Business Combination | Note 3 — Business Combinations The transactions below met the requirements to be considered a business combination under Accounting Standards Codification (“ASC”) 805. The accounts, affected for preliminary adjustments to reflect fair market values assigned to assets purchased and liabilities assumed, and results of operations, are included in the Company’s financial statements from the date of acquisition. The Company has allocated the purchase price to the tangible assets, identifiable intangible assets and liabilities based on their estimated fair market values at the acquisition date as required under ASC 805. The excess of the purchase price over the fair value of the net identifiable tangible assets, intangible assets and liabilities was recorded as goodwill. Acquisition of Summit Tooling and Summit Plastics MCT Holdings completed an acquisition of Summit Tooling and Summit Plastics LLC (“Summit Plastics”, collectively, “Summit”) on February 1, 2021 in which it acquired 100 percent of the equity interest of Summit. In conjunction with the equity purchase, the Company acquired the real estate in which Summit performs their operations. Summit Tooling designs and manufactures plastic injection molds and Summit Plastics provides molding of precision plastic components for a variety of industries. The primary reason for the acquisition was to expand the Company’s capabilities in manufacturing and expand its customer base of high-quality manufacturing and industrial technology companies in North America. The transaction was accounted for using the acquisition method of accounting and the fair value of the total purchase consideration transferred consisted of the following (in thousands): Cash $ 10,875 Fair value of total consideration transferred $ 10,875 The consideration excludes $892 of buyer transaction expenses that are included in other expenses within the accompanying Unaudited Condensed Consolidated Statements of Comprehensive Loss. The Company paid a transaction fee of $225 to an affiliate of the majority member of the Company. The goodwill recognized as part of the acquisition primarily reflects the value of the assembled workforce acquired and the value of future growth prospects and expected business synergies realized as a result of combining and integrating the acquired business into the Company’s existing platform. The goodwill recognized is partially deductible for tax purposes. The following table sets forth the fair values of the assets acquired and liabilities assumed in connection with the acquisition of Summit (in thousands): Recognized amounts of identifiable assets acquired and liabilities assumed Cash $ 40 Accounts receivable 627 Inventory 339 Fixed assets 4,371 Intangible assets 5,000 Total assets acquired 10,377 Accounts payable 40 Deferred revenue 776 Other current liabilities 95 Other noncurrent liabilities 1,323 Total liabilities assumed 2,234 Total identifiable net assets 8,143 Goodwill $ 2,732 Below is a summary of the intangible assets acquired in the acquisition (in thousands): Acquisition Date Estimated Life (Years) Trade name $ 400 5 Customer relationships 4,600 11 Total Intangible assets $ 5,000 The amounts of revenue and net loss of Summit since the acquisition date included in the Unaudited Condensed Consolidated Statements of Comprehensive Loss for the nine months ended September 30, 2021 are as follows (in thousands): Revenue $ 4,496 Net loss (1,029 ) Acquisition of PPC Incodema Holdings completed an acquisition of PPC on April 30, 2021 in which it acquired 100 percent of the membership interest of PPC. In conjunction with the equity purchase, the Company acquired the real estate in which PPC performs their operations. PPC is a manufacturing company that offers integrated engineering-to- small-run for medical, high-tech, automotive and metal stamping industries. The primary reason for the acquisition was to both expand the Company’s capabilities into metal stamping with high-quality manufacturing and industrial technology companies in North America. The transaction was accounted for using the acquisition method of accounting and the fair value of the total purchase consideration transferred consisted of the following (in thousands) Cash $ 25,721 Fair value of total consideration transferred $ 25,721 The consideration excludes $984 of buyer transaction expenses that are included in other expenses within the accompanying Unaudited Condensed Consolidated Statements of Comprehensive Loss. The