UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Amendment No. 1)
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of Earliest Event
Reported):
(Exact Name of Registrant as Specified in Charter)
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| of Incorporation) | File Number) | Identification No.) |
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(
(Registrant’s telephone number, including area code)
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
| Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
| Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| Pre-commencement communications pursuant to Rule 13e-4(c)) under the Exchange Act (17 CFR 240.13e-4(c)) |
Securities registered pursuant to Section 12(b) of the Act:
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Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
Explanatory Note
On March 23, 2023, Interlink Electronics, Inc. (“Interlink” or the “Company”) filed a Current Report on Form 8-K (the “Original Report”) to report that it acquired all of the outstanding shares in Calman Technology Limited (the “Transaction”) as of March 17, 2023.
| Item 9.01 | Financial Statements and Exhibits. |
| (a) | Financial statements of businesses or funds acquired. |
The audited financial statements of Calman Technology Limited as of and for the years ended September 30, 2022 and 2021, and the related notes thereto, are included as Exhibit 99.1 to this Current Report and are incorporated herein by reference.
The unaudited condensed balance sheets of Calman Technology Limited as of December 31, 2022 and September 30, 2022, the unaudited condensed statements of earnings, stockholders’ equity and cash flows of Calman Technology Limited for the three months ended December 31, 2022 and 2021, and the related notes thereto, are included as Exhibit 99.2 to this Current Report and are incorporated herein by reference.
| (b) | Pro forma financial information. |
The unaudited pro forma condensed combined financial statements of Interlink Electronics, Inc. are included as Exhibit 99.3 to this Current Report and are incorporated herein by reference. The unaudited pro forma condensed combined financial statements of Interlink Electronics, Inc. are comprised of the unaudited pro forma condensed combined balance sheet as of December 31, 2022, the unaudited pro forma condensed combined statement of operations for the year ended December 31, 2022, and the related notes thereto.
The unaudited pro forma condensed combined financial statements were derived from the separate historical financial statements of Interlink Electronics, Inc. and of Calman Technology Limited. These pro forma financial statements may not necessarily reflect what our results of operations and financial position would have been had the Transaction occurred during the periods presented in the pro forma financial statements, or what our results of operations and financial position will be in the future.
| 2 |
| (d) | Exhibits. |
| 3 |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| Date: June 2, 2023 | INTERLINK ELECTRONICS, INC. | |
| By: | /s/ Ryan J. Hoffman | |
| Ryan J. Hoffman | ||
| Chief Financial Officer | ||
| 4 |
Exhibit 23
Consent of Independent Accountants
We hereby consent to the incorporation by reference in the Registration Statements on Form S-3 (No. 333-261602 and 333-261603) and Form S-8 (No. 333-250142) of Interlink Electronics, Inc., of our report dated June 2, 2023, relating to the financial statements of Calman Technology Limited, which appears in this Amendment No. 1 to Current Report on Form 8-K/A.
/s/ LMHS, P.C.
Norwell, MA
June 2, 2023
Exhibit 99.1
CALMAN TECHNOLOGY LIMITED
AUDITED FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 2022 AND 2021
CALMAN TECHNOLOGY LIMITED
AUDITED FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 2022 AND 2021
| Page | |
| INDEPENDENT AUDITORS’ REPORT | 1-2 |
| FINANCIAL STATEMENTS: | |
| Balance Sheets | 3 |
| Statements of Earnings | 4 |
| Statements of Stockholders’ Equity | 5 |
| Statements of Cash Flows | 6 |
| Notes to Financial Statements | 7-9 |
INDEPENDENT AUDITORS’ REPORT
To The Stockholders
Calman Technology Limited
Irvine, Ayrshire, United Kingdom
Opinion
We have audited the financial statements of Calman Technology Limited, which comprise the balance sheets as of September 30, 2022 and 2021, and the related statements of earnings, stockholders’ equity, and cash flows for the years then ended, and the related notes to the financial statements.
In our opinion, the accompanying financial statements present fairly, in all material respects, the financial position of Calman Technology Limited as of September 30, 2022, and 2021, and the results of its operations and its cash flows for the years then ended in accordance with accounting principles generally accepted in the United States of America.
Basis for Opinion
We conducted our audits in accordance with auditing standards generally accepted in the United States of America (GAAS). Our responsibilities under those standards are further described in the Auditors’ Responsibilities for the Audit of the Financial Statements section of our report. We are required to be independent of Calman Technology Limited, and to meet our other ethical responsibilities, in accordance with the relevant ethical requirements relating to our audits. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Responsibilities of Management for the Financial Statements
Management is responsible for the preparation and fair presentation of the financial statements in accordance with accounting principles generally accepted in the United States of America, and for the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, management is required to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about Calman Technology Limited’s ability to continue as a going concern for one year after the date that the financial statements are issued.
Auditors’ Responsibilities for the Audit of the Financial Statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditors’ report that includes our opinion. Reasonable assurance is a high level of assurance but is not absolute assurance and therefore is not a guarantee that an audit conducted in accordance with GAAS will always detect a material misstatement when it exists. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Misstatements are considered material if there is a substantial likelihood that, individually or in the aggregate, they would influence the judgment made by a reasonable user based on the financial statements.
In performing an audit in accordance with GAAS, we:
| · | Exercise professional judgment and maintain professional skepticism throughout the audit. |
| · | Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, and design and perform audit procedures responsive to those risks. Such procedures include examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. |
| · | Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of Calman Technology Limited’s internal control. Accordingly, no such opinion is expressed. |
| · | Evaluate the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluate the overall presentation of the financial statements. |
| · | Conclude whether, in our judgment, there are conditions or events, considered in the aggregate, that raise substantial doubt about Calman Technology Limited’s ability to continue as a going concern for a reasonable period of time. |
We are required to communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit, significant audit findings, and certain internal control-related matters that we identified during the audit.
