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Business Combination

3 Months Ended

Mar. 31, 2017

8. Business Combination

On February 1, 2016, the Company acquired the assets of Vogel Capital, Inc., d/b/a Diamond Machining Technology (“DMT”) based in Marlborough, MA for $6.97 million in cash. The DMT products are leaders in sharpening tools for knives, scissors, chisels, and other cutting tools. The DMT products use finely dispersed diamonds on the surfaces of sharpeners. The acquired assets include over 50 patents and trademarks.

The purchase price was allocated to assets acquired and liabilities assumed as follows (in thousands):

Assets:
Accounts Receivable	$	1,145
Inventory		280
Equipment		262
Prepaid expenses		176
Intangible Assets		5,481
Total assets	$	7,344

Liabilities
Accounts Payable	$	192
Accrued Expense		181
Total liabilities	$	373

Assuming the assets of DMT were acquired on January 1, 2016, unaudited pro forma combined net sales for the three months ended March 31, 2016 for the Company would have been approximately $25.9 million. Unaudited pro forma combined net income for the three months ended March 31, 2016 for the Company would have been approximately $0.6 million.

On February 1, 2017, the Company purchased the assets of Spill Magic, Inc., located in Santa Ana, CA and Smyrna, TN for $7.2 million in cash. The Spill Magic products are leaders in absorbents that encapsulate spills into dry powders that can be safely disposed. Many large retail chains use its products to remove liquids from broken glass containers, oil and gas spills, bodily fluids and solvents.

The purchase price was allocated to assets acquired as follows (in thousands):

Assets:
Accounts receivable	$	684
Inventory		453
Equipment		296
Intangible assets		5,800
Total assets	$	7,233

Management’s assessment of the valuation of intangible assets is preliminary and finalization of the Company’s purchase price accounting assessment may result in changes to the valuation of the identified intangible assets. The Company will finalize the purchase price allocation as soon as practicable within the measurement period in accordance with Accounting Standards Codification Topic 805 “Business Combinations”.

Assuming Spill Magic asset were acquired on January 1, 2017, unaudited pro forma combined net sales for the three months ended March 31, 2017 for the Company would have been approximately $28.1 million. Unaudited pro forma combined net income for the three months ended March 31, 2017 for the Company would have been approximately $0.7 million.

Net sales for the three months ended March 31, 2017 attributable to Spill Magic products were approximately $1.2 million. Net income for the three months ended March 31, 2017 attributable to Spill Magic products was approximately $0.1 million.

Assuming Spill Magic assets were acquired on January 1, 2016, unaudited proforma combined net sales for the three months ended March 31, 2016, for the Company would have been approximately $26.8 million. Unaudited proforma combined net income for the three months ended March 31, 2016 for the Company would have been approximately $0.7 million.