(2) Business Acquisitions and Dispositions

Acquisition of Mechtronic Solutions, Inc.

On December 16, 2010, the Company acquired Mechtronic Solutions, Inc. (MSI), an engineering services company, located in Albuquerque, New Mexico. The addition of MSI advances the Company's full-service integrated engineering services capabilities and provides additional established customers. The purchase price paid at closing was $6,500,000 in cash and $500,000 in Company stock. The $500,000 in Company stock consisted of 65,703 shares of common stock calculated at the closing price as of the acquisition date. The Company agreed to pay an additional maximum amount of $1,600,000 (earn-out) if MSI achieves a certain level of revenue and EBITDA over the next three years. The Company originally estimated the fair market value of the earn-out to be $500,000, and had recorded this estimate as part of the purchase price. Subsequently the earn-out was adjusted to $100,000, and the difference was recorded to selling, general and administrative expense in the current year. The Company incurred $130,000 in legal expense related to this acquisition. Amortization of the goodwill on this transaction is not tax deductible. The results of operations for Mechtronic Solutions, Inc. are included in the Company's consolidated statements of operations from December 16, 2010 to January 31, 2012.

The aggregate purchase price is comprised of the following:

Cash paid	$	6,500,000
Stock issued to sellers		500,000
Estimated fair value of earn-out		500,000
	$	7,500,000

The purchase price allocation has been finalized. The Company has allocated the aggregate purchase price of $7,500,000 to the estimated fair value at the date of acquisition of the acquired tangible and intangible assets and assumed liabilities of Mechtronic Solutions, Inc. as follows:

Accounts receivable	$	932,000
Other current assets		48,000
Inventories		294,000
Property, plant and equipment, net		534,000
Goodwill		3,865,000
Intangible assets		3,700,000
Deposits		11,000
Accounts Payable		(59,000	)
Accrued expenses		(61,000	)
Other current liabilities		(81,000	)
Deferred income taxes, non-current		(1,683,000	)
	$	7,500,000

Acquisition of Ingenium Testing

On July 21, 2011, the Company acquired substantially all of the business and assets of Ingenium Testing, a provider of product compliance and engineering services based in Rockford, Illinois. The acquisition gives NTS a presence in the Chicago region, which reaches into Wisconsin, Indiana, Michigan and the rest of Illinois.

NTS acquired the business and assets of Ingenium and two affiliated companies for $12,525,000 which consisted of $12,002,000 in cash consideration and $523,000 in assumed net liabilities. The Company agreed to pay an additional maximum amount of $7,075,000 in earn-out consideration if certain performance targets are met related to EBITDA over the next three years. The Company estimates that the fair market value of this earn-out is $400,000 and has recorded this estimate as part of the purchase price. The intangible assets acquired consist of customer relations and will be amortized over 10 years.

The valuation techniques that were used by the Company to determine the fair value of the assets acquired and liabilities assumed are the market approach, the income approach and the cost approach. The market approach uses prices and other relevant information generated by market transactions involving identical or comparable assets or liabilities. The income approach uses valuation techniques to convert future amounts to a single present value based on current market expectations about those future amounts, including present value techniques, option-pricing models and the excess earnings method. The cost approach is based on the amount that would be required to replace the service capacity of an asset (replacement cost). The Company used significant assumptions in the valuation techniques used including the discount rate and forecasted profitability.

The acquisition-related costs for the twelve months ended January 31, 2012 were $350,000 and were recorded to selling, general and administrative expense. Amortization of the goodwill and other intangibles on this transaction is tax deductible. The results of operations for Ingenium are included in the Company's consolidated statements of operations from July 21, 2011 to January 31, 2012.

