NOTE

– Acquisition of Business

March 8, 2016

, the Company closed on the acquisition of substantially all of the assets of BAMKO, Inc. (“BAMKO”). The transaction had an effective date of

March 1, 2016.

BAMKO is a full-service merchandise sourcing and promotional products company based in Los Angeles, CA. With sales offices in the United States and Brazil, as well as support offices in China, Hong Kong, and India, BAMKO serves many of the world’s most successful brands. The purchase price for the asset acquisition consisted of approximately

$15,161,000

in cash, net of cash acquired, the issuance of approximately

324,000

restricted shares of Superior’s common stock that vests over a

five

-year period, the potential future payment of approximately

$5,500,000

in additional contingent consideration through

2021,

and the assumption of certain liabilities of BAMKO. The transaction also includes the acquisition of BAMKO’s subsidiaries in Hong Kong, China, Brazil and England as well as an affiliate in India.

The foregoing description of the asset purchase agreement does

not

purport to be complete and is subject to, and qualified in its entirety by, the full text of

the agreement, which is filed as an exhibit to the Quarterly Report on Form

-Q filed on

April 28, 2016

Fair Value of Consideration Transferred

A summary of the purchase price is as follows:

Cash consideration at closing, net of cash acquired	$	15,161,000

Restricted shares of Superior common stock issued		4,558,000

Contingent consideration		5,205,000

Total Consideration	$	24,924,000

Assets Acquired and Liabilities Assumed

The total purchase price was allocated to t

he acquired tangible and intangible assets and assumed liabilities of BAMKO based on their estimated fair values as of

March 1, 2016.

The excess of the purchase price over the estimated fair values of the assets acquired and liabilities assumed was allocated to goodwill.

The followin

g table presents the allocation of the total fair value of consideration transferred, as shown above, to the acquired tangible and intangible assets and assumed liabilities of BAMKO based on their fair values as of the effective date of the transaction.

The following is our assignment of the aggregate consideration:

Accounts receivable	$	4,885,000

Prepaid expenses and other current assets		3,200,000

Inventories		236,000

Property, plant and equipment		199,000

Other assets		100,000

Identifiable intangible assets		11,360,000

Goodwill		6,994,000

Total assets	$	26,974,000

Accounts payable	$	1,314,000

Other current liabilities		736,000

Total liabilities	$	2,050,000

The

Company recorded

$11,360,000

in identifiable intangibles at fair value, consisting of

$2,090,000

in acquired customer relationships,

$370,000

in non-compete agreements from the former owners of BAMKO, and

$8,900,000

for the acquired trade name.

he estimated fair value for acquisition-related contingent consideration payable was

$5,368

,000

as of

September 30, 2017.

The Company will continue to evaluate this liability for remeasurement at the end of each reporting period and any change will be recorded in the Company's consolidated statement of comprehensive income. The carrying amount of the liability

may

fluctuate significantly and actual amounts paid

may

be materially different from the estimated value of the liability.

Goodwill was calculated as the di

fference between the fair value of the consideration and the values assigned to the assets acquired and liabilities assumed.

The intangible assets associated with the customer relationshi

ps are being amortized for

seven

years beginning on

March 1, 2016

and the non-compete agreement is being amortized for

five

years and

ten

months. The trade name is considered an indefinite-life asset and as such is

not

being amortized.

The Company recognized amortization expense on these acqui

red intangible assets of

90,000

for each of the

three

-month periods ended

September 30, 2017

and

2016

and

$271,000

and

$211,000

for the

nine

-month periods ended

September 30, 2017

and

2016,

respectively.

For the

three

and

nine

-month periods ended

September 30

2016,

the Company incurred and expensed transaction related expenses of approximately

$44

,000

and

$1,116

,000,

respectively. These amounts are included in selling and administrative expenses on the consolidated statements of comprehensive income.

n a pro forma basis as if the results of this acquisition had been included in our consolidated results for the entire

nine

-month period ended

September 30, 2016,

net sales would have increased approximately

$6,587

,000.

Net income for the

nine

-month period ended

September 30, 2016

would have increased approximately

$1,021,000

$0.07

per share.

August 21, 2017,

BAMKO acquired substantially all of the assets and assumed certain liabilities of PublicIdentity, Inc. (“

Public Identity”) of Los Angeles, CA. Public Identity is a promotional products and branded merchandise agency that provides innovative, high quality merchandise and promotional products to corporate clients and universities across the country.

The purchase price for the acquisition consisted of

$766,000

in cash, the issuance of approximately

54,000

restricted shares of Superior’s common stock and future payments of approximately

$440,000

in additional consideration through

2020.

The majority of the shares issued vest over a

three

-year period. The preliminary estimated fair value of the consideration transferred is approximately

$2,300,000.

Based upon our preliminary estimates of their acquisition date fair values, we have assigned approximately

$2,000,000

to identifiable intangible assets and approximately

$300,000

to goodwill. Our final fair value determinations

may

be significantly different.