/s/ LMHS, P.C.
Norwell, Massachusetts
June 2, 2023
CALMAN TECHNOLOGY LIMITED
BALANCE SHEETS
SEPTEMBER 30, 2022 AND 2021
| 2022 | 2021 | |||||||
| ASSETS | ||||||||
| CURRENT ASSETS: | ||||||||
| Cash | $ | 1,432,344 | $ | 1,337,648 | ||||
| Accounts Receivable | 465,867 | 502,503 | ||||||
| Inventory | 566,767 | 153,808 | ||||||
| Prepaid Expenses and Other | 16,656 | 23,017 | ||||||
| 2,481,634 | 2,016,976 | |||||||
| PROPERTY AND EQUIPMENT: | ||||||||
| Furniture and Fixtures | 40,706 | 49,125 | ||||||
| Leashold Improvements | 42,650 | 51,470 | ||||||
| Machinery and Equipment | 687,324 | 826,540 | ||||||
| 770,680 | 927,135 | |||||||
| Accumulated Depreciation | (620,524 | ) | (700,827 | ) | ||||
| 150,156 | 226,308 | |||||||
| $ | 2,631,790 | $ | 2,243,284 | |||||
| LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||||
| CURRENT LIABILITIES: | ||||||||
| Current Portion of Long-Term Debt | $ | 33,510 | $ | 20,220 | ||||
| Accounts Payable and Accrued Expenses | 349,535 | 225,032 | ||||||
| Corporate Income Taxes Payable | 263,238 | 148,779 | ||||||
| Due To Officers | - | 280,873 | ||||||
| 646,283 | 674,904 | |||||||
| LONG-TERM LIABILITIES: | ||||||||
| Long-Term Debt, Net of Current Portion | 117,285 | 181,980 | ||||||
| STOCKHOLDERS' EQUITY: | ||||||||
| Common Stock, Par Value GB£1; 100,000 Shares Authorized, 43,199 Issued and Outstanding | 58,232 | 58,232 | ||||||
| Additional Paid-In Capital | 30,534 | 30,534 | ||||||
| Retained Earnings | 2,127,848 | 1,250,021 | ||||||
| Accumulated Other Comprehensive Income (Loss) | (348,392 | ) | 47,613 | |||||
| 1,868,222 | 1,386,400 | |||||||
| $ | 2,631,790 | $ | 2,243,284 | |||||
See Notes to Financial Statements
3
CALMAN TECHNOLOGY LIMITED
STATEMENTS OF EARNINGS
YEARS ENDED SEPTEMBER 30, 2022 AND 2021
| 2022 | 2021 | |||||||
| NET SALES | $ | 3,351,865 | $ | 2,795,888 | ||||
| COST OF GOODS SOLD: | ||||||||
| Purchases, Net | 775,946 | 810,307 | ||||||
| Consumables | 8,152 | 9,566 | ||||||
| 784,098 | 819,873 | |||||||
| GROSS PROFIT | 2,567,767 | 1,976,015 | ||||||
| OPERATING AND ADMINISTRATIVE EXPENSES: | ||||||||
| Salaries, Wages, and Benefits | 746,193 | 736,566 | ||||||
| General and Administrative Expenses | 281,123 | 273,022 | ||||||
| 1,027,316 | 1,009,588 | |||||||
| EARNINGS FROM OPERATIONS | 1,540,451 | 966,427 | ||||||
| OTHER INCOME AND (EXPENSE): | ||||||||
| Interest Income | 801 | 1,119 | ||||||
| Other Income | 1,056 | - | ||||||
| Interest Expense | (3,458 | ) | - | |||||
| Gain on Foreign Currency Transactions | 6,848 | 440 | ||||||
| 5,247 | 1,559 | |||||||
| EARNINGS BEFORE INCOME TAXES | 1,545,698 | 967,986 | ||||||
| INCOME TAXES | 301,620 | 151,063 | ||||||
| NET EARNINGS | $ | 1,244,078 | $ | 816,923 | ||||
See Notes to Financial Statements
4
CALMAN TECHNOLOGY LIMITED
STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED SEPTEMBER 30, 2022 AND 2021
| Accumulated | ||||||||||||||||||||
| Additional | Other | |||||||||||||||||||
| Common | Paid-In | Retained | Comprehensive | |||||||||||||||||
| Stock | Capital | Earnings | Earnings | Total | ||||||||||||||||
| Balance, October 1, 2020 | $ | 58,232 | $ | 30,534 | $ | 1,136,374 | $ | 9,568 | $ | 1,234,708 | ||||||||||
| Comprehensive Income: | ||||||||||||||||||||
| Net Earnings | - | - | 816,923 | - | 816,923 | |||||||||||||||
| Other Comprehensive: | ||||||||||||||||||||
| Gain (Loss) on Foreign | ||||||||||||||||||||
| Currency Translation | - | - | - | 38,045 | 38,045 | |||||||||||||||
| Comprehensive Income | - | - | 816,923 | 38,045 | 854,968 | |||||||||||||||
| Dividends to Stockholders | - | - | (703,276 | ) | - | (703,276 | ) | |||||||||||||
| Balance, September 30, 2021 | 58,232 | 30,534 | 1,250,021 | 47,613 | 1,386,400 | |||||||||||||||
| Comprehensive Income: | ||||||||||||||||||||
| Net Earnings | - | - | 1,244,078 | - | 1,244,078 | |||||||||||||||
| Other Comprehensive: | ||||||||||||||||||||
| Gain (Loss) on Foreign | ||||||||||||||||||||
| Currency Translation | - | - | - | (396,005 | ) | (396,005 | ) | |||||||||||||
| Comprehensive Income | - | - | 1,244,078 | (396,005 | ) | 848,073 | ||||||||||||||
| Dividends to Stockholders | - | - | (366,251 | ) | - | (366,251 | ) | |||||||||||||
| Balance, September 30, 2022 | $ | 58,232 | $ | 30,534 | $ | 2,127,848 | $ | (348,392 | ) | $ | 1,868,222 | |||||||||
See Notes to Financial Statements
5
CALMAN TECHNOLOGY LIMITED
STATEMENTS OF CASH FLOWS
YEARS ENDED SEPTEMBER 30, 2022 AND 2021
| 2022 | 2021 | |||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||
| Net Earnings | $ | 1,244,078 | $ | 816,923 | ||||
| Noncash Items Included in Net Earnings: | ||||||||
| Depreciation | 45,604 | 23,741 | ||||||
| (Increase) Decrease In: | ||||||||
| Accounts Receivable | 36,636 | (250,682 | ) | |||||
| Inventory | (412,959 | ) | (22,696 | ) | ||||
| Prepaid Expenses and Other | 6,361 | (4,813 | ) | |||||
| Increase (Decrease) In: | ||||||||
| Accounts Payable and Accrued Expenses | 124,503 | 114,510 | ||||||
| Corporate Income Taxes Payable | 114,459 | 3,109 | ||||||
| Due To Officers | (280,873 | ) | 89,488 | |||||
| 877,809 | 769,580 | |||||||
| CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||
| Additions to Property and Equipment | (2,778 | ) | (150,680 | ) | ||||
| CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||
| New Borrowings: | ||||||||
| Long-Term Debt | - | 202,200 | ||||||
| Debt Reduction: | ||||||||
| Long-Term Debt | (51,405 | ) | - | |||||
| Dividends Paid | (366,251 | ) | (703,276 | ) | ||||
| (417,656 | ) | (501,076 | ) | |||||
| EFFECT OF EXCHANGE RATE CHANGES ON CASH | (362,679 | ) | 40,356 | |||||
| NET INCREASE (DECREASE) IN CASH | 94,696 | 158,180 | ||||||
| CASH - BEGINNING | 1,337,648 | 1,179,468 | ||||||
