On October 1, 2019, we entered into an Asset Purchase Agreement (the “Paramount Purchase Agreement”) with Paramount Chemical Specialties, Inc. (“Paramount”). Pursuant to the Purchase Agreement, we purchased all of Paramount’s intangible assets, finished goods inventory, and assets used in connection with the manufacture, sale and distribution of the Kids N Pets^® and Messy Pet^® brands (collectively, the “Acquisition”).

The total consideration paid for the Acquisition was $5,500, plus or minus any inventory adjustment based on the value of finished goods inventory as of the closing compared to the target inventory of $223. Subsequently, the inventory adjustment of $83 increased the total consideration we paid to approximately $5,583.

In addition to the above consideration, the Paramount Purchase Agreement included contingent consideration, requiring us to pay Paramount 20% of brand-specific GAAP revenue in excess of $3,500 for each of calendar years 2021, 2022, 2023, and 2024 (the “Earnout Payment”).

The Company concluded that the Acquisition qualified as a business combination under ASC 805.

For the year ended December 31, 2019, we incurred approximately $116 of transaction costs related to the Acquisition. These expenses were recorded in general and administrative expense in the consolidated statement of operations.

The following summarizes the aggregate fair values of the assets acquired during 2019 as of the date of the Acquisition:

Inventories	$	306
Intangible assets		3,595
Goodwill		1,709
Total assets acquired	$	5,610

	Intangible Assets		Useful Life
Customer relationships - Walmart	$	1,900		13
Customer relationships - other customers		430		10
Trade names - Kids N Pets		700		25
Trade names - Messy Pet		180		10
Formulas and batching processes		370		10
Non-compete		15		5
	$	3,595

In addition to the assets described above, the Company recorded a $27 liability associated with the Earnout Payment, as fair valued through the use of a Monte Carlo Simulation. The Earnout Payment liability is presented in other liabilities on the consolidated balance sheets.

The estimates of the fair value of the assets acquired assumed at the date of the Acquisition are subject to adjustment during the measurement period (up to one year from the Acquisition date). The primary areas of the accounting for the Acquisition that are not yet finalized relate to the fair value of intangible assets acquired, residual goodwill and any related tax impact. The fair value of these net assets acquired are based on management’s estimates and assumptions, as well as other information compiled by management, including valuations that utilize customary valuation procedures and techniques. While the Company believes that such preliminary estimates provide a reasonable basis for estimating the fair value of assets acquired, it evaluates any necessary information prior to finalization of the fair value. During the measurement period, the Company will adjust assets if new information is obtained about facts and circumstances that existed as of the Acquisition date that, if known, would have resulted in the revised estimated values of those assets as of that date. The impact of all changes that do not qualify as measurement period adjustments are included in current period earnings. If the actual results differ from the estimates and judgments used in these fair values, the amounts recorded in the condensed consolidated financial statements could be subject to a possible impairment of the intangible assets or goodwill, or require acceleration of the amortization expense of intangible assets in subsequent periods.

Goodwill recorded in connection with the Acquisition represents, among other things, future economic benefits expected to be recognized from the Company’s expansion of the products it offers to the household segment, as well as expected future synergies and operating efficiencies from combining the acquired products with the brands we market and distribute. All of the recorded goodwill is tax-deductible.

The following table summarizes selected unaudited pro forma condensed consolidated statements of operations data for the years ended December 31, 2019 and 2018 as if the Paramount Acquisition had been completed on January 1, 2018.

	2019			2018
Net sales	$	30,834		$	39,918
Net (loss) income	$	(489	)	$	2,419

This selected unaudited pro forma condensed consolidated financial data is included only for the purpose of illustration and does not necessarily indicate what the operating results would have been if the Acquisition had been completed on that date. Moreover, this information does not indicate what our future operating results will be. The information for 2018 and 2019 prior to the Acquisition is based on prior accounting records maintained by Paramount. In some cases, Paramount’s accounting policies may differ materially from accounting policies adopted by the Company following the Acquisition. For 2019, this information includes actual operating results recorded in the financial statements for the period subsequent to the date of the Acquisition on October 1, 2019. The Company’s consolidated statements of operations for the year ended December 31, 2019 includes net sales and net income of $755 and $447, respectively, attributable to the Acquisition.

The pro forma amounts included in the table above reflect the application of accounting policies and adjustment of the results of the Acquisition to reflect: (1) the additional amortization that would have been charged to the acquired intangible assets; (2) additional interest expense relating to the borrowings on the our line of credit; and (3) the tax impacts.