Quarterly report pursuant to Section 13 or 15(d)

Acquisition

v3.19.3
Acquisition
9 Months Ended
Sep. 30, 2019
Business Combinations [Abstract]  
Acquisition

NOTE 9 - ACQUISITION

 

On January 30, 2019, I.D. Systems completed the CarrierWeb US Acquisition. Aggregate consideration for the CarrierWeb US Acquisition was $3,500,000, consisting of (i) closing cash payment of $2,800,000, which consisted of cash of $2,150,000 and a credit bid by I.D. Systems in the amount of the aggregate principal amount plus accrued and unpaid interest outstanding under a $650,000 debtor-in-possession loan made by I.D. Systems to CarrierWeb on January 11, 2019, and (ii) $700,000 payment in April 2019, when CarrierWeb Ireland was restored to the Register of Companies in Ireland. The CarrierWeb US Acquisition was subject to the entry of a sale order by the United States Bankruptcy Court for the Northern District of Georgia approving such acquisition. The sale order was entered on January 28, 2019. In connection with the restoration of CarrierWeb Ireland to the Register of Companies in Ireland, I.D. Systems also made certain loans to CarrierWeb Ireland in the aggregate principal amount of $300,000.

 

On July 30, 2019, I.D. Systems, completed the CarrierWeb Ireland Acquisition. Consideration for the CarrierWeb Ireland Acquisition included (i) $550,000 in cash paid at closing, and (ii) 126,748 shares of I.D. Systems’ common stock, less (1) 55,783 shares for the satisfaction of aggregate principal amount plus accrued and unpaid interest outstanding under $300,000 loans, less (2) 43,706 shares held back with an estimated fair value of $250,000 which is included in accounts payable and accrued expenses in the Condensed Consolidated Balance Sheets.

 

The assets I.D. Systems acquired in the CarrierWeb Acquisitions will be integrated into the Company’s logistics visibility solutions and products. In connection with the CarrierWeb Acquisitions, I.D. Systems offered employment to all of the former employees of CarrierWeb and CarrierWeb Ireland. The CarrierWeb Acquisitions allow the Company to offer a full complement of highly-integrated logistics technology solutions to its current customers and prospects and immediately add customers and subscriber units. For the three- and nine-month periods ended September 30, 2019, I.D. Systems incurred acquisition-related expenses of approximately $(15,000) and $145,000, respectively, which are included in acquisition-related fees.

 

The purchase method of accounting in accordance with ASC805, Business Combinations, was applied for the CarrierWeb Acquisitions. This requires the total cost of an acquisition to be allocated to the tangible and identifiable intangible assets acquired and liabilities assumed based on their respective fair values at the date of acquisition with the excess cost accounted for as goodwill. Goodwill arising from the acquisition is attributable to expected product and sales synergies from combining the operations of the acquired business with those of the Company.

 

The following table summarizes the approximate preliminary purchase price allocation of CarrierWeb and CarrierWeb Ireland based on estimated fair values of the net assets acquired at the acquisition date:

 

Accounts receivable   $ 192,000  
Inventory     200,000  
Other assets     26,000  
Customer relationships     1,080,000  
Trademark and tradename     112,000  
Patents     1,121,000  
Goodwill (a)     2,044,000  
Net assets acquired   $ 4,775,000  

 

  (a) The goodwill is fully deductible for tax purposes.

 

The Company will finalize the purchase price allocation as soon as all the required information is available.

 

The results of operations of CarrierWeb and CarrierWeb Ireland have been included in the condensed consolidated statement of operations as of the effective date of acquisitions. For the three- and nine-month periods ended September 30, 2019, the CarrierWeb and CarrierWeb Ireland acquisitions contributed approximately $1,111,000 and $3,087,000, respectively, to I.D. Systems’ revenues. Operating income contributed by the CarrierWeb and CarrierWeb Ireland acquisitions was not separately identifiable due to Company’s integration activities and is impracticable to provide.

 

On July 31, 2017, I.D. Systems, together with its wholly-owned subsidiary Keytroller, acquired substantially all of the assets of Keytroller, LLC, a Florida limited liability company (the “Keytroller Acquisition”), pursuant to an asset purchase agreement (as amended, the “Keytroller Purchase Agreement”) by and among I.D. Systems, Keytroller, Keytroller, LLC, a Florida limited liability company (n/k/a Sparkey, LLC) (“Sparkey”) and the principals of Sparkey party thereto. Consideration for the Keytroller Acquisition included (i) $7,098,000 in cash paid at closing, (ii) 295,902 shares of I.D. Systems’ common stock issued at closing with a fair value of $2,000,000 and (iii) up to $3,000,000 of shares of I.D. Systems’ common stock as potential earn-out payments to be made on the first and second anniversaries of the closing date of the Keytroller Acquisition, computed in accordance with the terms of the Keytroller Purchase Agreement. The potential earn-out payments were estimated at a fair value of $2,683,000. During the fourth quarter of 2017, I.D. Systems paid a post-closing working capital adjustment of $275,000. On September 14, 2018, I.D. Systems issued 296,000 shares of its common stock for the earn-out payment for the twelve-month period ending on the first anniversary of the closing date of the Keytroller Acquisition. On August 17, 2019, I.D. Systems issued 147,951 shares of its common stock for the earn-out payment for the twelve-month period ending on the second anniversary of the closing date of the Keytroller Acquisition.