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Acquisition of Assets of SPEC Sensors and KWJ Engineering

12 Months Ended

Dec. 31, 2022

Acquisition of Assets of SPEC Sensors and KWJ Engineering

Acquisition of SPEC Sensors, LLC and KWJ Engineering, Inc.

Note 4 – Acquisition of Assets of SPEC Sensors and KWJ Engineering

On December 16, 2022, we acquired all of the assets of SPEC Sensors, LLC, a Delaware limited liability company (“SPEC”), and KWJ Engineering, Inc., a California corporation (“KWJ”) (collectively, “SPEC/KWJ”), two industry-leading designers and manufacturers of gas, air and environmental quality sensors, pursuant to an Asset Purchase Agreement, dated as of December 16, 2022 (the “Purchase Agreement”), by and among the Company, SPEC/KWJ, and the equity holders of SPEC and KWJ (the “Transaction”). The Purchase Agreement contains customary representations, warranties and covenants, including non-competition covenants. Under the terms of the Purchase Agreement, the purchase price for both companies’ assets was $2,000,000, plus (or minus) the amount by which the combined companies’ net working capital at closing is more (or less) than $1,350,000, which was preliminarily calculated as $2,213,527, of which $1,519,000 was paid at closing, $375,000 was paid into escrow subject to a 90-day purchase price adjustment process (of which we expect $55,473 will be reimbursed to us), and $375,000 was paid into escrow to be available to satisfy claims, if any, made by the Company for breaches of representations and warranties by SPEC/KWJ or the equity holders.

The following table summarizes the estimated fair values of the assets acquired and liabilities assumed at the acquisition date (in thousands). We are in the process of identifying and measuring the fair value of certain property and equipment assets, intangible assets, and working capital balances, thus the provisional measurements of these assests and goodwill are subject to change.

​	​	​	​
Cash		$	541
Accounts receivable		​	316
Inventories		​	1,063
Prepaid expenses and other current assets		​	42
Deposits		​	16
Accounts payable		​	(157)
Accrued liabilities		​	(257)
Net identifiable assets acquired		​	1,564
Goodwill		​	650
Net assets acquired	​	$	2,214

​

The goodwill recognized is attributable primarily to expected synergies and the assembled workforces of SPEC/KWJ. The goodwill is expected to be deductible for income tax purposes. The fair value of accounts receivable is equal to the $316 thousand gross contractual amount, as we expect the entire balance to be collectible. Revenue and (loss) of SPEC/KWJ included in our consodliated statement of operations from the acquisition date to December 31, 2022 were $10 thousand and $(100) thousand, respectively.

The following represents the proforma consolidated statement of operations as if SPEC/KWJ had been included in our consolidated results for the entire years ended December 31, 2022 and 2021 (unaudited):

​

​	​	​	​	​	​	​
​		Year Ended December 31,
​	​	2022		​	2021
​	​	(in thousands)
Revenue	​	$	12,175	​	$	12,274
Net income (loss)	​	$	1,367	​	$	(487)

​

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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

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-Publisher FASB
-Name Accounting Standards Codification
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