(3)	Acquisitions

Bassi Unipersonale S.r.l (“Bassi”)

On January 26, 2016, the Company, and its wholly-owned indirect subsidiary, Sevcon S.r.l., (“Sevcon Italy”) entered into a Quota Sale and Purchase Agreement with Bassi Holding S.r.l., (“Bassi Holding”) an Italian limited liability company, and the quota owners of Bassi Holding, to acquire all the outstanding quotas of Bassi, a limited liability company located in Lugo, Italy. Bassi designs, manufactures and sells battery chargers for electric vehicles and power management and uninterrupted power source systems for industrial, medical and telecom applications, as well as electronic instrumentation for battery laboratories. The principal reasons for the acquisition were to enable the Company to expand its addressable share of the high-growth electrification market and enhance earnings by adding an immediately accretive business.

In order to fund the cash element of the acquisition price, on January 27, 2016, the Company also entered into a Term Loan Agreement providing for a credit facility with Banca Monte dei Paschi di Siena S.p.A. The acquisition was closed on January 29, 2016.

Purchase Price

The total purchase price was approximately $19.1 million and included (1) cash consideration of €10.0 million ($10.8 million) and (2) 500,000 shares of the Company’s common stock ($4.8 million at the Company’s Closing Date stock price of $9.52) and (3) the fair value of assumed dividends payable to the former owner of Bassi, Bassi Holding of $3.5 million.

Sevcon Italy is required to distribute to the former owner of Bassi, Bassi Holding, outstanding dividends at fair value aggregating €3.23 million (approximately $3.5 million) in increments over a three-year period, post-closing.

During the six months ended April 2, 2016, the Company incurred $1.4 million in costs and expenses related to the Company’s acquisition of Bassi that are included in the consolidated statement of operations.

The Company accounted for the transaction using the acquisition method and, accordingly, the consideration has been allocated to the tangible and intangible assets acquired and liabilities assumed on the basis of their respective estimated fair values on the acquisition date. Goodwill resulting from this acquisition is largely attributable to the experienced workforce of Bassi and synergies expected to arise after the integration of Bassi’s products and operations into those of the Company. Goodwill resulting from this acquisition is not deductible for tax purposes. Identifiable intangible assets acquired as part of the acquisition included definite-lived intangible assets for developed technologies, customer relationships, order backlog and trade names, which are being amortized using the straight-line method over their estimated useful lives, as well as indefinite-lived intangible assets.

The fair value of the total consideration has been allocated based on the estimated fair values of assets acquired and liabilities assumed as follows (in thousands)

	(in thousands of dollars) January 29, 2016
Consideration

Cash				$	10,832

Common stock (500,000 shares of Sevcon, Inc.)					4,760

Fair value of pre-acquisition dividends payable to Bassi Holding					3,503

Fair value of total consideration				$	19,095

Recognized amounts of identifiable assets acquired and liabilities assumed:

Cash	$	1,577
Accounts receivable		3,318
Inventory		4,183
Property and equipment		923
Other assets		715
Accounts payable		(3,513	)
Accrued and other current liabilities		(2,020	)
Other long-term liabilities	$	(3,307	)	$	1,876

Estimated fair value of identifiable intangible assets acquired:

Developed technologies		325
Customer relationships		8,774
Trade name		758
Order backlog		325			10,182

Fair value of total consideration, excluding goodwill					12,058

Goodwill					7,037

Fair value of total consideration				$	19,095

The above fair value allocation is considered preliminary and is subject to revision during the measurement period. Management is in the process of completing its evaluation of acquired intangible assets. Additionally, the Company is in the process of validating the fair values of working capital including inventory and property and equipment.

The preliminary fair value of the assets acquired includes accounts receivable of $3,318,000. The gross amount due under contracts is $3,428,000 of which $110,000 is expected to be uncollectible.

Valuation of Intangible Assets Acquired

The following table sets forth the components of intangible assets acquired in connection with the Bassi acquisition (dollars in thousands):

	Amount Assigned		Amortization Period (in years)
Definite-lived intangible assets:
Developed technologies	$	325		10.0
Customer relationships		8,774		15.0
Trade name		758		10.0
Order backlog		325		1.0
Total intangible assets acquired	$	10,182

Actual Results of Bassi Acquisition

Bassi’s net revenues and operating income following the acquisition are included in the Company’s operating results for the period ended April 2, 2016 and were $4.0 million and $0.3 million, respectively.

Pro Forma Summary

The unaudited consolidated pro forma results for the six month periods ended April 2, 2016 and April 4, 2015 are set out in the table below. The pro forma consolidated results combine the results of operations of the Company and Bassi as though Bassi had been acquired on October 1, 2014 and include amortization charges for the acquired intangibles and interest expense related to the Company’s borrowings to finance the acquisition. The 2016 pro forma results were adjusted to exclude $1,417,000 of acquisition costs related to Bassi and $97,000 of non-recurring expense relating to the fair value adjustments to acquisition date inventory and property and equipment. The pro forma financial information is presented for informational purposes only and is not necessarily indicative of the results of operations that would have been achieved if the acquisition had taken place on October 1, 2014.

	(in thousands of dollars)
	Six months ended April 2, 2016			Six months ended April 4, 2015
Revenue	$	27,975		$	28,647
Net income (loss)	$	(123	)	$	636