| CASH - ENDING | $ | 1,432,344 | $ | 1,337,648 | ||||
| SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION | ||||||||
| Cash Paid During The Year For: | ||||||||
| Interest | $ | 3,458 | $ | - | ||||
| Income Taxes | $ | 301,620 | $ | 151,063 | ||||
See Notes to Financial Statements
6
CALMAN TECHNOLOGY LIMTIED
NOTES TO FINANCIAL STATEMENTS
| A. | ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: |
| 1. | Organization - Calman Technology Limited (“Calman” or the “Company”) is a corporation organized under the laws of the United Kingdom and commenced operations on June 15, 1992. |
| 2. | Operations - The Company, based outside Glasgow, Scotland, has over 25 years of experience in the design and manufacture of membrane keypads, graphic overlays and printed electronics. |
| 3. | Method of Accounting - The Company’s policy is to prepare its financial statements on the accrual method of accounting whereby revenues are recognized when earned and expenses are recognized when incurred. This method of accounting conforms to generally accepted accounting principles (GAAP). |
| 4. | Functional Currency Translation - The functional currency of the Company is the Pound Sterling (£). The assets and liabilities of the Company are translated at year-end rates of exchange, and the statements of earnings and comprehensive income accounts are translated at the average rates of exchange for the period. The resulting translation adjustments are reported as a component of accumulated other comprehensive income within stockholders’ equity. Net foreign currency translation gains/(losses) included in comprehensive income amounted to ($396,005) and $38,045 for the years ended September 30, 2022 and 2021, respectively. |
| 5. | Concentration of Credit Risk - Financial instruments that potentially subject the Company to concentrations of credit risk consist primarily of deposits in excess of insured limits and accounts receivable. These risks are managed by maintaining all deposits in high quality financial institutions and obtaining signed sales orders, and/or establishing credit limits with all customers. Management believes that the Company is not exposed to any significant credit risk as a result of these credit concentrations. |
| 6. | Cash and Cash Equivalents - For purposes of the statements of cash flows, the Company considers all highly liquid investments available for current use with an initial maturity of three months or less to be cash equivalents. |
| 7. | Inventory - The Company’s inventory is valued at the lower of cost (first-in, first-out) or market. |
| 8. | Property and Equipment - Property and equipment are recorded at cost. Maintenance and repairs are charged to expense as incurred whereas major betterments are capitalized. Depreciation is computed using the declining balance method over the assets estimated useful life ranging from three to ten years. |
| 9. | Fair Value of Financial Instruments - The Company’s financial instruments include cash and cash equivalents, accounts receivable, accounts payable, accrued expenses, and long-term debt. The recorded values of cash and cash equivalents, accounts receivable, accounts payable, and accrued expenses approximate their fair values based on their short-term nature. The recorded values of long-term debt approximate their fair values, as current interest rates approximate market rates. |
7
CALMAN TECHNOLOGY LIMTIED
NOTES TO FINANCIAL STATEMENTS
(Continued)
| A. | ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (Continued) |
| 10. | Revenue Recognition - The Company recognizes revenue in accordance with Topic 606 of the Financial Accounting Standards Board Accounting Standards Codification. Revenue from contracts with customers is recognized when, or as, the Company satisfies its performance obligations by transferring goods or services to customers. A good or service is transferred to a customer when, or as, the customer obtains control of that good or service. A performance obligation may be satisfied over time or at a point in time. Revenue from a performance obligation satisfied at a point in time is recognized at the point in time that the Company determines the customer has obtained control over the promised good or service. The amount of revenue recognized reflects the consideration of which the Company expects to be entitled in exchange for the promised goods or services. Revenue is recognized when orders are shipped or services are rendered. All revenue for the years ended September 30, 2022 and 2021 was determined to be performance obligations satisfied at a point in time. |
| 11. | Income Taxes - The Company is obliged to file income tax returns within the United Kingdom. Taxes are provided based upon earnings and tax rates applicable to the Company using the method of accounting described above. |
Deferred income taxes are provided for differences in timing in reporting income for financial statement and tax purposes arising principally from differences in the methods of accounting for allowances for bad debts, accrued absences, and depreciation. Bad debts are reported for tax purposes on the direct write-off method and for financial statement purposes on the allowance method. Accrued absences are reported for tax purposes on the cash method and for financial statement purposes on the accrual method. Depreciation is reported for tax purposes over shorter periods of time and at a more accelerated rate than the method for financial statement purposes. Deferred tax assets and liabilities are classified as current or non-current in the accompanying balance sheets, based upon classification of the related asset or liability.
