EX-99.3 5 tm237480d1_ex99-3.htm EXHIBIT 99.3

 

Exhibit 99.3

 

INTERLINK ELECTRONICS, INC.
PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
September 30, 2022
(unaudited)

 

 

 

 

INTERLINK ELECTRONICS, INC.
INDEX TO UNAUDITED PRO FORMA CONDENSED COBINED FINANCIAL STATEMENTS
September 30, 2022

 

Introduction to Unaudited Pro Forma Condensed Combined Financial Statements   2 
      
Unaudited Pro Forma Condensed Combined Balance Sheet as of September 30, 2022   3 
      
Unaudited Pro Forma Condensed Combined Statement of Operations for the Nine Months Ended September 30, 2022   4 
      
Unaudited Pro Forma Condensed Combined Statement of Operations for the Year Ended December 31, 2021   5 
      
Notes to Unaudited Pro Forma Condensed Combined Financial Statements        6 – 7 

 

 

 

 

INTERLINK ELECTRONICS, INC.
INTRODUCTION TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
September 30, 2022

 

On December 16, 2022, Interlink Electronics, Inc., a Nevada corporation, (“Interlink” or the “Company”), acquired all of the assets of SPEC Sensors, LLC, a Delaware limited liability company (“SPEC”), and KWJ Engineering, Inc., a California corporation (“KWJ”) (collectively, “SPEC/KWJ”) pursuant to an Asset Purchase Agreement (the “Purchase Agreement”) by and among the Company, SPEC/KWJ, and the equity holders of SPEC and KWJ (the “Transaction”). The Purchase Agreement contains customary representations, warranties, and covenants, including non-competition covenants on the part of the two principal equity holders, who will continue with the Company.

 

Under the terms of the Purchase Agreement, the purchase price for both companies’ assets is $2,269,000, of which $1,519,000 was paid at closing, $375,000 was paid into escrow subject to a 90-day purchase price adjustment process, and $375,000 was escrowed against claims for breaches of representations and warranties (subject to certain deductibles and caps). The purchase price is subject to adjustment based on the extent if any to which the combined companies’ net working capital at closing is more or less than $1,350,000.

 

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 September 30, 2022, for the nine months ended September 30, 2022, and for the year ended December 31, 2021 from our financial statements contained on Forms 10-Q and 10-K as filed with the Securities and Exchange Commission. We have derived SPEC Sensors, LLC and KWJ Engineering, Inc.’s historical financial statements as of September 30, 2022, for the nine months ended September 30, 2022, and for the year ended December 31, 2021 from SPEC Sensors, LLC and KWJ Engineering, Inc.’s combined financial statements contained elsewhere in this Form 8-K/A.

 

The unaudited pro forma condensed combined balance sheet as of September 30, 2022 assumes the Transaction consummated on September 30, 2022. The unaudited pro forma condensed combined statements of operations for the nine months ended September 30, 2022 assumes the Transaction consummated on January 1, 2022. The unaudited pro forma condensed combined statement of operations for the year ended December 31, 2021 assumes the Transaction consummated on January 1, 2021.

 

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 SPEC Sensors, LLC and KWJ Engineering, Inc.

 

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INTERLINK ELECTRONICS, INC.
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
September 30, 2022

 

   Interlink
Electronics,
Inc.		   SPEC
Sensors, LLC
and KWJ
Engineering,
Inc.
(combined)		   Pro Forma
Adjustments
(Note 3)		   AJE #  Pro Forma
Combined
Balances		 
                    
   (in thousands, except par value) 
ASSETS
Current assets                       
Cash and cash equivalents  $3,889   $631   $(2,011)  1  $2,509 
Marketable securities   6,574    -    -       6,574 
Accounts receivable, net   958    244    -       1,202 
Inventories   1,057    627    -       1,684 
Prepaid expenses and other current assets   453    38    -       491 
Total current assets   12,931    1,540    (2,011)      12,460 
Property, plant and equipment, net   196    34    -       230 
Intangible assets, net   89    16    292   2   397 
Goodwill   -    -    308   2   308 
Right-of-use assets   197    -    -       197 
Deferred tax assets   8    -    -       8 
Other assets   39    16    -       55 
Total assets  $13,460   $1,606   $(1,411)     $13,655 
                        
LIABILITIES AND STOCKHOLDERS’ EQUITY                       
Current liabilities                       
Accounts payable  $358   $195   $-      $553 
Accrued liabilities   334    -    -       334 
Lease liabilities, current   144    -    -       144 
Accrued income taxes   113    -    -       113 
Total current liabilities   949    195    -       1,144 
                        
Long-term liabilities                       
Lease liabilities, long-term   60    -    -       60 
Total long-term liabilities   60    -    -       60 
Total liabilities   1,009    195    -       1,204 
                        
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   62,567    -    -       62,567 
Accumulated other comprehensive (loss)   (133)   -    -       (133)
Accumulated deficit   (49,992)   -    -       (49,992)
Owners’ equity   -    1,411    (14,11)  3   - 
Total stockholders’ equity   12,451    1,411    (1,411)      12,451 
Total liabilities and stockholders’ equity  $13,460   $1,606   $(1,411)     $13,655 

