Business Combination

3 Months Ended

Mar. 31, 2016

Business Combinations [Abstract]

Business Combination Disclosure [Text Block]

Business Combination

After the close of business on November 23, 2015, the Company and STG Group completed the Business Combination in which the Company acquired STG Group from its current owner. The purchase price consisted of: (a) $68 million paid in cash and $3.4 million of an estimated net working capital adjustment and other purchase price adjustments paid in cash (“Cash Consideration”); (b) 8,578,199 new shares of Company common stock, 445,161 shares that were forfeited by the Sponsor and reissued to the stockholders of the Predecessor, and an additional 35,000 shares that were transferred by the Sponsor to the stockholders of the Predecessor, valued at a price of approximately $8.50 per share (“Stock Consideration”); and (c) $5.6 million worth of stock at approximately $8.50 per share (658,513 “Conversion Shares”) in a private placement. The Company funded a majority of the purchase price through new debt financing as described further in Note 7. On the date of the Business Combination, the Company also collected $2.50 million from the Predecessor’s stockholder pursuant to a note receivable agreement outstanding. This is netted against the purchase price adjustments that were settled in cash.

 

Upon consummation of the Business Combination, the Predecessor changed its name to STG Group Holdings, Inc. and the Company changed its name from Global Defense & National Security Systems, Inc. to STG Group, Inc.

The Company has recorded an allocation of the purchase price to the Predecessor’s tangible and identifiable intangible assets acquired and liabilities assumed based on their fair values as of the Business Combination date. The calculation of purchase price and purchase price allocation is as follows (in thousands):

Cash consideration:
Cash consideration	$	68,000
Net working capital and other cash consideration adjustments		3,400
Total cash consideration		71,400
Stock consideration, including Conversion Shares		82,632
Total purchase price	$	154,032

Current assets	$	42,716
Property and equipment		1,745
Goodwill		113,589
Identifiable intangible assets		39,840
Other assets		166
Total assets acquired		198,056
Current liabilities		26,639
Deferred income taxes		11,903
Other long-term liabilities		5,482
Total liabilities assumed		44,024
Total purchase price		154,032
Less cash acquired		2,184
Total purchase price, net of cash acquired	$	151,848

The following unaudited pro forma financial information for the three months ended March 31, 2015, assumes the Business Combination occurred on January 1, 2015, after giving effect to certain adjustments for amortization, interest, and income tax effects. The pro forma information is presented for illustrative purposes only and is not indicative of what actual results would have been if the acquisition had taken place on January 1, 2015, or of future results. The table below summarizes unaudited pro forma results for the three months ended March 31, 2015, (in thousands, except for per share information):

Contract revenue	$	48,964
Operating income		540
Net loss		(952)
Net loss per share, basic and diluted		(0.06)

The pro forma adjustments increased amortization and interest expense by $1.5 million and $2.0 million, respectively, and increased the income tax benefit by $0.5 million for the three months ended March 31, 2015.

 

There were no adjustments made to the purchase price allocation during the three months ended March 31, 2016.