Company paid a transaction fee of $264 to an affiliate of the majority member of the Company. The goodwill recognized as part of the acquisition primarily reflects the value of the assembled workforce acquired and the value of future growth prospects and expected business synergies realized as a result of combining and integrating the acquired business into the Company’s existing platform. The goodwill recognized is partially deductible for tax purposes. The following table sets forth the fair values of the assets acquired and liabilities assumed in connection with the acquisition of PPC (in thousands): Recognized amounts of identifiable assets acquired and liabilities assumed Cash $ 162 Accounts receivable 899 Inventory 480 Fixed assets 2,413 Intangible assets 14,200 Total assets acquired 18,154 Accounts payable 148 Accrued expenses 79 Total liabilities assumed 227 Total identifiable net assets 17,927 Goodwill $ 7,794 Below is a summary of the intangible assets acquired in the acquisition (in thousands): Acquisition Date Estimated Life Trade name $ 1,100 5 Customer relationships 13,100 17 Total intangible assets $ 14,200 The amounts of revenue and net loss of PPC since the acquisition date included in the Unaudited Consolidated Statements of Comprehensive Loss for the nine months ended September 30, 2021 are as follows (in thousands): Revenue $ 4,571 Net loss (262 ) Acquisition of Centex and Laser Incodema Holdings completed acquisitions of Centex and Laser on April 30, 2021 in which it acquired 100 percent of the equity interests of Centex and Laser. Both entities are wholly owned entities of Incodema Holdings. Centex is a top tier medical device manufacturing supplier and Laser provides high precision manufacturing services, combining state of the art technology with expert craftsmanship to deliver superior products. The acquisition is consistent with the Company’s mission to expand its high-quality manufacturing and industrial technology capabilities in North America. The transaction was accounted for using the acquisition method of accounting and the fair value of the total purchase consideration transferred consisted of the following (in thousands): Centex Laser Total Cash $ 11,774 $ 6,946 $ 18,720 Fair value of total consideration transferred $ 11,774 $ 6,946 $ 18,720 The consideration excludes $1,226 of buyer transaction expenses that are included in other expenses within the accompanying Unaudited Condensed Consolidated Statements of Comprehensive Loss. The Company paid a transaction fee of $190 to an affiliate of the majority member of the Company. The goodwill recognized as part of the acquisition primarily reflects the value of the assembled workforce acquired and the value of future growth prospects and expected business synergies realized as a result of combining and integrating the acquired businesses into the Company’s existing platform. The goodwill recognized is partially deductible for tax purposes. The following table sets forth the preliminary fair values of the assets acquired and liabilities assumed in connection with the acquisition of Centex and Laser (in thousands): Acquisition Date Fair Centex Laser Recognized amounts of identifiable assets acquired and liabilities assumed Cash $ — $ 68 Accounts receivable 1,775 900 Inventory 524 622 Prepaid expenses 108 1 Fixed assets 1,787 760 Intangible assets 6,243 3,557 Other assets 1 2 Total assets acquired 10,438 5,910 Accounts payable 252 568 Paycheck Protection Program (PPP) loan 649 — Accrued expenses 271 27 Other current liabilities 23 44 Other noncurrent liabilities 1,234 703 Total liabilities assumed 2,429 1,342 Total identifiable net assets $ 8,009 $ 4,568 Goodwill 3,765 2,378 Below is a summary of the intangible assets acquired in the acquisition (in thousands): Acquisition Estimated Life Trade name $ 510 5 Customer relationships 5,733 17 Total intangible assets $ 6,243 Acquisition Estimated Life Trade name $ 290 5 Customer relationships 3,267 17 Total intangible assets $ 3,557 The amounts of revenue and net loss of Centex since the acquisition date included in the Unaudited Condensed Consolidated Statements of Comprehensive Loss for the nine months ended September 30, 2021 are as follows (in thousands): Revenue $ 3,049 Net loss (1,102 ) The amounts of revenue and net income of Laser since the acquisition date included in the Unaudited Condensed Consolidated Statements of Comprehensive Loss for the nine months ended September 30, 2021 are as follows (in thousands): Revenue $ 2,707 Net income 425 Acquisition of Micropulse West Incodema Holdings completed an acquisition of Micropulse West on April 30, 2021 in which it acquired 100 percent of the membership interest of Micropulse West. Micropulse West is a full-service specialist offering a variety of services such as wire Electrical Discharge Machine (“EDM”), ram EDM, small hole EDM, CNC and manual machining/turning, surface grinding, and inspection. The acquisition is consistent with the Company’s mission to acquire high-quality manufacturing and industrial technology companies in North America. The transaction was accounted for using the acquisition method of accounting and the fair value of the total purchase consideration transferred consisted of the following (in thousands): Cash $ 12,452 Contingent consideration 1,295 Fair value of total consideration transferred $ 13,747 The consideration excludes $869 of buyer transaction expenses that are included in other expenses within the accompanying Unaudited Condensed Consolidated Statements of Comprehensive Loss. The Company paid a transaction fee of $130 to an affiliate of the majority member of the Company. The goodwill recognized as part of the acquisition primarily reflects the value of the assembled workforce acquired and the value of future growth prospects and expected business synergies realized as a result of combining and integrating the acquired businesses into the Company’s existing platform. The goodwill recognized is partially deductible for tax purposes. The following table sets forth the preliminary fair values of the assets acquired and liabilities assumed in connection with the acquisition of Micropulse West (in thousands): Recognized amounts of identifiable assets acquired and liabilities assumed Cash $ 70 Accounts receivable 866 Inventory 333 Other current assets 10 Fixed assets 2,490 Intangible assets 7,000 Total assets acquired 10,769 Accounts payable 139 Accrued expenses 13 Other current liabilities 99 Total liabilities assumed 251 Total identifiable net assets 10,518 Goodwill $ 3,229 Additional contingent consideration is due to the seller of Micropulse West. The earnout is based upon the Micropulse West’s reported earnings before interest, taxes, depreciation, and amortization for the trailing twelve- month period ending April 30, 2022. The maximum amount payable under the arrangement is $4,000. The Company expects that the aggregate undiscounted payments under the contingent consideration arrangement will range from $0 to $4,000. Below is a summary of the intangible assets acquired in the acquisition (in thousands): Acquisition Date Estimated Life Trade name $ 600 5 Customer relationships 6,400 17 Total intangible assets $ 7,000 The amounts of revenue and net loss of Micropulse West since the acquisition date included in the Unaudited Condensed Consolidated Statements of Comprehensive Loss for the nine months ended September 30, 2021 are as follows (in thousands): Revenue $ 3,022 Net loss (187 ) Supplemental and Unaudited Pro Forma Information The following unaudited supplemental pro forma information summarizes the combined results of operations for the above-described transactions as if the transactions had occurred on January 1, 2020 (in thousands). Nine months ended 2021 2020 Revenue $ 118,254 $ 111,945 Net income $ 2,261 $ (1,203 ) The supplemental and unaudited pro forma net income includes the following adjustments: • Adjustments to fair value write-up • Adjustments to property and equipment for the nine months ended September 30, 2021 and September 30, 2020 of $306 and $2,045, respectively. • Adjustments to intangible amortization for the nine months ended September 30, 2021 and September 30, 2020 of $773 and $5,349, respectively. • Adjustments to interest expense for the nine months ended September 30, 2021 and September 30, 2020 of $(8,902) and $4,129, respectively. The historical financial information has been adjusted by applying the Company’s accounting policies and giving effect to the pro forma adjustments, which consist of (i) amortization expense associated with identified intangible assets; (ii) depreciation of fixed asset step-up pre-acquisition step-up | Note 3 — Business Combination The transactions below met the requirements to be considered a business combination under ASC 805. The accounts, affected for preliminary adjustments to reflect fair market values assigned to assets purchased and liabilities assumed, and results of operations, are included in the Company’s