The fair values of acquired assets have not been finalized pending further information that may impact the valuation of the property, plant and equipment acquired. The Company has preliminarily estimated fair value at the date of acquisition of the acquired tangible and intangible assets of Ingenium Testing as follows:

Cash paid	$	12,002,000
Estimated fair value of earn-out		400,000
Aggregate purchase price		12,402,000


Property, plant and equipment		8,007,000
Intangible assets		4,200,000
Net liabilities assumed		(523,000	)
Estimated fair value of assets and liabilities acquired		11,684,000
Goodwill	$	718,000

Acquisition of Lightning Technologies, Inc

On September 1, 2011, the Company acquired Lightning Technologies, Inc. ("LTI"), a provider of testing and engineering services located in Pittsfield, Massachusetts. LTI is an engineering services and testing laboratory, specializing in the field of lightning protection. LTI's customer base, capabilities and service offerings are concentrated in the aerospace, construction and wind power generation markets. The acquisition expanded the Company's non-defense industry businesses and particularly strengthens its aerospace business.

Cash paid at closing was $5,200,000 and included $100,000 in working capital adjustment. An additional working capital adjustment of $148,000 was subsequently paid. $900,000 of the purchase price was held back to secure LTI's indemnification obligations under the purchase agreement and is payable 18 months after closing. The Company agreed to pay an additional maximum amount of $1,000,000 (earn-out) if LTI achieves a certain level of EBITDA over the next four years. The Company estimates the fair value of the earn-out to be $500,000.

The costs related to this acquisition were $40,000 for the twelve months ended January 31, 2012 and were recorded to selling, general and administrative expense. Amortization of the goodwill on this transaction is tax deductible. The results of operations for LTI are included in the Company's consolidated statements of operations from September 1, 2011 to January 31, 2012.

Cash paid	$	5,200,000
Working capital adjustment paid		148,000
Estimated fair value of earn-out		500,000
Purchase price held back		900,000
Aggregate purchase price		6,748,000


Accounts receivable and other assets		1,062,000
Property, plant and equipment		1,702,000
Intangible assets		3,700,000
Net liabilities assumed		(228,000	)
Estimated fair value of assets and liabilities acquired		6,236,000
Goodwill	$	512,000

Discontinued Operations

On October 31, 2011 the Company closed its facility in Calgary, Canada due to non-renewal of the facility's lease. The decision to shut down operations was based on the cost to relocate to a new facility in the area and the low operating profit of the existing business. Fixed assets with a net book value of $44,000 were disposed of. The remaining fixed assets with a net book value of $403,000 were relocated to other NTS facilities. These assets will be utilized and will not be sold. The facility was closed down as of October 31, 2011. Shut-down expenses of $566,000 were incurred and recorded.

The major classes of assets and liabilities of discontinued operations included in the Company's consolidated balance sheets as of January 31, 2012 and January 31, 2011 are as follows:

	January 31, 2012			January 31, 2011
Cash and cash equivalents	$	15,000		$	376,000
Accounts receivable, less allowance for doubtful accounts of $15,000 at January 31, 2012 and $10,000 at January 31, 2011		105,000			377,000
Prepaid expenses		-			6,000
Property, plant and equipment, at cost		-			1,464,000
Accumulated depreciation		-			(976,000	)
Total assets of discontinued operations	$	120,000		$	1,247,000

Accounts payable	$	-		$	(34,000	)
Accrued expenses		(84,000	)		(141,000	)
Total liabilities of discontinued operations	$	(84,000	)	$	(175,000	)

In accordance with FASB ASC 205-20, Discontinued Operations, the Company determined that the Calgary facility became a discontinued operation in 2011, as the facility is a component of the Company that has clearly distinguishable operating activities and cash flows; and the Company will not have any continuing involvement, as the facility is closed. Accordingly, all revenues and expenses for the Calgary facility for the twelve months ending January 31, 2012 are presented as "Loss from discontinued operations, net of tax" in the accompanying statements of operation. Prior year numbers were reclassified to conform to the current year presentation.

The results from discontinued operations for the twelve months ending January 31, 2012 and 2011 are as follows:

	January 31, 2012			January 31, 2011
Net revenues	$	1,278,000		$	1,688,000
Cost of sales		1,305,000			1,710,000
Gross profit		(27,000	)		(22,000	)
Selling, general and administrative expenses		26,000			26,000
Recovery of receivable previously written off		(261,000	)		-
Other expense		23,000			30,000
Shut down expense		566,000			-
Loss from Calgary operations	$	(381,000	)	$	(78,000	)
Income taxes		-			-
Loss from discontinued operations, net of tax	$	(381,000	)	$	(78,000	)