Item 9.01
|
Financial Statements and Exhibits
|
(a)
|
Financial Statements of Business Acquired
|
The audited historical financial statements of Accutronics
for the most recent fiscal year ended August 31, 2015, are filed herewith in Exhibit 99.1. These financial statements were prepared and audited in accordance with United Kingdom Generally Accepted Accounting Standards. The Company utilized a
third party independent accounting firm to analyze any material differences between UK and US Generally Accepted Accounting Principles (US GAAP) for Accutronics. Based on this review and the due diligence performed by the Company, we are
not aware of any material differences requiring adjustment in the financial statements presented.
(b)
|
Pro Forma Financial Information
|
The pro forma financial information required by this item is presented
below. The financial information provided for Accutronics in the Pro Forma Financial Information has been recast to be consistent with the Companys fiscal year ended December 31, 2015.
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION
The following unaudited pro forma condensed combined financial statements are based on our historical consolidated financial statements and Accutronics
recasted historical financial statements as adjusted to give effect to the Companys acquisition of Accutronics. The unaudited pro forma condensed combined statement of operations for the twelve months ended December 31, 2015 gives effect
to the transaction had it occurred on January 1, 2015. The unaudited pro forma condensed combined balance sheet as of December 31, 2015 gives effect to the transaction had it occurred on January 1, 2015.
The assumptions and estimates underlying the unaudited adjustments to the pro forma condensed combined financial statements are described in the accompanying
notes, which should be read together with the pro forma combined financial statements.
The unaudited pro forma condensed combined financial statements
should be read together with the Companys historical financial statements, which are included in the Companys latest annual report on Form 10-K, and Accutronics historical information included herein. The financial information provided
for Accutronics in the unaudited pro forma condensed combined financial statements has been recast to be consistent with the Companys fiscal year ended December 31, 2015. Accutronics results for this twelve-month period are derived by
adding their results for the four months subsequent to its financial statements for its fiscal year ended August 31, 2015 and subtracting the comparable months from the preceding year.
Unaudited Pro Forma Condensed Combined Balance Sheet
Year Ended December 31, 2015
(In Thousands, Except Per Share Information)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
|
|
|
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Ultralife Corporation
and Subsidiaries
Historical
|
|
|
Accutronics Ltd
Historical
|
|
|
Pro Forma
Adjustments
|
|
|
Notes
|
|
Pro Forma
Combined
|
|
Current Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash, Cash Equivalents and Restricted Cash
|
|
$
|
14,533
|
|
|
$
|
1,304
|
|
|
-$
|
11,161
|
|
|
a
|
|
$
|
4,676
|
|
Trade Accounts Receivable
|
|
|
11,430
|
|
|
|
1,344
|
|
|
|
|
|
|
|
|
|
12,774
|
|
Inventories
|
|
|
23,814
|
|
|
|
2,093
|
|
|
|
|
|
|
|
|
|
25,907
|
|
Prepaid Expense and Other Current Assets
|
|
|
2,077
|
|
|
|
289
|
|
|
|
|
|
|
|
|
|
2,366
|
|
Deferred Income Taxes
|
|
|
92
|
|
|
|
|
|
|
|
|
|
|
|
|
|
92
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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Current Assets
|
|
|
51,946
|
|
|
|
5,030
|
|
|
|
-11,161
|
|
|
|
|
|
45,815
|
|
Property, Equipment and Improvements
|
|
|
9,038
|
|
|
|
368
|
|
|
|
|
|
|
|
|
|
9,406
|
|
Goodwill
|
|
|
16,283
|
|
|
|
|
|
|
|
4,383
|
|
|
b
|
|
|
20,666
|
|
Intangible Assets
|
|
|
3,946
|
|
|
|
|
|
|
|
4,776
|
|
|
c
|
|
|
8,722
|
|
Other Non-Current Assets
|
|
|
309
|
|
|
|
|
|
|
|
|
|
|
|
|
|
309
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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Total Assets
|
|
$
|
81,522
|
|
|
$
|
5,398
|
|
|
-$
|
2,002
|
|
|
|
|
$
|
84,918
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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Current Liabilities:
|
|
|
|
|
|
|
|
|
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|
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|
|
|
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Accounts Payable
