2.	Acquisition of O Olive

March 1, 2017,

the Company

purchased substantially all of the assets of O Olive for

$2.5

million in cash plus contingent consideration of up to

$7.5

million over the next

three

years based upon O Olive achieving certain earnings before interest, taxes, depreciation and amortization (“EBITDA”) targets. O Olive, founded in

1995,

is based in Petaluma, California, and produces specialty olive oils and wine vinegars. Its products are sold in natural food, conventional grocery and mass retail stores, primarily in the United States and Canada.

The

potential earn out payment up to

$7.5

million is based on O Olive’s cumulative EBITDA over the Company’s fiscal years

2018

through

2020.

At the end of each fiscal year, beginning in fiscal year

2018,

the former owners of O Olive will earn the equivalent of the EBITDA achieved by O Olive for that fiscal year up to

$4.6

million over the

three

year period. The former owners can then earn an additional

$2.9

million on a dollar for dollar basis for exceeding

$6.0

million of cumulative EBITDA over the

three

year period. During the

fourth

quarter of fiscal year

2017,

the Company performed, with the assistance of a

third

party appraiser, an analysis of O Olive’s projected EBITDA over the next

three

years. Based on this analysis the Company recorded a

$5.9

million liability as of

May 28, 2017,

representing the present value of the expected earn out payments. For this analysis, the Company assumed that the maximum earn out of

$7.5

million would be paid over the

three

year period with over half being earned in fiscal year

2020.

e operating results of O Olive are included in the Company’s financial statements beginning

March 1, 2017

, in the Other segment. Included in the Company’s results for O Olive for the fiscal year

2017

was

$773,000

revenues and a pre-tax loss of

$231,000.

Intangible Assets

The Company identified

two

intangible assets

in connection with the O Olive acquisition: trade names and trademarks valued at

$1.6

million, which are considered to be indefinite life assets and therefore, will

not

be amortized; and customer base valued at

$700,000

with an

eleven

year useful life. The trade name/trademark intangible asset was valued using the relief from royalty valuation method and the customer relationship intangible asset was valued using the excess earnings method.

Goodwill

The excess of the consideration transferred over the fair

values assigned to the assets acquired and liabilities assumed was

$5.2

million on the closing date, which represents the goodwill amount resulting from the acquisition which can be attributable to O Olive’s long history, future prospects and the expected operating synergies with Apio’s salad business and distribution and logistics capabilities. The Company will test goodwill for impairment on an annual basis or sooner, if indicators of impairment exist.

Acquisition-Related Transaction Costs

The

Company recognized

$159,000

of acquisition-related expenses that were expensed in the year ended

May

28,

2017

and are included in selling, general and administrative expenses in the Consolidated Statements of Comprehensive Income (Loss) for the year ended

May

28,

2017.

These expenses included legal, accounting and tax service fees and appraisals fees.