Business Combination

9 Months Ended

Sep. 30, 2016

Business Combination [Abstract]

Business Combination

B. Business Combination

On September 2, 2016, PTF acquired certain assets and assumed certain liabilities of Precise Time and Frequency, Inc. ("PTF Inc.") (the "PTF Acquisition") for cash consideration of $295,000. The acquisition was accounted for under the acquisition method of accounting for business combinations pursuant to the provisions of Accounting Standards Codification ("ASC") 805, Business Combinations, ("ASC 805"). The acquisition method of accounting requires, among other things, that the assets acquired and liabilities assumed in a business combination be measured at their fair values as of the closing date of the acquisition.

The acquired assets include intellectual property and equipment that will support the Company's strategy to be a broader based supplier of highly engineered products for the generation, synchronization and control of timing and frequency. The intangible assets acquired are being amortized over a weighted average period of ten years. The Company believes this product line will complement the complete line of spectrum control products that Mtron currently provides.

The following is a summary of the preliminary purchase price allocation to the estimated fair values of assets acquired and liabilites assumed in the PTF Acquisition (in thousands):

Purchase consideration	$	295
Net assets acquired:
Current assets		45
Fixed assets		85
Intangible assets		214
Current liabilities		(45	)
Net assets acquired	$	299
Bargain purchase gain	$	(4	)

The assets acquired and and liabilites assumed by PTF were done so through the distressed sale of PTF Inc. and  resulted in a bargain purchase gain which is recorded in other income (expense), net in the condensed consolidated statements of operations for the three and nine months ended September 30, 2016.

Management estimated the fair value of net assets acquired using valuation techniques including income, cost and market approaches. In estimating the fair value of acquired assets and assumed liabilities, the fair value estimates are based on, but not limited to, expected future revenues and cash flows, expected future growth rates and estimated discount rates. The allocation of the purchase price is preliminary as the third party valuation report is not finalized and may be adjusted during the remainder of fiscal 2016.  The items still under review include the fair value of inventory, fixed assets and intangible assets. 

The following table sets forth certain unaudited pro forma information for the three and nine months ended September 30, 2016 and 2015 assuming that the PTF Acquisition occurred on January 1, 2015 (in thousands, except per share data):

	Three Months Ended September 30, 2016							Nine Months Ended September 30, 2016
	Historical		Pro Forma Adjustments			Pro Forma		Historical			Pro Forma Adjustments		Pro Forma
Revenue	$	5,188	$	—		$	5,188	$	15,353		$	—	$	15,353
Net income (loss)	$	29	$	34		$	63	$	(90	)	$	25	$	25
Basic net income per share	$	0.01	$	0.01		$	0.02	$	(0.03	)	$	0.01	$	(0.02	)
Diluted net income per share	$	0.01	$	(0.02	)	$	0.02	$	(0.03	)	$	0.01	$	(0.02	)

	Three Months Ended September 30, 2015									Nine Months Ended September 30, 2015
	Historical			Pro Forma Adjustments			Pro Forma			Historical			Pro Forma Adjustments			Pro Forma
Revenue	$	4,979		$	—		$	4,979		$	16,219		$	—		$	16,219
Net income (loss)	$	(205	)	$	(42	)	$	(247	)	$	(605	)	$	(51	)	$	(656	)
Basic net income per share	$	(0.08	)	$	(0.01	)	$	(0.09	)	$	(0.23	)	$	(0.02	)	$	(0.25	)
Diluted net income per share	$	(0.08	)	$	(0.01	)	$	(0.09	)	$	(0.23	)	$	(0.02	)	$	(0.25	)

The pro forma adjustments include amortization expense related to the acquired intangible assets and an adjustment for acquisition related expenses incurred that for pro forma purposes should be reflected in 2015.

The net sales included in the Company's consolidated statement of operations which were generated by the PTF Acquisition from the acquisition closing date of September 2, 2016 through September 30, 2016 was $14,000. The losses included in the Company's condensed consolidated statement of operations derived from the PTF Acquisition's business from the acquisition closing date to September 30, 2016 were $(50,000).

Acquisition-related costs for purposes of accounting principles generally accepted in the United States of America ("GAAP") are costs the acquirer incurs to effect a business combination, including advisory, legal, accounting, valuation, and other professional or consulting fees.  The Company incurred a total of approximately $38,000 of acquisition-related costs charged to engineering, general and administrative expenses during the three and nine months ended September 30, 2016.