| 12. | General and Administrative Expenses - These expenses are charged to operations as incurred and are not allocated to cost of sales. |
| 13. | Freight - The Company includes freight in as a component of inventory and freight out as pat of cost of sales. |
| 14. | Use of Estimates - The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates. |
| B. | ACCOUNTS RECEIVABLE: |
The Company utilizes the allowance method to account for uncollectible accounts receivable balances. Under the allowance method, an estimate of uncollectible customer balances is made based on the Company’s prior history and other factors such as the credit quality of the customer and economic conditions of the market. Based on these factors, at September 30, 2022 and 2021, no allowances for doubtful accounts were recorded.
| C. | INVENTORY, NET: |
Inventory, both materials and finished goods, consists primarily of materials and components used in the manufacture and assembly of membrane keypads, graphic overlays, and printed electronics. Inventory was valued at $566,767 and $153,808 on September 30, 2022 and 2021, respectively.
| D. | DUE TO OFFICERS: |
Amounts due to officers are unsecured, temporary in nature, and non-interest bearing. At September 30, 2022 and 2021, the amounts due to officers were zero, and $280,873, respectively.
8
CALMAN TECHNOLOGY LIMTIED
NOTES TO FINANCIAL STATEMENTS
(Continued)
| E. | CORONAVIRUS BUSINESS INTERRUPTION LOAN: |
On March 29, 2021, the Company received loan proceeds from the Bank of Scotland in the amount of $202,200 under the Coronavirus Business Interruption Loan Scheme (CBIL). The CBIL provides for loans to qualifying businesses that have been negatively impacted by COVID-19. The loan bears interest at 3.10%, is unsecured, and matures in May 2027. Monthly installments of approximately $3,370 plus interest commenced in April 2022. At September 30, 2022 and 2021, the amounts outstanding on this loan were $150,795 and $202,200, respectively.
| F. | OPERATING LEASES: |
The Company leases its manufacturing, distribution and office space in Irvine, Scotland under a lease expiring February 28, 2023. Rent expense for the years ended September 30, 2022 and 2021 amounted to $43,468 and $43,066 respectively. Future minimum lease payments total $16,290 for the year ending September 30, 2023.
| G. | ADVERTISING AND BUSINESS PROMOTION: |
The Company follows the policy of charging the costs of advertising and business promotion to expense as incurred. For the years ended September 30, 2022 and 2021, advertising costs amounted to $230 and $515, respectively.
| H. | RETIREMENT PLAN: |
The Company sponsors a mandatory pension for all qualified employees. The Company’s contribution percentage is set by the government of the United Kingdom, currently that percentage is 3%. For the years ended September 30, 2022 and 2021, the Company’s contribution to this plan totaled $14,014 and $13,824, respectively. These amounts are included in Salaries, Wages and Benefits.
| I. | MAJOR CUSTOMERS: |
For the years ended September 30, 2022 and 2021, the Company had one major customer, to which sales accounted for approximately 61% and 52%, respectively, of the Company’s revenue.
| J. | CONTINGENT LIABILITIES: |
The Company has certain contingent liabilities and is a party to various claims and actions arising in the ordinary course of business. Management is of the opinion that all such matters are without merit or are of such kind or involve such amounts that unfavorable disposition would not have a material effect on the financial position of the Company.
| K. | SUBSEQUENT EVENTS: |
Management has evaluated events occurring after the balance sheet date through June 2, 2023, the date on which these financial statements were available to be issued. On March 17, 2023, Interlink Electronics, Inc. acquired all of the Company’s outstanding shares for approximately GB£4,127,000, subject to adjustment based on the extent if any to which Calman’s net working capital at closing is more or less than GB£600,000.
9
Exhibit 99.2
CALMAN TECHNOLOGY LIMITED
CONDENSED INTERIM FINANCIAL STATEMENTS (UNAUDITED)
DECEMBER 31, 2022
CALMAN TECHNOLOGY LIMIITED
INDEX TO CONDENSED INTERIM FINANCIAL STATEMENTS
DECEMBER 31, 2022
| CONDENSED INTERIM FINANCIAL STATEMENTS (UNAUDITED) | |
| Condensed Balance Sheets as of December 31, 2022 and September 30, 2022 | 1 |
| Condensed Statements of Earnings for the Three Months Ended December 31, 2022 and 2021 | 2 |
| Condensed Statements of Stockholders’ Equity for the Three Months Ended December 31, 2022 and 2021 | 3 |
| Condensed Statements of Cash Flows for the Three Months Ended December 31, 2022 and 2021 | 4 |
| Notes to Condensed Interim Financial Statements | 5 – 6 |
CALMAN TECHNOLOGY LIMITED
CONDENSED BALANCE SHEETS
DECEMBER 31, 2022 AND SEPTEMBER 30, 2022
| December 31, | September 30, | |||||||
| 2022 | 2022 | |||||||
| ASSETS | ||||||||
| CURRENT ASSETS | ||||||||
| Cash | $ | 1,495,050 | $ | 1,432,344 | ||||
| Accounts Receivable | 523,821 | 465,867 | ||||||
| Inventory | 611,275 | 566,767 | ||||||
| Prepaid Expenses and Other | 17,050 | 16,656 | ||||||
| 2,647,196 | 2,481,634 | |||||||
| PROPERTY AND EQUIPMENT | ||||||||
| Property and equipment | 831,203 | 770,680 | ||||||
| Accumulated depreciation | (678,853 | ) | (620,524 | ) | ||||
| 152,350 | 150,156 | |||||||
| TOTAL ASSETS | $ | 2,799,546 | $ | 2,631,790 | ||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
| CURRENT LIABILITIES | ||||||||
| Current Portion of Long-Term Debt | $ | - | $ | 33,510 | ||||
| Accounts Payable and Accrued Expenses | 351,430 | 349,535 | ||||||
| Corporate Income Taxes Payable | 283,911 | 263,238 | ||||||
| 635,341 | 646,283 | |||||||
| LONG-TERM LIABILITIES | ||||||||
| Long-Term Debt, Net of Current Portion | - | 117,285 | ||||||
| STOCKHOLDERS’S EQUITY | 2,164,205 | 1,868,222 | ||||||
| TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | $ | 2,799,546 | $ | 2,631,790 | ||||
See notes to condensed financial statements.