|
|
$
|
6,494
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|
|
$
|
1,009
|
|
|
|
|
|
|
|
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$
|
7,503
|
|
Accrued Compensation and Related Benefits
|
|
|
2,377
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,377
|
|
Accrued Expenses and Current Liabilities
|
|
|
1,749
|
|
|
|
1,134
|
|
|
|
|
|
|
|
|
|
2,883
|
|
Income Taxes Payable
|
|
|
227
|
|
|
|
111
|
|
|
|
|
|
|
|
|
|
338
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10,847
|
|
|
|
2,254
|
|
|
|
|
|
|
|
|
|
13,101
|
|
Deferred Income Taxes
|
|
|
4,631
|
|
|
|
74
|
|
|
|
860
|
|
|
d
|
|
|
5,565
|
|
Other Non-Current Liabilities
|
|
|
28
|
|
|
|
209
|
|
|
|
|
|
|
|
|
|
237
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Liabilities
|
|
|
15,506
|
|
|
|
2,536
|
|
|
|
860
|
|
|
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|
18,902
|
|
Total Shareholders Equity
|
|
|
66,016
|
|
|
|
2,862
|
|
|
|
-2,862
|
|
|
e
|
|
|
66,016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Liabilities and Shareholders Equity
|
|
$
|
81,522
|
|
|
$
|
5,398
|
|
|
-$
|
2,002
|
|
|
|
|
$
|
84,918
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
Unaudited Pro Forma Condensed Combined Statement of Operations
Year Ended December 31, 2015
(In Thousands, Except Per Share Information)
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|
|
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|
|
|
|
|
|
|
|
|
|
|
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|
Ultralife Corporation
and Subsidiaries
Historical
|
|
|
Accutronics Ltd
Historical
|
|
|
Pro Forma
Adjustments
|
|
|
Notes
|
|
Pro Forma
Combined
|
|
Revenues
|
|
$
|
76,427
|
|
|
$
|
13,108
|
|
|
|
|
|
|
|
|
$
|
89,535
|
|
Cost of Products Sold
|
|
|
53,111
|
|
|
|
9,058
|
|
|
|
|
|
|
|
|
|
62,169
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
Gross Profit
|
|
|
23,316
|
|
|
|
4,050
|
|
|
|
|
|
|
|
|
|
27,366
|
|
Operating Expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research & Development
|
|
|
5,473
|
|
|
|
363
|
|
|
|
|
|
|
|
|
|
5,836
|
|
Selling, General & Administrative
|
|
|
14,128
|
|
|
|
2,433
|
|
|
|
|
|
|
|
|
|
16,561
|
|
Intangible Asset Amortization
|
|
|
235
|
|
|
|
0
|
|
|
|
370
|
|
|
f
|
|
|
605
|
|
Intangible Asset Impairment
|
|
|
150
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
150
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
19,986
|
|
|
|
2,795
|
|
|
|
370
|
|
|
|
|
|
23,151
|
|
Operating Income
|
|
|
3,330
|
|
|
|
1,255
|
|
|
|
-370
|
|
|
|
|
|
4,215
|
|
Other (Expense) Income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest Income (Expense), Net
|
|
|
-245
|
|
|
|
-63
|
|
|
|
|
|
|
|
|
|
-308
|
|
Miscellaneous
|
|
|
65
|
|
|
|
16
|
|
|
|
|
|
|
|
|
|
81
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-180
|
|
|
|
-48
|
|
|
|
|
|
|
|
|
|
-228
|
|
|
|
|
|
|
|
Income Before Income Taxes
|
|
|
3,150
|
|
|
|
1,207
|
|
|
|
-370
|
|
|
|
|
|
3,987
|
|
|
|
|
|
|
|
Income Tax Provision
|
|
|
310
|
|
|
|
120
|
|
|
|
-74
|
|
|
g
|
|
|
356
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income
|
|
|
2,840
|
|
|
|
1,087
|
|
|
|
-296
|
|
|
|
|
|
3,631
|
|
|
|
|
|
|
|
Net Loss Attributable to Non-Controlling Interest
|
|
|
29
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
29
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income Attrributable to Ultralife
|
|
|
2,869
|
|
|
|
1,087
|
|
|
|
-296
|
|
|
|
|
|
3,660
|
|
|
|
|
|
|
|
Net Income Per Share - Basic
|
|
$
|
0.18
|
|
|
$
|
0.07
|
|
|
-$
|
0.02
|
|
|
|
|
$
|
0.23
|
|
|
|
|
|
|
|
Net Income Per Share - Diluted
|
|
$
|
0.17
|
|
|
$
|
0.07
|
|
|
-$
|
0.02
|
|
|
|
|
$
|
0.22
|
|
|
|
|
|
|
|
Weighted Average Shares Outstanding - Basic
|
|
|
16,182
|
|
|
|
|
|
|
|
|
|
|
|
|
|
16,182
|
|
|
|
|
|
|
|
Weighted Average Shares Outstanding - Diluted
|
|
|
16,458
|
|
|
|
|
|
|
|
|
|
|
|
|
|
16,458
|
|
See accompanying notes to the Unaudited Pro Forma Condensed Combined Financial Information
Notes to the Unaudited Pro Forma Condensed Combined Financial Information
(In Thousands, Except Per Share Information)
Note 1 Basis of Presentation
The historical
consolidated financial statements have been adjusted in the pro forma condensed combined financial statements to give effect to the pro forma events that are (1) directly attributable to the business combination, (2) factually supportable
and (3) with respect to the pro forma condensed combined statement of operations, expected to have a continuing impact on the combined results following the business combination.
