v3.26.1
BUSINESS COMBINATION
 12 Months Ended
Jun. 30, 2026
Business Combination, Asset Acquisition, Transaction between Entities under Common Control, and Joint Venture Formation [Abstract]  
BUSINESS COMBINATION

3. BUSINESS COMBINATION

 

On February 9, 2026, we completed the acquisition of all of the issued and outstanding membership interests of APM, a manufacturer of precision machined components and assemblies for the medical, aerospace and defense industries. The aggregate purchase price was $8,650,000 of which $6,650,000 was paid in cash through a new term loan (Term Loan D) we borrowed from UMB Bank, N.A. (See Note 9) and $2,000,000 of which is to be paid by the Company under the terms of a sixty-three month promissory note (the “Subordinated Promissory Note”) issued to Advanced-Precision Machining Holding Company, Inc., the former owner of APM. The Subordinated Promissory Note bears interest at 8% per annum and requires twenty-one quarterly payments of principal and accrued interest in the approximate amount of $118,000. This Subordinated Promissory Note is subordinate to all debt issued under our Second Amended and Restated Credit and Security Agreement with UMB Bank, N.A.

 

The following table summarizes the consideration paid and the estimated fair value of the assets acquired and liabilities assumed for APM as of the acquisition date of February 9, 2026 (in thousands).

    
    APM Purchase Price Allocation  
Consideration:     
Cash   $6,650 
Promissory note payable to seller    2,000 
Total Consideration   $8,650 
      
Fair value of assets acquired and liabilities assumed:     
Cash   $155 
Inventory    875 
Accounts receivable    426 
Fixed assets    977 
Prepaids and other assets    57 
Tradename    210 
Customer relationships    510 
Accounts payable and accrued expenses    (502)
Long-term lease liabilities    (583)
Net assets acquired   $2,125 
Goodwill   $6,525 

 

The acquisition of APM was completed to support expansion of our business and broaden the Company’s customer base as well as to support the increased demand resulting from the contract extension executed with our largest customer in the second quarter of this fiscal year. We have accounted for this acquisition as a business combination using the acquisition method of accounting. This method requires, among other things, that assets acquired, and liabilities assumed in a business combination be recognized at their fair values as of the acquisition date.   Pro forma historical results of operations related to APM during the period prior to the acquisition date have not been presented because they are not material to our consolidated income statements.  The results of operations related to APM have been included in the Company’s consolidated income statements since the date of acquisition. While APM was acquired primarily for vertical integration, the consolidated income statement for the year ended June 30, 2026, includes $719,000 of revenue and $84,000 of income before income taxes, respectively, generated from APM. The fair value determination of assets recorded and liabilities assumed are those of management. The fair value determination of the customer relationships was based on the excess of earnings method which is based on the prospective net cash flows of the existing customers. The fair value determination of the trade name was based upon a relief from royalty approach which assesses the royalty savings an entity realizes since it owns the asset and isn’t required to pay a third-party license for its use. We incurred approximately $434,000 in acquisition-related costs which are primarily included in selling, general and administrative expenses. We expect that the APM goodwill in the amount of $6.5 million will be deductible for income tax purposes.