| 1 |
CALMAN TECHNOLOGY LIMITED
CONDENSED STATEMENTS OF EARNINGS
THREE MONTHS ENDED DECEMBER 31, 2022 AND 2021
| Three Months Ended | ||||||||
| December 31, 2022 | December 31, 2021 | |||||||
| NET SALES | $ | 755,921 | $ | 901,522 | ||||
| COST OF GOODS SOLD | 357,609 | 312,628 | ||||||
| GROSS PROFIT | 398,312 | 588,924 | ||||||
| OPERATING AND ADMINISTRATIVE EXPENSES | 209,463 | 253,587 | ||||||
| EARNINGS FROM OPERATIONS | 188,849 | 335,337 | ||||||
| OTHER INCOME AND (EXPENSE) | (1,754 | ) | 151 | |||||
| EARNINGS BEFORE INCOME TAXES | 187,095 | 335,488 | ||||||
| INCOME TAXES | - | - | ||||||
| NET EARNINGS | $ | 187,095 | $ | 335,488 | ||||
See notes to condensed financial statements.
| 2 |
CALMAN TECHNOLOGY LIMITED
CONDENSED STATEMENTS OF STOCKHOLDERS’ EQUITY
THREE MONTHS ENDED DECEMBER 31, 2022 AND 2021
| Capital | Retained Earnings | Accumulated Other Comprehensive Income (Loss) | Total | |||||||||||||
| Balance, October 1, 2021 | $ | 88,766 | $ | 1,250,021 | $ | 47,613 | $ | 1,386,400 | ||||||||
| Net Earnings | - | 335,488 | - | 335,488 | ||||||||||||
| Foreign Currency Translation Adjustments | - | - | 79,636 | 79,636 | ||||||||||||
| Dividends to Stockholders | - | (43,805 | ) | - | (43,805 | ) | ||||||||||
| Balance, December 31, 2021 | $ | 88,766 | $ | 1,541,704 | $ | 127,249 | $ | 1,757,719 | ||||||||
| Capital | Retained Earnings | Accumulated Other Comprehensive Income (Loss) | Total | |||||||||||||
| Balance, October 1, 2022 | $ | 88,766 | $ | 2,127,848 | $ | (348,392 | ) | $ | 1,868,222 | |||||||
| Net Earnings | - | 187,095 | - | 187,095 | ||||||||||||
| Foreign Currency Translation Adjustments | - | - | 152,354 | 152,354 | ||||||||||||
| Dividends to Stockholders | - | (43,466 | ) | - | (43,466 | ) | ||||||||||
| Balance, December 31, 2022 | $ | 88,766 | $ | 2,271,477 | $ | (196,038 | ) | $ | 2,164,205 | |||||||
See notes to condensed financial statements.
| 3 |
CALMAN TECHNOLOGY LIMITED
CONDENSED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED DECEMBER 31, 2022 AND 2021
| Three Months Ended | ||||||||
| December 31, | December 31, | |||||||
| 2022 | 2021 | |||||||
| CASH FLOWS FROM OPERATING ACTIVITIES | ||||||||
| Net Earnings | $ | 187,095 | $ | 335,488 | ||||
| Noncash Items Included in Net Earnings: | ||||||||
| Depreciation | 9,233 | 7,764 | ||||||
| (Increase) Decrease In: | ||||||||
| Accounts Receivable | (20,562 | ) | (46,765 | ) | ||||
| Inventory | - | - | ||||||
| Prepaid Expenses and Other | 879 | 663 | ||||||
| Increase (decrease) In: | ||||||||
| Accounts Payable and Accrued Expenses | (24,587 | ) | 97,081 | |||||
| Due To Officers | - | (276,335 | ) | |||||
| 152,058 | 117,896 | |||||||
| CASH FLOWS FROM INVESTING ACTIVITIES | ||||||||
| Additions to Property and Equipment | - | 474 | ||||||
| - | 474 | |||||||
| CASH FLOWS FROM FINANCING ACTIVITIES | ||||||||
| Payments on Note Payable | (156,492 | ) | - | |||||
| Dividends Paid | (43,466 | ) | (43,805 | ) | ||||
| (199,958 | ) | (43,805 | ) | |||||
| EFFECT OF EXCHANGE RATE CHANGES ON CASH | 110,606 | 71,575 | ||||||
| NET INCREASE IN CASH | (62,706 | ) | 146,140 | |||||
| CASH – BEGINNING | 1,432,344 | 1,337,648 | ||||||
| CASH – ENDING | $ | 1,495,050 | $ | 1,483,788 | ||||
See notes to condensed financial statements.
