Business Acquisition

3 Months Ended

Mar. 31, 2013

Business Acquisition

Business Acquisition

Note 2 — Business Acquisition

On April 2, 2012, the Company acquired all of the issued and outstanding shares of Dansensor pursuant to a Share Purchase Agreement (SPA).  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 and the remainder of the purchase price was paid through the issuance of the Seller Note as is more fully described in Note 10.

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 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		Basic Earnings per Share
Supplemental pro forma combined results of operations:
Three-month period ended March 31, 2012	$	14,056,968	$	905,262	$	0.17

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

	Three Months Ended March 31, 2012
Amortization of intangibles	$	278,338
Interest expense	106,237
Income tax effect of adjustments	(115,373		)
	$	269,202

The Company incurred a total of approximately $848,000 in acquisition related costs, all of which were recognized during fiscal years 2011 and 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.