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ACQUISITION | 3 Months Ended
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Mar. 31, 2022
Business Combination And Asset Acquisition [Abstract] |
ACQUISITION | 4. ACQUISITION Acquisition Summary – On December 1, 2021 (“Acquisition Date”), we entered into a definitive agreement and acquired (“DSS Acquisition”) the services and industrial staffing businesses (“DSS Business”) of Dynamic Industries, Inc. (“Dynamic”) for $7.6 million (“Purchase Price”). We also hired substantially all of the employees of the DSS Business. Preliminary Purchase Price Allocation – The Purchase Price was allocated to the major categories of assets and liabilities acquired based upon preliminary estimates of their fair values at the Acquisition Date, which were based, in part, upon outside appraisals for certain assets, including property, machinery and equipment and specifically-identifiable intangible assets. The excess of the Purchase Price over the estimated fair value of the net tangible and identifiable intangible assets acquired was recorded as goodwill. The factors contributing to the goodwill (which is all deductible for tax purposes) include the acquired established workforce, estimated future cost savings and revenue synergies associated with the DSS Business. The following table summarizes our preliminary purchase price allocation at the Acquisition Date:
Tangible assets and liabilities: |  |  |  |
Land and buildings (1) |  | $ | 475 |
Machinery and equipment (2) |  |  | 2,557 |
Right-of-use asset (3) |  |  | 2,000 |
Accrued expenses and other liabilities |  |  | (672 | )
Net tangible assets and liabilities |  |  | 4,360 |
Intangible assets - customer relationships (4) |  |  | 996 |
Goodwill |  |  | 2,217 |
Purchase Price (5) |  | $ | 7,573 |
| (1) | Land and buildings – Represents an acquired operating facility located in Ingleside, Texas (“Ingleside Facility”). The fair value of the facility was estimated based on a third-party appraisal.
| (2) | Machinery and equipment – Represents acquired machinery, equipment and vehicles. The fair values of the assets were estimated based on third-party appraisals.
| (3) | Right-of-use asset – Represents a fabrication and operating facility located in Harvey, Louisiana (“Harvey Facility”) that is subject to a lease arrangement with Dynamic that expires on June 30, 2022. The Harvey Facility is also subject to a separate purchase option that enables us to buy the facility from Dynamic prior to December 2, 2022, for a nominal amount (“Harvey Option”). We believe it is probable we will exercise the Harvey Option, and accordingly, have concluded that the arrangement represents a finance lease under the guidance of ASC 842,“Leases”, due to the Harvey Option representing a bargain purchase option. We have reflected the estimated fair value of the Harvey Facility plus future lease payment obligations as a right-of-use asset in our preliminary purchase price allocation, with the estimated fair value based on a combination of a third-party appraisal, third-party indications of interest for the facility, and indications of value communicated by and between us and Dynamic during the due diligence process. The corresponding lease liability is not material.
| (4) | Customer relationships – Represents the estimated fair value of existing underlying customer relationships with estimated lives of 7 years. The fair value was estimated based on a multi-period excess earnings method which incorporated Level 3 inputs. The significant assumptions used in estimating fair value included revenue and income projections for the DSS Business and the estimated discount rate that reflects the level of risk associated with receiving future cash flows. For the three months ended March 31, 2022, amortization expense for our intangible assets was less than $0.1 million, and our amortization expense is estimated to be $0.1 million to $0.2 million for each of 2022, 2023, 2024, 2025 and 2026, and $0.3 million thereafter.
| (5) | Purchase Price – Represents a base cash purchase price of $8.0 million, less $0.4 million attributable to assumed employee vacation obligations.
The purchase price allocation and related amortization periods are based on preliminary information and are subject to change when additional information concerning final asset and liability valuations is obtained. We have not completed our final assessment of the fair value of the right-of-use asset. Our final purchase price allocation may result in adjustments to such asset, including the residual amount allocated to goodwill. Supplemental Pro Forma Financial Information – The following unaudited pro forma condensed combined financial information (“Pro Forma Information”) gives effect to the DSS Acquisition, accounted for as a business combination using the purchase method of accounting. The Pro Forma Information reflects the DSS Acquisition and related events as if they occurred on January 1, 2021, and gives effect to pro forma events that are directly attributable to the DSS Acquisition, factually supportable and expected to have a continuing impact on the combined results of the Company and the DSS Business following the DSS Acquisition. The Pro Forma Information for the three months ended March 31, 2021, reflects adjustments to include: (1) incremental intangibles amortization and depreciation expense of $0.1 million associated with fair value adjustments related to the DSS Acquisition and (2) the historical results of the DSS Business for the period. Revenue and net loss attributable to the DSS Business for the three months ended March 31, 2021 were $10.7 million and $0.2 million, respectively. The Pro Forma Information has been presented for illustrative purposes only and is not necessarily indicative of the operating results that would have been achieved had the pro forma events taken place on the dates indicated. Further, the Pro Forma Information does not purport to project the future operating results of the combined Company following the DSS Acquisition.
|  | Three Months Ended March 31, 2021 |
Pro forma revenue from continuing operations |  | $ | 34,463 |
Pro forma net loss from continuing operations |  |  | (2,590 | )
Per share data: |  |  |  |
Basic and diluted loss from continuing operations |  | $ | (0.17 | )

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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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