The business combination was accounted for under the acquisition method of accounting in accordance with ASC Topic 805, Business Combinations. As an acquirer
for accounting purposes, the Company has estimated the fair value of Accutronics assets acquired and liabilities assumed and ensured that the accounting policies of Accutronics were consistent with that of the Company.
The pro forma condensed combined financial statements do not necessarily reflect what the combined companys
financial condition or results of operations would have been had the acquisition occurred on the dates indicated. They also may not be useful in predicting the future financial condition and results of operations of the combined company. The actual
financial position and results of operations may differ significantly from the pro forma amounts reflected herein due to a variety of factors.
The
condensed combined pro forma financial information does not reflect the realization of any expected cost savings or other synergies from the acquisition of Accutronics as a result of restructuring activities, other cost savings initiatives or sales
synergies following the completion of the business combination.
Note 2 Foreign Currency and US GAAP Conversion
The recast historical financial information of Accutronics was prepared in accordance with United Kingdom Generally Accepted Accounting Standards and presented
in British Pounds Sterling. The recast historical information was translated from British Pounds Sterling to US Dollars using the following historical exchange rates:
|
|
|
|
|
|
|
$/£
|
|
Statement of Operations - 12 Month Average Exchange Rate for Year Ended December 31, 2015
|
|
|
1.57
|
|
Balance Sheet - Exchange Rate for Acquisition Date (January 13, 2016)*
|
|
|
1.45
|
|
*
|
The Balance Sheet translation rate was not materially different from the December 31, 2015 rate.
|
The Company
utilized a third party independent accounting firm to analyze any material differences between UK and US GAAP for Accutronics. Based on this review and the due diligence performed by the Company, we are not aware of any material differences
requiring adjustment in the pro forma condensed combined financial statements.
Note 3 Funding Transaction
The Company completed the acquisition of Accutronics for approximately £7.708 million (approximately $11.2 million) in cash. The Company utilized
monies from its general corporate funds for the acquisition.
Note 4 Preliminary Purchase Price Allocation
The Company has performed a preliminary valuation analysis of the fair market value of Accutronics assets and liabilities to identify, value and assign
estimated useful lives to intangible assets and to determine goodwill. The resulting valuation analysis is considered preliminary as it has not been audited by the Companys independent registered public accountant at the time of this filing.
The following table summarizes the allocation of the preliminary purchase price as of the acquisition date (in thousands):
|
|
|
|
|
Cash
|
|
$
|
1,304
|
|
Accounts Receivable
|
|
|
1,344
|
|
Inventory
|
|
|
2,093
|
|
Prepaids and Other Current Assets
|
|
|
289
|
|
Property, Plant & Equipment
|
|
|
368
|
|
Identifiable Intangible Assets
|
|
|
4,776
|
|
Goodwill
|
|
|
4,383
|
|
Accounts Payable
|
|
|
-1,009
|
|
Accrued Expenses
|
|
|
-1,134
|
|
Income Taxes Payable
|
|
|
-111
|
|
Non-Current Liabilities
|
|
|
-209
|
|
Deferred Income Taxes
|
|
|
-74
|
|
Deferred Taxes on Intangible Assets
|
|
|
-860
|
|
|
|
|
|
|
Total Consideration
|
|
$
|
11,161
|
|
|
|
|
|
|
The preliminary purchase price allocation has been used to prepare pro forma adjustments in the pro forma balance sheet and
income statement. The final purchase price allocation will be determined when the Companys allocation is audited. The final allocation could differ materially from the preliminary allocation used in the pro forma adjustments. The final audited
allocation may include (1) changes in allocations to intangible assets such as customer contracts and relationships, trade name and intellectual property as well as goodwill, (2) changes to deferred taxes and (3) other changes to
assets and liabilities.