| 4 |
CALMAN TECHNOLOGY LIMITED
NOTES TO CONDENSED INTERIM FINANCIAL STATEMENTS
A. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
| 1. | Organization – Calman Technology Limited (“Calman” or the “Company”) is a corporation organized under the laws of the United Kingdom and commenced operations on June 15, 1992. |
| 2. | Operations – Calman, based outside Glasgow, Scotland, has over 25 years of experience in the design and manufacture of membrane keypads, graphic overlays and printed electronics. |
| 3. | Method of Accounting – The Company’s policy is to prepare its financial statements on the accrual method of accounting whereby revenues are recognized when earned and expenses are recognized when incurred. This method of accounting conforms to generally accepted accounting principles (GAAP). |
| 4. | Functional Currency Translation – The functional currency of the Company is the Pound Sterling (£). The assets and liabilities of the Company are translated at year-end rates of exchange, and the statements of earnings accounts are translated at the average rates of exchange for the period. The resulting translation adjustments are reported as a component of accumulated other comprehensive income within stockholders’ equity. |
| 5. | Concentration of Credit Risk – Financial instruments that potentially subject the Company to concentrations of credit risk consist primarily of deposits in excess of insured limits and accounts receivable. These risks are managed by maintaining all deposits in high quality financial institutions and obtaining signed sales orders, and/or establishing credit limits with all customers. Management believes that the Company is not exposed to any significant credit risk as a result of these credit concentrations. |
| 6. | Cash and Cash Equivalents – For purposes of the statements of cash flows, the Company considers all highly liquid investments available for current use with an initial maturity of three months or less to be cash equivalents. |
| 7. | Inventory – The Company’s inventory is valued at the lower of cost (first-in, first-out) or market. |
| 8. | Property and Equipment – Property and equipment are recorded at cost. Maintenance and repairs are charged to expense as incurred whereas major betterments are capitalized. Depreciation is computed using the declining balance method over the assets’ estimated useful life ranging from three to ten years. |
| 9. | Fair Value of Financial Instruments – The Company’s financial instruments include cash and cash equivalents, accounts receivable, accounts payable, accrued expenses, and long-term debt. The recorded values of cash and cash equivalents, accounts receivable, accounts payable, and accrued expenses approximate their fair values based on their short-term nature. The recorded values of long-term debt approximate their fair values, as current interest rates approximate market rates. |
| 10. | Revenue Recognition – The Company recognizes revenue in accordance with Topic 606 of the Financial Accounting Standards Board Accounting Standards Codification. Revenue from contracts with customers is recognized when, or as, the Company satisfies its performance obligations by transferring goods or services to customers. A good or service is transferred to a customer when, or as, the customer obtains control of that good or service. A performance obligation may be satisfied over time or at a point in time. Revenue from a performance obligation satisfied at a point in time is recognized at the point in time that the Company determines the customer has obtained control over the promised good or service. The amount of revenue recognized reflects the consideration of which the Company expects to be entitled in exchange for the promised goods or services. Revenue is recognized when orders are shipped or services are rendered. All revenue for the three months ended December 31, 2022 and 2021 was determined to be performance obligations satisfied at a point in time. |
| 11. | General and Administrative Expenses – These expenses are charged to operations as incurred and are not allocated to cost of sales. |
| 5 |
| 12. | Use of Estimates – The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates. |
B. ACCOUNTS RECEIVABLE:
The Company utilizes the allowance method to account for uncollectible accounts receivable balances. Under the allowance method, an estimate of uncollectible customer balances is made based on the Company’s prior history and other factors such as the credit quality of the customer and economic conditions of the market. Based on these factors, at December 31, 2022 and September 30, 2022, no allowances for doubtful accounts were recorded.
C. CORONAVIRUS BUSINESS INTERRUPTION LOAN:
On March 29, 2021, the Company received loan proceeds from the Bank of Scotland in the amount of $202,200 under the Coronavirus Business Interruption Loan Scheme (CBIL). The CBIL provides for loans to qualifying businesses that have been negatively impacted by COVID-19. The loan was unsecured and payable in monthly installments of approximately $3,370 plus interest commencing in April 2022. At December 31, 2022 and September 30, 2022, the amounts outstanding on this loan were $0 and $150,795, respectively.
D. OPERATING LEASES:
The Company leases its manufacturing, distribution and office space in Irvine, Scotland under a lease expiring February 28, 2023. Rent expense for the three months ended December 31, 2022 and 2021 amounted to $10,944 and $11,988, respectively.
E. CONTINGENT LIABILITIES:
The Company has certain contingent liabilities and is a party to various claims and actions arising in the ordinary course of business. Management is of the opinion that all such matters are without merit or are of such kind or involve such amounts that unfavorable disposition would not have a material effect on the financial position of the Company.
F. SUBSEQUENT EVENTS:
Management has evaluated events occurring after the balance sheet date through June 2, 2023, the date on which these financial statements were available to be issued. On March 17, 2023, Interlink Electronics, Inc. acquired all of the Company’s outstanding shares for approximately GB£4,127,000 (approximately $4,912,000), subject to adjustment based on the extent if any to which our net working capital at closing is more or less than GB£600,000 (approximately $714,000).
| 6 |
Exhibit 99.3
INTERLINK ELECTRONICS, INC.
PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
December 31, 2022
(unaudited)
INTERLINK ELECTRONICS, INC.
INDEX TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
December 31, 2022
| Introduction to Unaudited Pro Forma Condensed Combined Financial Statements | 1 |
| Unaudited Pro Forma Condensed Combined Balance Sheet as of December 31, 2022 | 2 |
| Unaudited Pro Forma Condensed Combined Statement of Operations for the Year Ended December 31, 2022 | 3 |
| Notes to Unaudited Pro Forma Condensed Combined Financial Statements | 4 – 5 |
INTERLINK ELECTRONICS, INC.
