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BUSINESS ACQUISITIONS | 12 Months Ended
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Dec. 28, 2019
BUSINESS ACQUISITIONS [Abstract] |
BUSINESS ACQUISITIONS | 2. B usiness Acquisitions Load N Lock Systems, Inc. Effective June 1, 2018 the Company acquired certain assets of Load N Lock Systems, Inc. (“Load N Lock”), including accounts receivable, inventories, furniture, fixtures and equipment, intellectual property rights, and assumed certain liabilities and rights existing under all sales and purchase agreements. Load N Lock provides innovative truck cap and tonneau cover locks that keep truck contents safe and secure. Load N Lock developed and patented the first integrated power lock for the automotive industry and has developed numerous truck cap and tonneau cover lock related products. Load N Lock provides its innovative products and solutions to the automotive industry’s leading manufacturers of truck and automotive accessories in the United States and Asia. The above acquisition was accounted for under ASC 805 – Business Combinations. Load N Lock has been included in the Security Products segment of the Company from the date of the acquisition. The cost of the acquisition of Load N Lock was approximately $4,995,000. The excess of the cost of Load N Lock over the fair market value of the net definitive tangible and intangible assets acquired was $2,694,700, which has been recorded as goodwill. In connection with the above acquisition, the Company recorded the following intangible assets:
Asset Class/Description |  | Amount |  |  | Weighted-average Life in Years |
Patents, technology, and licenses |  |  |  |  |  |
Customer relationships |  | $ | 689,675 |  |  |  | 8.3 |
Intellectual property |  |  | 586,762 |  |  |  | 8.3 |
Non-compete agreements |  |  | 52,570 |  |  |  | 8.3 |
|  | $ | 1,329,007 |  |  |  | 8.3 |
Big 3 Precision Products On August 30, 2019, the Company and its newly-formed wholly-owned subsidiary, Eastern Engineered Systems, Inc., a Delaware corporation (“EES”) entered into a Stock Purchase Agreement (the “Stock Purchase Agreement”) with Big 3 Holdings, LLC, a Delaware limited liability company (“Seller”), Big 3 Precision Mold Services, Inc., a Delaware corporation and wholly-owned subsidiary of Seller (“Big 3 Mold”), Big 3 Precision Products, Inc., a Delaware corporation and wholly owned subsidiary of Seller (“Big 3 Products”), Industrial Design Innovations, LLC, a Delaware limited liability company and wholly-owned subsidiary of Big 3 Products (“Design Innovations”), Sur-Form, LLC, a Delaware limited liability company and wholly-owned subsidiary of Big 3 Products (“Sur-Form”), Associated Toolmakers Limited, a limited company formed under the laws of England and Wales and wholly-owned subsidiary of Big 3 Mold (“Associated” and together with Big 3 Mold, Big 3 Products, Design Innovations and Sur-Form, collectively “Big 3 Precision”), TVV Capital Partners III, L.P., a Delaware limited partnership, TVV Capital Partners III-A, L.P., a Delaware limited partnership, Alan Scheidt, Todd Riley, Clinton Hyde, and Big 3 Holdings, LLC, a Delaware limited liability company, as the initial Seller Representative (the “Seller Representative”). On August 30, 2019, pursuant to the Stock Purchase Agreement, the Company, through EES, acquired all of the outstanding equity interests of Big 3 Precision Products and Big 3 Mold Services, and indirectly through them, all of the outstanding equity interests in Design The Innovations, Sur-Form and Associated, for an adjusted purchase cash price of $81.2 million. The Big 3 acquisition was financed with a combination of $2.1 million of cash on hand, a credit agreement (the “Credit Agreement”) with Santander Bank, N.A., for itself and, People’s United Bank, National Association and TD Bank, N.A. as lenders, providing for a $100.0 million term loan and a $20.0 million revolving credit line. In connection with the Credit Agreement, the Company also used its cash to repay the remaining balance (approximately $19.1 million) of its then outstanding term loan with People’s United Bank National Association. Through its two divisions, Big 3 Products and Big 3 Mold, Big 3 Precision serves diverse markets including truck, automotive, plastic packaging products, packaged consumer goods and pharmaceuticals. In particular, Big 3 Precision Products works with leading manufacturers to design and produce custom returnable packaging to integrate with their assembly processes. Big 3 Mold is a global leader in the design and manufacture of blow mold tools. The following table summarizes the consideration paid for Big 3 Precision and the amounts of the assets acquired and liabilities assumed recognized at the acquisition date, as well as the fair value at the acquisition date. At August 30, 2019:
Consideration |  |  |
Cash |  | $ | 338,714 |
Cash proceeds from debt |  |  | 80,817,039 |
|  | $ | 81,155,753 |
Recognized amounts of identifiable assets acquired and liabilities assumed |  |  |  |
Accounts receivable |  | $ | 13,649,937 |
Inventory |  |  | 3,240,382 |
Prepaid and other assets |  |  | 32,268 |
Property plant and equipment |  |  | 13,770,170 |
Other noncurrent assets |  |  | 1,337,337 |
Other intangible assets |  |  | 21,054,000 |
Current liabilities |  |  | (4,910,384 | )
Deferred revenue |  |  | (1,585,709 | )
Income tax payable |  |  | (2,039,117 | )
Note payable |  |  | (375,379 | )
Deferred tax liabilities |  |  | (7,114,732 | )
Total identifiable net assets |  |  | 37,058,773 |
Goodwill |  |  | 44,096,980 |
|  | $ | 81,155,753 |
Accounts Receivable Acquired receivables are amounts due from customers, and are stated at net realizable value. Inventories The estimated fair value of inventories acquired, which is at net realizable value based upon third party valuation specialist. Property, Plant and Equipment The property plant and equipment are estimated at net realizable value at the time of the acquisition based upon third party valuation specialist. Intangible Assets The estimated fair value of identifiable intangible assets is determined primarily using the Income Approach method which is a valuation technique that provides an estimate of the fair value of an asset based on the market participant’s expectations of the cash flows that an asset would generate over its remaining useful life. Some of the more significant assumption inherent in the development of the identifiable intangible assets valuation, from the perspective of a market participant, include the estimate net cash flows for each year for each project or product, the appropriate discount rate to select in order to measure the risk inherent in each future cash flow stream, the assessment of each asset’s life cycle, competitive trends impacting the asset and each cash flow stream as well as other factors. Goodwill Allocation Goodwill of $44,096,980 arising from the acquisition consists of the difference between the consideration paid and the fair value of the assets and liabilities acquired. None of the goodwill recognized is expected to be deductible for income tax purposes. Current Liabilities Acquired current liabilities are amounts owed to vendors or accrued expenses. Deferred Revenue Deferred revenue is the amount of customers deposits at the time of the acquisition. Income taxes Income taxes are the estimated amount of state and federal taxes to settle certain tax positions prior to the acquisition. Deferred Tax Liability The deferred tax liability is stated at estimated tax liability due to the difference in the book basis of assets compared to the tax basis of those assets at the time of acquisition. Acquisition Related Expenses Included in general and administrative expenses in the consolidated statements of operations for the three and twelve month periods ended December 28, 2019 were $765,000 and $1,184,000, respectively, for acquisition expenses.

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- Definition The entire disclosure for a business combination (or series of individually immaterial business combinations) completed during the period, including background, timing, and recognized assets and liabilities. The disclosure may include leverage buyout transactions (as applicable). + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -URI http://asc.fasb.org/topic&trid=2303972 + Details
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