Business Acquisition

12 Months Ended

Dec. 31, 2012

Business Acquisition

Business Acquisition

(2) Business Acquisition

        On April 2, 2012, the Company purchased all of the issued and outstanding shares of Dansensor pursuant to a Share Purchase Agreement (SPA) which the Company entered into with the former parent company of Dansensor, PBI Holding A/S (PBI Holding) on March 9, 2012. Under the terms of the SPA, the Company acquired Dansensor for approximately $19.2 million, net of cash acquired. Approximately $13.6 million of the purchase price was paid in cash at closing. The balance of the purchase price was paid through the issuance of the Seller Note as is more fully described in Note 16.

        The acquisition has been accounted for under the acquisition method of accounting in accordance with ASC Topic 805, Business Combinations. Under the acquisition method of accounting, the total purchase price is allocated to the net tangible and intangible assets acquired, based on their estimated fair values. The total purchase price was allocated to the net assets acquired based upon their estimated fair values as of the close of business on April 2, 2012 as set forth below.

        The purchase price allocation for the acquisition is as follows:

Cash and cash equivalents	$	832,758
Trade accounts receivable, net		3,348,142
Other receivables		470,135
Inventories		2,943,855
Property, plant and equipment		1,376,296
Other assets		117,464
Intangible assets		12,210,330
Identifiable assets acquired		21,298,980
Accounts payable		744,714
Other accrued expenses		2,533,742
Deferred income tax-current		509,744
Deferred income tax-long-term		3,069,017
Liabilities assumed		6,857,217
Net identifiable assets acquired		14,441,763
Goodwill		5,639,837
Purchase price	$	20,081,600

        The allocation of the purchase price resulted in the recognition of the following intangible assets:

	Amount		Weighted Average Life- Years
Trademark/trade name	$	3,819,090		20
Developed technology		7,512,670		9
Customer relationships		878,570		9
	$	12,210,330

        The fair value of the identified intangible assets was estimated using an income approach. Under the income approach, an intangible asset's fair value is equal to the present value of future economic benefits to be derived from ownership of the asset. Indications of value are developed by discounting future net cash flows to their present value at market-based rates of return. The goodwill recognized as a result of the Dansensor acquisition is primarily attributable to the value of the workforce, corporate synergies, as well as unidentifiable intangible assets.

        None of the goodwill recognized is expected to be deductible for income tax purposes. The useful life of the intangible assets for amortization purposes was determined based on management's best estimate of the expected cash flows used to measure the fair value of the intangible assets, adjusted as appropriate for the entity-specific factors including legal, regulatory, contractual, competitive, economic or other factors that may limit the useful life of intangible assets.

        The actual Dansensor net sales and net loss, which is defined as gross profit less costs of operations such as selling, general and administrative and research and development expenses, less income tax expense and costs related to the acquisition, is included in the Company's consolidated statements of income for the year ended December 31, 2012. Dansensor's actual results of operations for the nine month period April 2, 2012 through December 31, 2012, net of intercompany sales, is disclosed in the table below. The supplemental unaudited pro forma net sales and net income of the combined entity, including U.S. GAAP conversion adjustments, had the acquisition been completed as of the earliest period presented are as follows:

	Net Sales		Net Income (Loss)			Basic Earnings per Share
Dansensor results of operations since acquisition date (April 2, 2012—December 31, 2012)	$	12,971,493	$	(1,177,354	)	$	—
Supplemental pro forma combined results of operations:
Three months ended December 31, 2011		15,134,705		1,353,285			0.25
Fiscal year ended December 31, 2012		54,814,162		2,086,563			0.38
Fiscal year ended December 31, 2011		57,605,949		5,519,353			1.03

        Material items included in the supplemental unaudited pro forma disclosures above are as follows:

	Three months Ended December 31, 2011			Fiscal Year Ended December 31, 2012			Fiscal Year Ended December 31, 2011
Amortization of intangibles	$	277,540		$	278,338		$	1,094,301
Interest expense		79,027			106,237			377,071
Income tax effect of adjustments		(106,970	)		(115,373	)		(470,839	)
	$	249,597		$	269,202		$	1,000,533

        A nonrecurring item related to an inventory fair value adjustment of $865,000 is included in the supplemental unaudited pro forma combined results of operations for the year ended December 31, 2012. The Company has incurred approximately $848,000 in acquisition related costs since inception of the acquisition. Approximately $812,000 of these costs were incurred during the year ended December 31, 2012 and are recorded as selling, general and administrative expenses in the consolidated statements of income as of December 31, 2012.

        These pro forma condensed consolidated financial results have been prepared for illustrative purposes only and do not purport to be indicative of the results of operations that actually would have resulted had the acquisition occurred on the first day of the earliest period presented, or of future results of the consolidated entities. The pro forma consolidated financial information does not reflect any operating efficiencies and cost savings that may be realized from the integration of the acquisition.