Acquisition of Jaco Displays

12 Months Ended

Feb. 28, 2021

Note 13. Acquisition of Jaco Displays

On January 21, 2020, the Company acquired the net assets of Jaco Display Solutions, LLC. The aggregate purchase price was

760,787

in debt and other liabilities assumed

(non-cash

transaction). Jaco Display Solutions is a

value-add

provider of LCD embedded computing products and integrated display solutions. The acquisition of Jaco provides operating synergies and growth opportunities through product enhancement and channel expansion in the display solutions sector.

The following table summarizes the fair values of the assets acquired and liabilities assumed as of the closing date of the Jaco Display Solutions acquisition:


	Fair Value			Estimated Useful Life
Receivables	$	233,587		n/a
Inventory		100,000		n/a
Property and equipment		40,000		5 years
Customer relationships		333,000		3 years
Tradename		54,200		3 years

Total identifiable assets acquired	$	760,787

Accounts payable	$	(120,852	)	n/a
Customer deposits		(56,000	)	n/a
Notes payable		(583,935	)	n/a

Total liabilities assumed	$	(760,787	)

Net assets acquired	$	—

The total purchase consideration for the acquisition was allocated to identifiable assets purchased and liabilities assumed based on fair value. No portion of the purchase price was allocated to goodwill. The estimated fair value attributed to intangible assets was based on common valuation techniques performed by a third party valuation firm. The trademark was fair valued using the relief from royalty method. Key assumptions included estimating the fair royalty rate applied to projected revenues supported by the trademark to calculate gross royalty savings for the hypothetical license of the trademark. The valuation of customer relationships utilized an income approach and discounted cash flows taking into consideration the number of customer relationships acquired and estimated customer turnover.

The Company is recording amortization expense resulting from the intangibles acquired over the

three

-year useful life period. As the acquisition occurred at the end of Q4 in fiscal 2020, amortization expense was not recorded for fiscal 2020 as the amount was not material to the quarterly or annual results. Amortization expense recorded in fiscal 2021, which also represents accumulated amortization, approximated $140 thousand. $129 thousand in amortization expense will be recorded in fiscal 2022 with the remaining $118 thousand in fiscal 2023.