Note 5 Pro Forma Adjustments
The pro forma adjustments are based on our preliminary estimates and assumptions that are subject to change. The following adjustments have been reflected in
the unaudited pro forma condensed combined financial information:
|
(a)
|
Represents the total aggregate purchase price for the acquisition of £7.708 million (approximately $11.2 million).
|
|
(b)
|
Reflects the adjustment to record goodwill associated with the acquisition of $4.383 million as shown in Note 4. The amount of the goodwill adjustment is based on the preliminary valuation analysis based on financial
data as of the Companys fiscal year ended December 31, 2015. The resulting valuation analysis is considered preliminary as it has not been audited by the Companys independent registered public accountant at the time of this filing.
|
|
(c)
|
Reflects the adjustment to allocate the purchase price to identifiable intangible assets as shown in Note 4. The Company performed an appraisal to
identify and value intangible assets, which they determined to be customer contracts and relationships, trade name and intellectual property. The fair value of the identifiable
|
|
intangible assets was determined using the income approach requiring a forecast of all of the expected future cash flows. The resulting valuation analysis is considered preliminary as
it has not been audited by the Companys independent registered public accountant at the time of this filing. The following table summarizes the estimated fair value, the estimated useful life and the estimated annual amortization for each of
the identifiable intangible assets resulting from the valuation analysis:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Estimated Fair
Value
|
|
|
Estimated
Useful Lives
in Years
|
|
Annual
Estimated
Amortization
Expense
|
|
|
|
($ 000s)
|
|
|
|
|
($ 000s)
|
|
Customer Contracts and Relationships
|
|
$
|
3,223
|
|
|
15
|
|
$
|
215
|
|
Trade Name
|
|
|
421
|
|
|
10
|
|
|
42
|
|
Intellectual Property
|
|
|
1,132
|
|
|
10
|
|
|
113
|
|
|
|
|
|
|
|
|
|
|
|
|
Pro Forma Adjustments
|
|
$
|
4,776
|
|
|
|
|
$
|
370
|
|
|
|
|
|
|
|
|
|
|
|
|
The unaudited estimates of fair value and estimated useful lives could differ from final amounts upon
completion of the Companys annual audit, and the difference could have a material effect on the accompanying unaudited pro forma condensed combined financial statements. A doubling or halving of the attrition estimates used to estimate the
fair value of the customer contracts and relationships could cause a corresponding increase or decrease in the balance between intangible assets and goodwill by approximately 11% to 12%. An increase or decrease in the estimated useful lives of the
identifiable intangible assets by five years could cause a corresponding change in the balance of intangible assets by approximately +5% or -16%, respectively, with the offset to goodwill. There would also be a corresponding impact to the annual
intangible amortization expense.
|
(d)
|
Reflects the adjustment to the deferred tax liabilities resulting from the acquisition. The estimated increase in deferred taxes liabilities stems from the fair value adjustments for non-deductible intangible assets
based on the long-term enacted corporation tax rate for the United Kingdom of 18%. The estimate of deferred income tax balances is preliminary and subject to change once the valuation analysis is audited by the Companys independent registered
public accountant. The following table summarizes the pro forma estimated deferred tax adjustment for each identifiable intangible asset:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Estimated Fair
Value
|
|
|
Estimated
Tax Rate
|
|
|
Deferred
Tax
|
|
|
|
($ 000s)
|
|
|
|
|
|
($ 000s)
|
|
Customer Contracts and Relationships
|
|
$
|
3,223
|
|
|
|
18
|
%
|
|
$
|
580
|
|
Trade Name
|
|
|
421
|
|
|
|
18
|
%
|
|
|
76
|
|
Intellectual Property
|
|
|
1,132
|
|
|
|
18
|
%
|
|
|
204
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pro Forma Adjustments
|
|
$
|
4,776
|
|
|
|
|
|
|
$
|
860
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(e)
|
Represents the adjustment to eliminate the shareholdersequity of Accutronics in accordance with purchase accounting for the acquisition.
|
|
(f)
|
Reflects the adjustment for the annual intangible asset amortization as described in Note 5 (c).
|
|
(g)
|
Reflects the income tax effect of pro forma adjustments based on the statutory UK tax rate for 2015.
|
Note
6 Non-Recurring Transaction Costs
The Company incurred non-recurring transaction costs of approximately $.25 million which are directly
attributable to the Accutronics acquisition. These costs, including one-time accounting, legal and due diligence services as well as stamp duties related to the acquisition of the UK-based company, were incurred in the first quarter of 2016
and, accordingly, are not reflected in the pro forma condensed combined financial statements presented herein.
99.1 Historical Audited Financial Statements for Accutronics for the Year Ended
August 31, 2015