INTRODUCTION TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
December 31, 2022
On March 17, 2023, Interlink Electronics, Inc., a Nevada corporation (“Interlink” or the “Company”), acquired all of the outstanding shares in Calman Technology Limited, a corporation organized under the laws of the United Kingdom (“Calman”), pursuant to a Share Purchase Agreement (the “Purchase Agreement”) by and among the Company and the shareholders of Calman (the “Transaction”). The Purchase Agreement contains customary representations, warranties and covenants, including non-competition covenants on the part of the sellers, who will continue to be employed by Calman.
Under the terms of the Purchase Agreement, the purchase price was GB£4,127,000 (approximately $4,912,000), of which GB£3,627,000 (approximately $4,317,000) was paid at closing and the balance is being held back for up to nine months against 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 is more or less than GB£600,000 (approximately $714,000), which resulted in additional consideration of approximately GB£1,297,000 (approximately $1,544,000).
The following unaudited pro forma condensed combined financial statements are presented to illustrate the pro forma effects of our having entered into and closed the Transaction. We have derived our historical financial data as of and for the year ended December 31, 2022 from our financial statements contained on Form 10-K as filed with the Securities and Exchange Commission. We have derived Calman’s historical financial statements as of and for the year ended December 31, 2022 from Calman’s financial statements contained elsewhere in this Form 8-K/A.
The unaudited pro forma condensed combined balance sheet as of December 31, 2022 assumes the Transaction consummated on December 31, 2022. The unaudited pro forma condensed combined statement of operations for the year ended December 31, 2022 assumes the Transaction consummated on January 1, 2022.
The information presented in the unaudited pro forma condensed combined financial statements does not purport to represent what our financial position or results of operations would have been had the Transaction occurred during the periods presented, nor is it indicative of our future financial position or results of operations for any period. You should not rely on this information as being indicative of the historical results that would have been achieved had the companies always been combined or the future results that the combined companies will experience after the Transaction.
The unaudited pro forma adjustments are based upon available information and certain assumptions that we believe are reasonable under the circumstances. These unaudited pro forma condensed combined financial statements should be read in conjunction with the accompanying notes and assumptions and the historical financial statements and related notes of Interlink Electronics, Inc. and Calman Technology Limited.
1
INTERLINK ELECTRONICS, INC.
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
December 31, 2022
| Interlink Electronics, Inc. | Calman Technology Limited | Pro Forma Adjustments (Note 3) | AJE # | Pro Forma Combined Balances | ||||||||||||||||
| (in thousands, except par value) | ||||||||||||||||||||
| ASSETS | ||||||||||||||||||||
| Current assets | ||||||||||||||||||||
| Cash and cash equivalents | $ | 10,091 | $ | 1,495 | $ | (6,261 | ) | 1 | $ | 5,325 | ||||||||||
| Accounts receivable, net | 1,178 | 524 | - | 1,702 | ||||||||||||||||
| Inventories | 2,112 | 611 | - | 2,723 | ||||||||||||||||
| Prepaid expenses and other current assets | 321 | 17 | - | 338 | ||||||||||||||||
| Total current assets | 13,702 | 2,647 | (6,261 | ) | 10,088 | |||||||||||||||
| Property, plant and equipment, net | 184 | 152 | - | 336 | ||||||||||||||||
| Intangible assets, net | 76 | - | 2,048 | 2 | 2,124 | |||||||||||||||
| Goodwill | 650 | - | 2,049 | 2 | 2,699 | |||||||||||||||
| Right-of-use assets | 172 | - | - | 172 | ||||||||||||||||
| Deferred tax assets | 134 | - | - | 134 | ||||||||||||||||
| Other assets | 65 | - | - | 65 | ||||||||||||||||
| Total assets | $ | 14,983 | $ | 2,799 | $ | (2,164 | ) | $ | 15,618 | |||||||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||||||||||||||
| Current liabilities | ||||||||||||||||||||
| Accounts payable | $ | 273 | $ | 351 | $ | - | $ | 624 | ||||||||||||
| Accrued liabilities | 568 | - | - | 568 | ||||||||||||||||
| Lease liabilities, current | 131 | - | - | 131 | ||||||||||||||||
| Accrued income taxes | 117 | 284 | - | 401 | ||||||||||||||||
| Total current liabilities | 1,089 | 635 | - | 1,724 | ||||||||||||||||
| Long-term liabilities | ||||||||||||||||||||
| Lease liabilities, long-term | 46 | - | - | 46 | ||||||||||||||||
| Total long-term liabilities | 46 | - | - | 46 | ||||||||||||||||
| Total liabilities | 1,135 | 635 | - | 1,770 | ||||||||||||||||
| Stockholders’ equity | ||||||||||||||||||||
| Preferred stock, $0.01 par value: 1,000 shares authorized, 200 shares of Series A Convertible Preferred Stock issued and outstanding ($5.0 million liquidation preference) | 2 | - | - | 2 | ||||||||||||||||
| Common stock, $0.001 par value: 30,000 shares authorized, 6,604 shares issued and outstanding | 7 | - | - | 7 | ||||||||||||||||
| Additional paid-in-capital | 62,617 | - | - | 62,617 | ||||||||||||||||
| Accumulated other comprehensive (loss) | (98 | ) | - | - | (98 | ) | ||||||||||||||
| Accumulated deficit | (48,680 | ) | - | - | (48,680 | ) | ||||||||||||||
| Owners’ equity | 2,164 | (2,164 | ) | 3 | - | |||||||||||||||
| Total stockholders’ equity | 13,848 | 2,164 | (2,164 | ) | 13,848 | |||||||||||||||
| Total liabilities and stockholders’ equity | $ | 14,983 | $ | 2,799 | $ | (2,164 | ) | $ | 15,618 | |||||||||||
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INTERLINK ELECTRONICS, INC.
