3. ACQUISITIONS

Since January 1, 2014, the Company has acquired two businesses in the U.S. These acquisitions have allowed the Company to expand its products and service capabilities and offer its customers a greater breadth of solutions for their electrical power distribution and backup power needs. A summary of the acquisitions is as follows:



Business Acquired	Closing	Net Assets Acquired (in 000s)		Segment	Primary Form of Consideration
Titan Energy Worldwide, Inc.	12/02/14	$	1,958	Critical Power	Cash/stock
Harmonics Holdings Inc.	01/16/15		1,202	T&D Solutions	Seller note/debt forgiveness
		$	3,160

Each of the acquired businesses has been included in the Company’s results of operations since the date of closing its respective closing.

2014 Acquisition

On December 2, 2014, the Company acquired voting control of Titan Energy Worldwide, Inc. (“Titan”), a Minneapolis-headquartered provider of sales and service for commercial and industrial-scale onsite power systems, including generators and associated switching equipment. By December 31, 2014, the Company had acquired 100% ownership of Titan. The Company funded the acquisition through a new term loan provided under its U.S. credit facilities and the issuance of shares of its common stock to former convertible preferred stock holders and note holders of Titan.

The following table summarizes the consideration paid for the Titan acquisition and presents the allocation of the amount to the net tangible and identifiable intangible assets based on their estimated fair values as of December 2, 2014 (in thousands):



	Titan Acquisition
Purchase Price
Cash consideration	$	953
Common stock consideration		1,005
	$	1,958

Purchase Price Allocation
Current assets, including cash and cash equivalents of $0.1 million	$	3,721
Property, plant and equipment		410
Identifiable intangible assets		5,147
Goodwill		2,719
Total assets acquired		11,997
Current liabilities		(6,881)
Notes payable		(3,158)
Net assets acquired	$	1,958

The Company determined the purchase price allocation based on estimates of the fair values of the tangible and intangible assets acquired and liabilities assumed. Fair value estimates are based on a complex series of judgments about future events and uncertainties and rely heavily on estimates and assumptions. The judgments used to determine the estimated fair value assigned to each class of assets acquired and liabilities assumed, as well as asset lives, can impact the Company’s results of operations. Management utilized recognized valuation techniques, including the income approach and cost approach for the net assets acquired, in addition to relying on asset appraisals.

The major classes of intangible assets arising from the acquisition of Titan, their respective amortization periods, and the amount of amortization expense recognized during the six months ended June 30, 2015 are as follows (in thousands):



	Weighted Average Amortization Years	Titan Acquisition
Acquired Intangible Assets
Customer relationships	4	$	4,320
Distributor territory license	4		474
Internally developed software	7		289
Trade names	1		64
		$	5,147

All of the goodwill and intangibles arising out of the Titan acquisition are amortizable for tax purposes.

The Company incurred $0.7 million of transaction, due diligence and integration costs during the year ended December 31, 2014 that were reflected in the Company’s results as a period expense. These costs included legal reorganization expenses, professional fees and integration costs and were included in the Company’s other expense in its statements of operations.

2015 Acquisition

On January 16, 2015, the Company acquired substantially all the assets of Harmonics Holdings Inc. (“Harmonics”), consisting primarily of intellectual property, accounts receivable and machinery and equipment. Harmonics is a Connecticut-based specialty provider of equipment that incorporates a patented technology for the elimination of harmonic currents in power distribution systems. The transaction was accounted for under the purchase method of accounting and the Company funded the cash consideration for the acquisition from available cash on hand.

The following table summarizes the consideration paid for the Harmonics acquisition and presents the preliminary allocation of the amount to the net tangible and identifiable intangible assets based on their estimated fair values as of January 16, 2015 (in thousands):



	Harmonics Acquisition
Purchase Price
Cash consideration	$	93
Forgiveness of trade payables and indebtedness due to purchaser		609
Deferred payments due to seller		500
	$	1,202

Purchase Price Allocation
Current assets	$	21
Property, plant and equipment		4
Goodwill		1,177
Total assets acquired		1,202
Current liabilities		-
Net assets acquired	$	1,202

The acquisition resulted in the recognition of goodwill in the Company’s consolidated financial statements because the purchase price exceeded the net tangible asset value and reflects the future earnings and cash flow potential of the acquired business. The Company made an initial allocation of the purchase price at the date of the acquisition, based upon its understanding of the fair value of the acquired tangible assets and assumed liabilities. After additional information is obtained about the intangible assets of the acquired business, the Company anticipates that its final allocation of the purchase price will result in a reduction to goodwill by an amount representing the estimated fair value of the intangible assets identified, which are likely to be intellectual property, customer relationships and non-compete agreements.

The Company incurred approximately $13,000 of transaction costs related to the acquisition during the six months ended June 30, 2015 that are reflected in the Company’s statement of operations as a period expense.