Quarterly report pursuant to Section 13 or 15(d)

Acquisition

v3.19.1
Acquisition
3 Months Ended
Mar. 31, 2019
Business Combinations [Abstract]  
Acquisition

NOTE 9 - ACQUISITION

 

On January 30, 2019, the Company completed the CarrierWeb Acquisition. Aggregate consideration for the CarrierWeb Acquisition was $2,797,000, consisting of a closing cash payment of $2,797,000, less a credit bid by the Company in the amount of the aggregate principal amount plus accrued and unpaid interest outstanding under a $650,000 debtor-in-possession loan made by the Company to CarrierWeb on January 11, 2019. An additional $700,000 is payable, if CarrierWeb Services Ltd. (“CarrierWeb Ireland”), an affiliate of CarrierWeb, is restored to the Register of Companies in Ireland on or before May 1, 2019. The $700,000 was paid in April 2019 upon such restoration. The CarrierWeb Acquisition was subject to the entry of a sale order by the United States Bankruptcy Court for the Northern District of Georgia approving such acquisition. The sale order was entered on January 28, 2019. In connection with the restoration of CarrierWeb Ireland to the Register of Companies in Ireland, the Company also made certain loans to CarrierWeb Ireland in the aggregate principal amount of $300,000 which is included in other assets in the Condensed Consolidated Balance Sheets.

 

The assets the Company acquired in the CarrierWeb Acquisition will be integrated into the Company’s logistics visibility solutions and products. In connection with the transaction, the Company offered employment to all of the former employees of CarrierWeb. The CarrierWeb Acquisition allows the Company to offer a full complement of highly-integrated logistics technology solutions to its current customers and prospects, and immediately add customers and subscriber units. For the three-month period ended March 31, 2019, the Company incurred acquisition-related expenses of approximately $130,000 which are included in acquisition-related fees.

 

The purchase method of accounting in accordance with ASC805, Business Combinations, was applied for the CarrierWeb Acquisition. This requires the total cost of an acquisition to be allocated to the tangible and identifiable intangible assets acquired and liabilities assumed based on their respective fair values at the date of acquisition with the excess cost accounted for as goodwill. Goodwill arising from the acquisition is attributable to expected product and sales synergies from combining the operations of the acquired business with those of the Company.

 

The following table summarizes the approximate preliminary purchase price allocation based on estimated fair values of the net assets acquired at the acquisition date:

 

Accounts receivable   $ 192,000  
Inventory     200,000  
Other assets     27,000  
Customer relationships     800,000  
Goodwill (a)     1,578,000  
Net assets acquired   $ 2,797,000  

 

  (a) The goodwill is fully deductible for tax purposes.

 

The Company will finalize the purchase price allocation as soon as all the required information is available.

 

The results of operations of CarrierWeb have been included in the condensed consolidated statement of operations as of the effective date of acquisition. For the three months ended March 31, 2019, the CarrierWeb acquisition contributed approximately $628,000 to the Company’s revenues. Operating income contributed by the CarrierWeb acquisition was not separately identifiable due to Company’s integration activities and is impracticable to provide.

 

On July 31, 2017, the Company, together with its wholly-owned subsidiary Keytroller, LLC, a Delaware limited liability company (“Keytroller”), acquired substantially all of the assets of Keytroller, LLC, a Florida limited liability company (the “Keytroller Acquisition”), pursuant to an asset purchase agreement (the “Purchase Agreement”) by and among the Company, Keytroller, Keytroller, LLC, a Florida limited liability company (n/k/a Sparkey, LLC) (“Sparkey”) and the principals of Sparkey party thereto. Consideration for the Keytroller Acquisition included (i) $7,098,000 in cash paid at closing, (ii) 295,902 shares of our common stock issued at closing with a fair value of $2,000,000 and (iii) up to $3,000,000 of shares of our common stock as potential earn-out payments to be made on the first and second anniversaries of the closing date of the Keytroller Acquisition, computed in accordance with the terms of the Purchase Agreement. The potential earn-out payments were estimated at a fair value of $2,683,000. During the fourth quarter of 2017, the Company paid a post-closing working capital adjustment of $275,000. On September 14, 2018, the Company issued 296,000 shares for the earn-out payment for the twelve-month period ending on the first anniversary of the closing date of the Keytroller Acquisition. On September 14, 2018, the Company entered into an amendment to the Purchase Agreement effective as of August 1, 2018, which, among other things, fixed the second anniversary earn-out payment that Sparkey will be entitled to receive at 147,951 shares of the Company’s common stock and removes certain restrictions on the operations of the Company during such twelve-month period. Because the amendment fixed the second anniversary earn-out payment by removing the performance criteria associated with such earn-out payment, the second anniversary earn-out payment is no longer considered contingent consideration.