Consolidated Financial Statements from the date of acquisition. The Company has allocated the purchase price to the tangible and identifiable intangible assets based on their estimated fair market values at the acquisition date as required under ASC 805. The excess of the purchase price over the fair value of the net identifiable tangible and intangible assets was recorded as goodwill. Acquisition of Kemeera, LLC. d/b/a FATHOM MCT Group Holdings, LLC completed an acquisition of Kemeera, LLC d/b/a FATHOM (“FATHOM”) on September 23, 2019 in which it acquired 100 percent of the membership interest of FATHOM. FATHOM provides a mix of prototype and production manufacturing services in addition to development and engineering services. FATHOM’s prototype services include 3D printing and additive manufacturing, CNC machining, urethane casting, tooling, injection molding, and part assembly and finishing. Additional services include industrial and engineering support and contract research and development projections. The primary reason for the acquisition was to expand the Company’s capabilities in 3-D The transaction was accounted for using the acquisition method of accounting and the fair value of the total purchase consideration transferred consisted of the following: Consideration (in thousands) Cash $ 26,912 Equity instruments 2,923 Fair value of total consideration transferred $ 29,835 The consideration excludes $1,094 of buyer transaction expenses that are included in other expenses within the accompanying Consolidated Statements of Comprehensive Loss. The following table sets forth the fair values of the assets acquired and liabilities assumed in connection with the acquisition of FATHOM (in thousands): Recognized amounts of identifiable assets acquired and liabilities assumed Cash and cash equivalents $ 125 Accounts receivable 2,298 Inventory 333 Prepaid expenses 351 Fixed assets 4,627 Intangible assets 14,100 Total assets acquired 21,834 Accounts payable 1,852 Accrued expenses 491 Other current liabilities 141 Taxes payable 158 Long-term debt 63 Total liabilities assumed 2,705 Total identifiable net assets 19,129 Goodwill $ 10,706 Below is a summary of the intangible assets acquired in the acquisition (in thousands): Acquisition Date Fair Value Estimated Life Trade name $ 4,300 15 Customer relationships 5,300 10 Developed technology 4,500 5 Total Intangible assets $ 14,100 The amounts of revenue and net (loss) income of FATHOM since the acquisition date included in the Consolidated Statements of Comprehensive Loss for the reporting periods are as follows: (in thousands) 2020 2019 Revenue $ 20,899 $ 6,569 Net income (loss) $ 370 $ (1,488 ) Acquisition of ICO Mold, LLC MCT Group Holdings, LLC completed an acquisition of ICO Mold, LLC and its subsidiary ICO Mold (Shenzhen), LLC (collectively, “ICO Mold”) on December 2, 2019 in which it acquired 100 percent of the membership interest of ICO Mold. ICO Mold is a custom plastic manufacturer servicing customers in a variety of industries that provides custom plastic injection molding, CNC machining of plastic and metal, and urethane casting. The primary reason for the acquisition was to both expand the Company’s capabilities into injection molding with high-quality manufacturing and industrial technology companies in North America and expand manufacturing capability in China. The transaction was accounted for using the acquisition method of accounting and the fair value of the total purchase consideration transferred consisted of the following: Consideration (in thousands) Cash $ 15,998 Equity instruments 3,219 Fair value of total consideration transferred $ 19,217 The consideration excludes $965 of buyer transaction expenses that are included in other expenses within the accompanying Consolidated Statements of Comprehensive Loss. The Company paid a transaction fee of $230 to an affiliate of the majority member of the Company. The following table sets forth the fair values of the assets acquired and liabilities assumed in connection with the acquisition of ICO Mold (in thousands): Recognized amounts of identifiable assets acquired and liabilities assumed Cash and cash equivalents $ 105 Accounts receivable 800 Inventory 88 Prepaid expenses 20 Fixed assets 62 Intangible assets 5,500 Total assets acquired 6,575 Accounts payable 678 Accrued expenses 194 Taxes payable 12 Total liabilities assumed 884 Total identifiable net assets 5,691 Goodwill $ 13,526 Below is a summary of the intangible assets acquired