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
For the Year Ended December 31, 2022
| Interlink Electronics, Inc. | Calman Technology Limited | Pro Forma Adjustments (Note 3) | AJE # | Pro Forma Combined Balances | ||||||||||||||||
| (in thousands, except per share amounts) | ||||||||||||||||||||
| Revenue, net | $ | 7,493 | $ | 3,206 | $ | - | $ | 10,699 | ||||||||||||
| Cost of revenue | 3,632 | 829 | - | 4,461 | ||||||||||||||||
| Gross profit | 3,861 | 2,377 | - | 6,238 | ||||||||||||||||
| Operating expenses | 4,529 | 983 | 410 | 4 | 5,922 | |||||||||||||||
| Income (loss) from operations | (668 | ) | 1,394 | (410 | ) | 316 | ||||||||||||||
| Other income (expense), net | 2,611 | 3 | - | 2,614 | ||||||||||||||||
| Income before income taxes | 1,943 | 1,397 | (410 | ) | 2,930 | |||||||||||||||
| Income taxes | 271 | 302 | - | 573 | ||||||||||||||||
| Net income | $ | 1,672 | $ | 1,095 | $ | (410 | ) | $ | 2,357 | |||||||||||
| Net income applicable to common stockholders | $ | 1,272 | $ | 1,957 | ||||||||||||||||
| Earnings per common share – basic and diluted | $ | 0.19 | $ | 0.30 | ||||||||||||||||
| Weighted average common shares outstanding – basic and diluted | 6,603 | 6,603 | ||||||||||||||||||
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INTERLINK ELECTRONICS, INC.
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
December 31, 2022
Note 1. Basis of Presentation
The unaudited pro forma condensed combined financial statements have been prepared in order to present the combined financial position and results of operations of Interlink Electronics, Inc. (“Interlink” or the “Company”) and Calman Technology Limited (“Calman”) as if the Transaction had occurred at December 31, 2022 for the unaudited pro forma condensed combined balance sheet, and as if the Transaction had occurred at January 1, 2022 for the unaudited pro forma condensed combined statement of operations for the year ended December 31, 2022.
The condensed financial statements of Interlink as of and for the year ended December 31, 2022 were derived from our financial statements contained on Form 10-K as filed with the Securities and Exchange Commission.
The condensed financial statements of Calman as of and for the year ended December 31, 2022 were derived from Calman’s financial statements contained elsewhere in this Form 8-K/A.
The Transaction is reflected in the unaudited pro forma condensed combined financial statements as being accounted for based on the acquisition method in accordance with Accounting Standards Codification Topic 805, Business Combinations. Under the acquisition method, the total estimated purchase price is calculated as described in Note 2. In accordance with the accounting guidance for business combinations, the assets acquired and liabilities assumed have been measured at fair value. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.
Note 2. Acquisition
On March 17, 2023, the Company acquired all of the outstanding shares in Calman for cash consideration of GB£4,127,000 (approximately $4,912,000 as of March 17, 2023) plus (or minus) the amount by which net working capital at closing is more (or less) than GB£600,000 (approximately $714,000 as of March 17, 2023). Had the Transaction occurred on December 31, 2022, the purchase price would have been GB£5,197,000 (approximately $6,261,000 as of December 31, 2022), as Calman’s net working capital was GB£1,670,000 (approximately $2,012,000 as of December 31, 2022) as of December 31, 2022. For the purposes of these unaudited pro forma condensed combined financial statements, the Company made preliminary estimates of the fair value of all identifiable assets acquired and liabilities assumed. The preliminary estimated fair value of all the assets acquired and liabilities assumed may be revised as a result of additional information obtained regarding the assets acquired and liabilities assumed, and revisions of provisional estimates of fair value, including, but not limited to, the completion of identification of and valuations related to intangible assets. The purchase price allocation will be finalized during the 12-month measurement period following the acquisition date. Therefore, it is likely that the fair value of the assets acquired and liabilities assumed will vary from those shown and as reflected in the unaudited pro forma condensed combined balance sheet, and the differences may be material.
The following summarizes the Company’s preliminary allocation of the purchase price to the fair value of the assets acquired and liabilities assumed at the acquisition date:
| Purchase Price Allocation | ||||
| Cash | $ | 1,495,000 | ||
| Accounts receivable | 524,000 | |||
| Inventory | 611,000 | |||
| Prepaid expenses and other | 17,000 | |||
| Property and equipment | 152,000 | |||
| Intangible assets | 2,048,000 | |||
| Goodwill | 2,049,000 | |||
| Total assets acquired | 6,896,000 | |||
| Accounts payable and accrued expenses | (351,000 | ) | ||
| Corporate income taxes payable | (284,000 | ) | ||
| Total liabilities assumed | (635,000 | ) | ||
| Net assets acquired | $ | 6,261,000 | ||
4
The goodwill is primarily for expected synergies from combining the operations of Calman with the Company’s existing operations. The goodwill is not expected to be deductible for tax purposes.
Note 3. Pro Forma Adjustments
The following unaudited pro forma adjustments are incorporated into the unaudited pro forma condensed combined balance sheet as of December 31, 2022, and the unaudited pro forma condensed combined statements of operations for the year ended December 31, 2022.
AJE 1 - Recognition of the cash payment of $6,261,000 for the acquisition of Calman.
AJE 2 - Recognition of goodwill of $2,049,000 and the increase in the preliminary estimated fair value of amortizable intangible assets of $2,048,000.
AJE 3 - Elimination of Calman’s equity.
AJE 4 - Record amortization expense of $410,000 for the amortizable intangible assets that would have been recorded had the Transaction occurred at the beginning of the period.
5