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Acquisitions | 6 Months Ended
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Jun. 30, 2023
Acquisitions |
Acquisitions | Note 3 – Acquisitions Acquisition of Assets of SPEC Sensors and KWJ Engineering On December 16, 2022, we acquired substantially all of the assets of SPEC Sensors, LLC (“SPEC”), and KWJ Engineering, Inc. (“KWJ”) (collectively, “SPEC/KWJ”), two designers and manufacturers of gas, air and environmental quality sensors that were under common ownership, pursuant to an Asset Purchase Agreement, dated as of December 16, 2022 (the “Asset Purchase Agreement”), by and among the Company, SPEC/KWJ, and the respective equity holders of SPEC and KWJ. The Asset Purchase Agreement contains customary representations, warranties and covenants, including non-competition covenants. Under the terms of the Asset Purchase Agreement, the purchase price for both companies’ assets is $2,000,000 plus the amount by which the combined companies’ net working capital at closing is more than $1,350,000. At closing, the purchase price was preliminarily calculated as $2,269,000, of which $1,519,000 was paid to SPEC/KWJ, and $750,000 was paid into escrow against purchase price adjustments and potential claims for breaches of representations and warranties by SPEC/KWJ or the equity holders. Subsequent to the closing, the parties reached an agreement pursuant to which (i) the purchase price was reduced to $2,102,313 resulting from the determination that the closing date net working capital was $166,687 lower than was preliminarily calculated, with such funds having been distributed back to the Company from the escrow account in May 2023, and (ii) the remaining funds in the escrow account were released to SPEC/KWJ in May 2023 without prejudice to the Company’s rights in respect of breaches of representations, warranties or covenants. The following table summarizes the estimated fair values of the assets acquired and liabilities assumed at the acquisition date, giving effect to the post-closing purchase price adjustment (in thousands). ​
​ | ​ | ​ | ​
Cash |  | $ | 541
Accounts receivable | ​ |  | 306
Inventories | ​ |  | 952
Prepaid expenses and other current assets | ​ |  | 52
Property and equipment | ​ |  | 50
Deposits | ​ |  | 16
Accounts payable and accrued liabilities | ​ |  | (415)
Net identifiable assets acquired | ​ | ​ | 1,502
Developed technology | ​ | ​ | 134
Customer relationships | ​ | ​ | 96
Tradenames and trademarks | ​ | ​ | 47
In-process research and development | ​ | ​ | 29
Non-compete agreements | ​ | ​ | 26
Order backlog | ​ | ​ | 22
Goodwill | ​ |  | 246
Net assets acquired | ​ | $ | 2,102
​ After our December 31, 2022 and March 31, 2023 financial statements were issued, the valuation report for the acquired intangible assets was completed. Based on the results of that valuation report, we have revised the preliminarily allocated $650,000 of goodwill to be allocated as follows: $50,000 property and equipment, $134,000 developed technology, $96,000 customer relationships, $47,000 trademarks and tradenames, $29,000 in-process research and development, $26,000 non-compete agreements, $22,000 order backlog, and $246,000 goodwill. In addition, the changes in these provisional amounts resulted in an increase in amortization expense and accumulated amortization of $82,000 recorded in the three months ended June 30, 2023, of which $12,000 relates to the three months ended December 31, 2022, and $37,000 relates to the three months ended March 31, 2023. The fair value of accounts receivable is equal to the $306,000 gross contractual amount, as we expect the entire balance to be collectible. The goodwill recognized is attributable primarily to expected synergies and the assembled workforces of SPEC/KWJ. The goodwill is expected to be deductible for income tax purposes. Acquisition of Calman Technology Limited On March 17, 2023, we acquired all of the outstanding shares in Calman Technology Limited (“Calman”), a Scotland-based designer and manufacturer of membrane keypads, graphic overlays and printed electronics, pursuant to a Share Purchase Agreement (the “Share Purchase Agreement”) by and among the Company’s wholly owned United Kingdom subsidiary, Interlink Electronics Limited, and the shareholders of Calman. The Share Purchase Agreement contains customary representations, warranties and covenants, including non-competition covenants on the part of the sellers, who continue to be employed by Calman. Under the terms of the Share Purchase Agreement, the purchase price is GB£4,127,000 (approximately $4,912,000), of which GB£3,627,000 (approximately $4,317,000) was paid at closing and the remaining GB£500,000 (approximately $595,000) is being held back for up to nine months against potential claims for breaches of representations and warranties (subject to certain deductibles and caps). The purchase price was subject to adjustment based on the extent, if any, to which Calman’s net working capital at closing was more or less than GB£600,000 (approximately $714,000), which resulted in additional purchase consideration of approximately GB£1,292,000 (approximately $1,538,000). The following table summarizes the estimated fair values of the assets acquired and liabilities assumed at the acquisition date (in thousands). We are in the process of identifying and measuring the fair value of certain property and equipment assets, intangible assets, and working capital balances, and accordingly the following measurements of these assets and goodwill are provisional and subject to change. ​
​ | ​ | ​ | ​
Cash |  | $ | 1,577
Accounts receivable | ​ |  | 656
Inventories | ​ |  | 622
Prepaid expenses and other current assets | ​ |  | 12
Property, plant, and equipment | ​ |  | 146
Right-of-use assets | ​ |  | 91
Accounts payable and accrued liabilities | ​ |  | (615)
Lease liabilities | ​ |  | (91)
Net identifiable assets acquired | ​ |  | 2,398
Goodwill | ​ |  | 4,052
Net assets acquired | ​ | $ | 6,450
​ The fair value of accounts receivable is equal to the $656,000 gross contractual amount, as we expect the entire balance to be collectible. The goodwill recognized is attributable primarily to expected synergies and the assembled workforce of Calman. The goodwill is not expected to be deductible for income tax purposes. The following represents the pro forma consolidated statement of operations as if both SPEC/KWJ and Calman had been included in our consolidated results for the periods ended June 30, 2023 and 2022 (unaudited): ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ |  | Pro Forma |  | Pro Forma
​ | ​ | Three Months Ended June 30, | ​ | Six Months Ended June 30,
​ |  | 2023 |  | 2022 |  | 2023 |  | 2022
​ | ​ | (in thousands)
Revenue | ​ | $ | 4,049 | ​ | $ | 3,978 | ​ | $ | 8,088 | ​ | $ | 8,177
Net income (loss) | ​ | $ | 381 | ​ | $ | 86 | ​ | $ | 677 | ​ | $ | 908
​

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