in the acquisition (in thousands): Acquisition Estimated Trade name $ 700 5 Customer relationships 3,500 6 Developed software 1,300 5 Total intangible assets $ 5,500 The amounts of revenue and net (loss) income of ICO Mold since the acquisition date included in the Consolidated Statements of Comprehensive Loss for the reporting periods are as follows: (in thousands) 2020 2019 Revenue $ 10,884 $ 672 Net income (loss) $ 641 $ (982 ) Acquisition of Incodema, LLC and Newchem, LLC Incodema Holdings, LLC completed acquisitions of Incodema, LLC (“Incodema”) and Newchem, LLC (“Newchem”) on July 27, 2020 in which it acquired 100 percent of the membership interests of Incodema and Newchem. Both entities are wholly owned entities of Incodema Holdings. Incodema is a prototype and short run sheet metal stamping provider which produces high quality items such as sheet metal stampings, intricate metal formings, short run production stamping, and laser cutting. Newchem is a photochemical milling company whose process involves coating material specified with a light sensitive polymer, imaging with a photo tool using UV light, developing and then chemically etching. The acquisition is consistent with the Company’s mission to expand its high-quality manufacturing and industrial technology capabilities in North America. The transaction was accounted for using the acquisition method of accounting and the fair value of the total purchase consideration transferred consisted of the following: Consideration (in thousands) Incodema Newchem Total Cash $ 30,948 $ 6,320 $ 37,268 Equity instruments $ 920 $ 183 $ 1,103 Contingent consideration $ 8,696 $ — $ 8,696 Fair value of total consideration transferred $ 40,564 $ 6,503 $ 47,067 The consideration transferred is subject to customary working capital settlements in the post-combination period. The consideration excludes $1,489 of buyer transaction expenses that are included in other expenses within the accompanying Consolidated Statements of Comprehensive Loss. The Company paid a transaction fee of $400 to an affiliate of the majority member of the Company. The following table sets forth the preliminary fair values of the assets acquired and liabilities assumed in connection with the acquisition of Incodema and Newchem (in thousands): Acquisition Date Fair Value Incodema Newchem Recognized amounts of identifiable assets acquired and liabilities assumed Cash and cash equivalents $ 63 $ 69 Accounts receivable 2,370 741 Inventory 735 487 Other current assets 3 1 Prepaid expenses 77 8 Fixed assets 2,277 1,949 Intangible assets 19,300 2,800 Total assets acquired 24,825 6,055 Accounts payable 324 223 Accrued expenses 110 35 Other current liabilities 286 61 Total liabilities assumed 720 319 Total identifiable net assets $ 24,105 $ 5,736 Goodwill 16,459 767 Additional contingent consideration is due to the seller of Incodema based upon the Gross Profit of a specified product sold by Incodema for the years ending December 31, 2020, 2021, and 2022. The Company expects that the aggregate undiscounted payments under the contingent consideration arrangement will be $3,260, $3,480 and $3,020 in the years ended December 31, 2021, 2022 and 2023, respectively. Below is a summary of the intangible assets acquired in the acquisition (in thousands): Acquisition Estimated Trade name $ 2,700 15 Customer relationships 11,500 9 Developed software 5,100 5 Total intangible assets $ 19,300 Acquisition Estimated Trade name $ 300 5 Customer relationships 2,500 16 Total intangible assets $ 2,800 The amounts of revenue and net (loss) income of Incodema since the acquisition date included in the Consolidated Statements of Comprehensive Loss for the reporting periods are as follows: (in thousands) 2020 Revenue $ 6,900 Net loss $ (1,085 ) The amounts of revenue and net income of Newchem since the acquisition date included in the Consolidated Statements of Comprehensive Loss for the reporting periods are as follows: (in thousands) 2020 Revenue $ 2,369 Net income $ 184 Acquisition of Dahlquist Machine, LLC Incodema Holdings, LLC completed an acquisition of Dahlquist Machine, LLC (“Dahlquist”) on December 16, 2020 in which it acquired 100 percent of the membership interest of Dahlquist. In conjunction with the equity purchase, the Company acquired the real estate in which Dahlquist Machine, LLC performs their operations. Dahlquist is a precision machining company with state-of-the-art The transaction was accounted for using the acquisition method of accounting