3. Acquisition

In December 2015, the Company purchased Klein, a designer, manufacturer and worldwide distributor of sonar and waterside security systems to military and commercial customers, for $10 million in cash. Klein’s product lines consist of single and multi-beam side scan sonar systems. The Company made this acquisition to expand the product offerings available to customers, gain access to additional technology, expand the markets in which it operates and to reduce the Company’s dependence on the cyclical energy industry.

The Company estimated fair values for assets acquired utilizing management estimates with the assistance of an independent appraisal firm. The value of tangible property was estimated using a combination of cost and sales comparison approaches. The value of identifiable intangible assets was estimated generally using an income approach. This approach utilized inputs that are not observable in the market and thus represents a Level 3 fair value measurement. Key assumptions include management’s estimates of revenue and costs associated with various intangible assets and the discount rate applied to those revenues and costs.

The following is a summary of the amounts recognized for assets acquired and liabilities assumed at the date of acquisition (in thousands):


Working capital	$	2,572
Property, plant and equipment		3,416
Intangible assets		2,350
Goodwill		1,662

Intangible assets include trade names of approximately $760,000, which have an indefinite useful life and are not amortizable. The weighted average useful life of other acquired intangibles is 9.5 years.

The goodwill associated with this acquisition is deductible for tax purposes.

Revenue and net income for Klein were $533,000 and $5,000, respectively, for the month ended January 31, 2016. The operations of Klein are included in our Equipment Manufacturing and Sales segment.

Pro Forma Results of Operations

The following consolidated pro forma results of operations for the years ended January 31, 2016 and 2015 assumes the acquisition of Klein occurred as of the beginning of those periods and reflects the full results of operations for the periods presented. The consolidated pro forma results have been prepared for comparative purposes only and do not purport to indicate the results of operations that would actually have occurred had the combinations been in effect on the dates indicated, or that may occur in the future.


	Years Ended January 31,
(In thousands, except per share amounts)	2016			2015
	(unaudited)
Revenues	$	59,702		$	91,347
Net loss	$	(38,987	)	$	(9,675	)
Loss per share:
Basic	$	(3.24	)	$	(0.78	)
Diluted	$	(3.24	)	$	(0.78	)

In May 2014, the Company’s wholly-owned subsidiary, Seamap Pte Ltd (“Seamap Singapore”), purchased two product lines from ION Geophysical Corporation (“ION”) for $14.5 million in cash and a credit of $2.0 million against future sales or rentals. These product lines consist of the Digishot^® energy source controller and the Sleeve Gun energy sources, collectively the “ION Source Products”. The Company made this acquisition to expand the product offerings available to customers, gain access to additional technology and expand the markets in which it operates. The Company accounted for this transaction as a business combination and these operations are included in the Seamap segment. Based on an independent valuation study, the fair value of the consideration was determined to be approximately $15.6 million and was allocated as follows: $10.0 million to amortizable intangible assets (including customer relationships of $5.1 million, property rights of $2.9 million and patents of $2.0 million), $3.6 million to inventory, $1.4 million to goodwill and $600,000 to furniture and fixtures. The goodwill is not deductible for tax purposes. Pro forma results of operations have not been presented as the business combination was not significant.