) entity. The acquisition was consummated pursuant to an asset purchase agreement for an initial cash purchase price of $4,417,000, plus an additional working capital adjustment of $42,000 paid to the former owners of E&M. In addition, the Company is contingently obligated to make additional payments to the former owners of E&M up to an aggregate of $5,200,000 over the next 2-3 years. The initial fair value of the contingent consideration as of the acquisition date was $3,560,000 determined using a probability weighted method and a Monte Carlo Simulation model.

Identified intangible assets acquired have the following useful lives: (i) 5 years for developed technology, (ii) 8 years for customer relationships, and (iii) 6 months for order backlog. The goodwill recorded in connection with the acquisition of E&M is deductible for income tax purposes. The Company incurred $355,000 in acquisition costs during the year ended March 31, 2019, which were recorded in general and administrative expenses. The assets and results of operations of E&M were not significant to the Company’s consolidated financial position or results of operations, and thus pro forma information is not presented.

The consideration transferred and purchase price allocation is as follows:

	Provisional Estimated Fair Value			Subsequent Changes in			Final Estimated Fair Value
	December 21, 2018			Valuation Estimates			March 31, 2019
Consideration
Cash consideration	$	4,417,000		$	-		$	4,417,000
Working capital adjustment		-			42,000			42,000
Contingent consideration		3,560,000			-			3,560,000
Total	$	7,977,000		$	42,000		$	8,019,000

Purchase price allocation
Accounts receivable, net of allowances	$	985,000		$	308,000		$	1,293,000
Inventory		1,683,000			(59,000	)		1,624,000
Prepaid expenses and other current assets		14,000			-			14,000
Plant and equipment		97,000			-			97,000
Order backlog		370,000			(50,000	)		320,000
Customer relationships		2,630,000			40,000			2,670,000
Developed technology		2,660,000			-			2,660,000
Accounts payable and accrued liabilities		(202,000	)		-			(202,000	)
Customer deposits		(1,111,000	)		-			(1,111,000	)
Fair value of net assets acquired		7,126,000			239,000			7,365,000
Goodwill	$	851,000		$	(197,000	)	$	654,000

Dixie Electric, Ltd.

On January 9, 2019, the Company completed the acquisition of all the equity interests of Dixie Electric, Ltd (“Dixie”), a privately held manufacturer and remanufacturer of alternators and starters for automotive aftermarket non-discretionary replacement parts for heavy-duty truck, industrial, marine and agricultural applications, based in Ontario, Canada. The addition of Dixie is expected to expand the Company’s heavy duty product portfolio. The initial cash purchase price of $8,049,000, which was reduced by a provisional working capital adjustment of $71,000, was paid to the former owners of Dixie. In addition, the Company is contingently obligated to make additional payments to the former owners of Dixie up to $1,130,000 over the next two years. The preliminary fair value of the contingent consideration as of the acquisition date was $840,000 determined using a Monte Carlo Simulation model.

Trademarks acquired will have useful life of 3 years. The Company incurred $576,000 in acquisition costs during the year ended March 31, 2019, which were recorded in general and administrative expenses. The assets and results of operations of Dixie, and in the aggregate with the E&M acquisition, were not significant to the Company’s consolidated financial position or results of operations, and thus pro forma information is not presented.

The consideration transferred and provisional purchase price allocation is as follows:

	Provisional Estimated Fair Value
	January 9, 2019
Consideration
Cash consideration	$	8,049,000
Working capital adjustment		(71,000	)
Contingent consideration		840,000
Total	$	8,818,000
Purchase price allocation
Cash	$	1,331,000
Accounts receivable		2,838,000
Inventory		6,005,000
Prepaid expenses and other current assets		239,000
Remanufactured cores held at customers' locations		155,000
Plant and equipment		1,282,000
Trademarks		130,000
Accounts payable and accrued expenses		(2,097,000	)
Customer finished goods returns accrual		(221,000	)
Customer deposits		(824,000	)
Other liabilities		(20,000	)
Fair value of net assets acquired	$	8,818,000