 

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INTERLINK ELECTRONICS, INC.
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS

For the Nine Months Ended September 30, 2022

 

   Interlink
Electronics,
Inc.		   SPEC
Sensors, LLC
and KWJ
Engineering,
Inc.
(combined)		   Pro Forma
Adjustments
(Note 3)		   AJE#  Pro Forma
Combined
Balances		 
                    
   (in thousands, except per share amounts) 
Revenue, net  $5,882   $3,268   $-      $9,150 
Cost of revenue   2,817    2,008    -       4,825 
Gross profit   3,065    1,260    -       4,325 
Operating expenses   3,388    1,612    31   4   5,031 
Income (loss) from operations   (323)   (352)   (31)      (706)
Other income (expense), net   704    (2)   -       702 
Income (loss) before income taxes   381    (354)   (31)      (4)
Income taxes   121    -    -       121 
Net income (loss)  $260   $(354)  $(31)     $(125)
                        
Net income (loss) applicable to common stockholders  $(40)               $(425)
Earnings per common share – basic and diluted  $(0.01)               $(0.06)
Weighted average common shares outstanding – basic and diluted   6,603                 6,603 

 

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INTERLINK ELECTRONICS, INC.
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS

For the Year Ended December 31, 2021

 

   Interlink
Electronics,
Inc.		   SPEC
Sensors, LLC
and KWJ
Engineering,
Inc.
(combined)		   Pro Forma
Adjustments
(Note 3)		   AJE#  Pro Forma
Combined
Balances		 
                    
   (in thousands, except per share amounts) 
Revenue, net  $7,478   $4,796   $-      $12,274 
Cost of revenue   3,420    2,963    -       6,383 
Gross profit   4,058    1,833    -       5,891 
Operating expenses   4,137    1,934    41   5   6,112 
Income (loss) from operations   (79)   (101)   (41)      (221)
Other income (expense), net   (50)   390    -       340 
Income (loss) before income taxes   (129)   289    (41)      119 
Income taxes   605    1    -       606 
Net income (loss)  $(734)  $288   $(41)     $(487)
                        
Net income (loss) applicable to common stockholders  $(782)               $(535)
Earnings per common share – basic and diluted  $(0.12)               $(0.08)
Weighted average common shares outstanding – basic and diluted   6,601                 6,601 

 

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INTERLINK ELECTRONICS, INC.
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
September 30, 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 SPEC Sensors, LLC (“SPEC”) and KWJ Engineering, Inc. (“KWJ”) (collectively, “SPEC/KWJ”) as if the Transaction had occurred at September 30, 2022 for the unaudited pro forma condensed combined balance sheet, as if the Transaction had occurred at January 1, 2022 for the unaudited pro forma condensed combined statement of operations for the nine months ended September 30, 2022, and as if the Transaction had occurred at January 1, 2021 for the unaudited pro forma condensed combined statement of operations for the year ended December 31, 2021.

 

The condensed financial statements of Interlink as of September 30, 2022, for the nine months ended September 30, 2022, and for the year ended December 31, 2021 were derived from our financial statements contained on Forms 10-Q and 10-K as filed with the Securities and Exchange Commission.

 

The condensed financial statements of SPEC/KWJ as of September 30, 2022, for the nine months ended September 30, 2022, and for the year ended December 31, 2021 were derived from SPEC/KWJ’s combined 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 December 16, 2022, the Company acquired all of the assets of SPEC/KWJ for cash consideration of $2,000,000 plus (or minus) the amount by which net working capital at closing is more (or less) than $1,350,000. Had the Transaction occurred on September 30, 2022, the purchase price would have been $2,010,8278, as SPEC/KWJ’s net working capital was $1,360,828 as of September 30, 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  $630,767 
Accounts receivable   244,129 
Inventory   627,143 
Prepaid expenses and other   37,668 
Property and equipment   33,467 
Deposits   16,000 
Intangible assets   308,267 
Goodwill   308,267 
Total assets acquired   2,205,708 
Accounts payable and accrued expenses   194,880 
Total liabilities assumed   194,880 
Net assets acquired  $2,010,828 

 

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The goodwill is primarily for expected synergies from combining the operations of SPEC/KWJ with the Company’s existing operations. The goodwill is 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 September 30, 2022, and the unaudited pro forma condensed combined statements of operations for the nine months ended September 30, 2022, and for the year ended December 31, 2021.

 

AJE 1 - Recognition of the cash payment of $2,010,828 for the acquisition of SPEC/KWJ.

 

AJE 2 - Recognition of goodwill of $308,267 and the increase in the preliminary estimated fair value of amortizable intangible assets of $291,872.

 

AJE 3 - Elimination of SPEC/KWJ’s owners’ equity.

 

AJE 4 - Reverse amortization expense of $15,342 for the nine months ended September 30, 2022, and record amortization expense of $46,240 for the amortizable intangible assets that would have been recorded had the Transaction occurred at the beginning of the period.

 

AJE 5 - Reverse amortization expense of $20,456 for the year ended December 31, 2021, and record amortization expense of $61,653 for the amortizable intangible assets that would have been recorded had the Transaction occurred at the beginning of the period.

 

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