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Subsequent Events
12 Months Ended
Dec. 31, 2014
Subsequent Events [Abstract]  
Subsequent Events

NOTE 20 - SUBSEQUENT EVENTS

 

As explained above in Note 18, on March 13, 2015, the Company received notification that the repayment demand in respect of French research and development claims for the years from 2009 to 2012 was to be reduced from $451,000 to $62,000. The charge for the reclaim had been established in the second and third quarters of 2014 but following the successful appeal $389,000 was released to income in the final quarter of the year.

 

On March 22, 2015, the Company entered into a Stock Purchase Agreement (the “Purchase Agreement”) with DDC (United Kingdom) Ltd., a subsidiary of Data Device Corporation (“DDC” or the “Purchaser’’), to sell all of the issued and outstanding shares of the common stock of the Company’s wholly owned subsidiary, EMRISE Electronics Ltd. (“EEL”), for a gross purchase price of $22 million, net of debt and transaction expenses and subject to a working capital adjustment (the “Transaction”). EEL, is the holding company for the electronic devices segment of the business. This segment constituted 68% of the Company’s sales in both 2014 and 2013 and operating profit of $3.8 million and $2.7 million in the year ended December 31, 2014 and 2013 respectively.

 

In connection with the Purchase Agreement, the Company and Purchaser have agreed to deposit $900,000 of the purchase price into escrow at the closing of the Transaction (the “Closing”) to secure certain indemnification obligations of the Company under the Purchase Agreement. This escrow amount will remain available for satisfaction of any indemnification claims until twelve months following the Closing, at which time any remaining balance not subject to outstanding and unresolved claims will be distributed to the Company.

 

In connection with the Company’s entry into the Purchase Agreement, certain individuals specified in the Purchase Agreement, including Graham Jefferies, our President and Chief Operating Officer, have entered into employment agreements with the Purchaser which shall become effective at Closing. The sale has been unanimously approved by the Board but will be subject to shareholder approval with a vote through a proxy process. Full details of the proposed transaction are contained in the Current Report on Form 8-K filed by the Company with the SEC on March 23, 2015. Shareholders will receive full details of the proxy and voting procedures in due course. The proposed sale followed a strategic review carried out by the Company over the preceding year. The Board also determined that, assuming the transaction receives shareholder approval, the Company’s communications business should also be sold and Emrise Corporation should be dissolved and liquidated completely after the consummation of the transaction. In this respect, the Board approved a Plan of Liquidation and Dissolution (the “Plan of Dissolution”). It is anticipated that under Delaware law that the execution of the Plan of Dissolution may take up to three years.