NOTE 7 – ACQUISITION



On May 14, 2020, in a reverse triangular merger, the Company completed the acquisition of 100% of Ecessa Corporation (“Ecessa”), based in Plymouth, Minnesota. The purchase price was $4,642,000, with cash acquired totaling $666,000. The purchase price includes initial consideration of $4,666,000 and $ (24,000) in working capital adjustments.



The estimated assets and liabilities of Ecessa are recorded in the condensed consolidated balance sheet within the Services & Support segment at September 30, 2020. The purchase price allocation was based on estimates of the fair value of assets acquired and liabilities assumed, and included total assets of $5,249,000, including estimated goodwill of $1,371,000 and estimated intangibles of $2,230,000, and total liabilities of $608,000. The fair value of acquired identifiable intangible assets of $2,230,000 is provisional depending on the final valuations for those assets. All balances recorded are estimated amounts and the Company expects to finalize the purchase price allocation during the fourth quarter of 2020 as the valuation of identifiable assets and liabilities is completed. The pro forma impact of Ecessa was not significant to the Company’s results for the three and nine months ended September 30, 2020. Ecessa’s revenue and operating loss since acquisition are $798,000 and $ (319,000), respectively. The operating loss is primarily due to the revaluation of $1,561,000 of pre-acquisition deferred revenue to a preliminary fair value of $257,000 as of the opening balance sheet date and $106,000 of intangibles amortization, thus lowering revenue recognized and increasing post-acquisition expenses on a similar operating cost structure. The Company is still in process of integrating Ecessa into its operations and therefore has not realized all potential cost-saving synergies.  The Company will include further, more detailed information on the 2020 post-acquisition Ecessa operating results in the 2020 Form 10-K.