and the fair value of the total purchase consideration transferred consisted of the following: Consideration (in thousands) Cash $ 16,098 Equity instruments 368 Contingent consideration 1,166 Fair value of total consideration transferred $ 17,632 fabricator and has evolved into one of the most progressive precision sheet metal products manufacturers in the nation. The acquisition is consistent with the Company’s mission to expand its high-quality manufacturing and industrial technology capabilities in North America. The transaction was accounted for using the acquisition method of accounting and the fair value of the total purchase consideration transferred consisted of the following: Consideration (in thousands) Cash $ 33,557 Equity instruments 1,471 Fair value of total consideration transferred $ 35,028 The consideration transferred is subject to customary working capital settlements in the post-combination period. The consideration excludes $1,145 of buyer transaction expenses that are included in other expenses within the accompanying Consolidated Statements of Comprehensive Loss. The Company paid a transaction fee of $361 to an affiliate of the majority member of the Company. The following table sets forth the preliminary fair values of the assets acquired and liabilities assumed in connection with the acquisition (in thousands): Recognized amounts of identifiable assets acquired and liabilities assumed Cash and cash equivalents $ — Accounts receivable 2,645 Inventory 1,184 Other current assets 30 Prepaid expenses 201 Fixed assets 4,229 Intangible assets 20,100 Total assets acquired 28,389 Accounts payable 244 Accrued expenses 231 Other current liabilities 644 Total liabilities assumed 1,119 Total identifiable net assets 27,270 Goodwill $ 7,758 Below is a summary of the intangible assets acquired in the acquisition (in thousands): Acquisition Estimated Trade name $ 1,500 5 Customer relationships 18,600 16 Total intangible assets $ 20,100 The amounts of revenue and net (loss) income of Majestic since the acquisition date included in the Consolidated Statements of Comprehensive Loss for the reporting periods are as follows: (in thousands) 2020 Revenue $ 911 Net loss $ (1,129 ) Other acquisitions Midwest Composite Technologies, LLC purchased substantially all assets and property, and agreed to assume certain liabilities of GPI Prototype & Manufacturing Services, LLC (“GPI”) on August 18, 2020 for a total consideration transferred of $2,441. The primary reason for the acquisition was to expand the Company’s capabilities in 3-D Incodema Buyer LLC completed an acquisition of Mark Two Engineering, LLC (“Mark Two”) on December 18, 2020 in which it acquired 100 percent of the membership interest of Mark Two for a total consideration transferred of $6,639. Mark Two is a contract manufacturing firm that specializes in rapid prototyping, complex high-precision component machining and manufacturing in the Medical Device and Aerospace industries. The acquisition is consistent with the Company’s mission to expand its high-quality manufacturing and industrial technology capabilities in North America. Supplemental and Unaudited Pro Forma Information The following unaudited supplemental pro forma information summarizes the combined results of operations for the above-described transactions as if the transactions had occurred on the following dates • January 1, 2018 for the FATHOM and ICO Mold transactions. • January 1, 2019 for the Incodema, Newchem, GPI, Dahlquist, Majestic, and Mark Two transactions. 2020 2019 Revenue $ 110,583 $ 97,020 Net income (loss) $ (7,441 ) $ (11,223 ) The supplemental and unaudited pro forma net income (loss) includes the following adjustments: • Adjustment to fair value write-up of inventory sold for the years ended December 31, 2020 and 2019 of $649 and $(649), respectively. • Adjustment to PPE depreciation for the years ended December 31, 2020 and 2019 of $2,282 and $2,139, respectively. • Adjustment to amortization of intangible assets for the years ended December 31, 2020 and 2019 of $3,821 and $7,223, respectively. • Adjustment to interest expense for the years ended December 31, 2020 and 2019 of $3,659 and $4,923, respectively. The historical financial information has been adjusted by applying the Company’s accounting policies and giving effect to the pro forma adjustments, which consist of (i) amortization expense associated with identified intangible assets; (ii) depreciation of fixed asset step-up pre-acquisition step-up |