Note 3 - Acquisition

On August 4, 2022, we acquired Astro Machine LLC (“Astro Machine”), an Elk Grove Village, Illinois-based manufacturer of printing equipment, including labelers, tabbers, conveyors, and envelope feeders for aggregate consideration of $17.1 million.

The acquisition was accomplished pursuant to an Equity Interest Purchase Agreement dated as of August 4, 2022 (the “Purchase Agreement”) by and among us, GSND Holding Corporation (“GSND”), the parent company of Astro Machine, and Astro Machine. Pursuant to the Purchase Agreement, we purchased 100%

of the issued and outstanding equity interests of Astro Machine from GSND for a purchase price

of $15.6

million. The acquisition was funded using borrowings under our credit facility. We obtained a representation and warranty insurance policy and placed

$300,000

of the purchase price into an escrow account, which pursuant to the terms and conditions of the Purchase Agreement, are our sole recourse for breaches of representations and warranties by GSND. Upon the closing of the transaction, Astro Machine became a wholly owned subsidiary of AstroNova, Inc.

Concurrently with the signing of the Purchase Agreement, our newly acquired subsidiary, Astro Machine, entered into a Purchase and Sale Agreement with Selak Real Estate Limited Partnership (“SRE”), pursuant to which Astro Machine purchased certain real property assets of SRE for a purchase price, paid in cash, of $1.5 million. These real estate assets are comprised of a 34,460 square foot industrial manufacturing building (including offices) on 1.26 acres of land which is Astro Machine’s principal place of business.

This transaction is a business combination and will be accounted for using the acquisition method of accounting prescribed by ASC Topic 805, Business Combinations (“ASC 805”), whereby the results of operations, including the revenues and earnings of Astro Machine, are included in our financial statements from the date of acquisition. The purchase price of Astro Machine will be allocated to the tangible and intangible assets acquired and liabilities assumed based on their fair value based on widely accepted valuation techniques in accordance with ASC Topic 820, Fair Value Measurements, at the acquisition date. Any excess of the purchase price over the fair value of the net identified assets acquired and liabilities assumed will be recorded as goodwill. The process for estimating fair values requires the use of significant estimates, assumptions and judgments, including determining the timing and estimates of future cash flows and developing appropriate discount rates. ASC 805 establishes a measurement period to provide companies with a reasonable amount of time to obtain the information necessary to identify and measure various items in a business combination and cannot extend beyond one year from the acquisition date. We expect to complete the final fair value determination of the assets acquired and liabilities assumed as soon as practicable within the measurement period and in any event not later than one year from the acquisition date.

Total acquisition-related costs to date of

$0.7

million are included in the general and administrative expenses in our consolidated statement of income for the nine months ended October 29, 2022.

The preliminary allocation of the purchase price as of October 29, 2022, is as follows:


(In thousands)
Cash	$	91
Accounts Receivable		3,393
Inventory		4,557
Property, Plant and Equipment		3,867
Identifiable Intangible Assets		1,000
Goodwill		6,567
Accounts Payable and Other Current Liabilities		(2,350	)

Total Purchase Price	$	17,125

The amounts above are provisional and are based on information that is currently available. Management believes the information provides a reasonable basis for estimating the fair values of assets acquired and liabilities assumed, but is waiting for additional information necessary to finalize those fair values. Therefore, the provisional measurements of fair value reflected are subject to change and such changes could be significanct. Management anticipates changes to the value of inventory, property, plant and equipment, deferred taxes and identifiable intangible assets as additional information is collected and analyzed and pending the completion of certain appraisals and a valuation report and expects to finalize the valuation and complete the purchase price allocation as soon as practicable but no later than one year from the acquisition.

The following table reflects the preliminary fair value of the acquired identifiable intangible asset and related estimated useful lives:


(In thousands)	Fair Value		Useful Life (Years)
Customer Relations	$	1,000		7

The Customer Relations intangible asset represents the relationships that will be maintained with certain historical customers of Astro Machine. This amount was estimated by our management based upon information known as of the date of filing and is subject to change pending completion of the formal valuation report.

Beginning August 4, 2022, the results of operations for Astro Machine have been included in our statement of income for the three and nine months ended October 29, 2022, and are reported as part of the Product Identification segment.