2.Acquisitions

In accordance with ASC Topic 805, “Business Combinations”, the Company accounts for acquisitions by applying the acquisition method of accounting. The acquisition method of accounting requires, among other things, that the assets acquired and liabilities assumed in a business combination be measured at their fair values as of the closing date of the acquisition.

The acquisitions of NMS and Coord3 have been accounted for as business combinations. During the fourth quarter, the Company had a valuation analysis performed and the resulting fair values at the date of acquisition are presented. The Company has up to one year from the dates of acquisition to adjust the fair values of the assets and liabilities acquired. Accordingly, the purchase price allocation is preliminary and subject to change. The accompanying Consolidated Statements of Operations for the fiscal year ended June 30, 2015 include revenue of $5.6 million and a net loss of $532,000 related to the operations of the acquisitions from the dates of closing.

Next Metrology Software

On January 29, 2015, the Company acquired 100% of the outstanding share capital of NMS. NMS is a developer of coordinate measuring machines (“CMM”) operating software, based in Prague, Czech Republic. The primary reason for the acquisition was to expand and diversify the Company’s offerings in the industrial metrology market, particularly in the scanning CMM market.

The total consideration payable in the acquisition of NMS is 2,250,000 euros (equivalent to approximately $2,560,425). The Company paid 1,800,000 euros (equivalent to approximately $2,050,560) on January 29, 2015, 250,000 euros (equivalent to approximately $282,025) on February 27, 2015 and 200,000 euros (equivalent to approximately $227,840) is payable 12 months following the closing of the NMS purchase to the extent not used to cover indemnification obligations.

The following table summarizes the acquisition date fair values of the assets and liabilities acquired.



Cash	$	129
Receivables and other current assets		77,007
Intangible asset		391,296
Goodwill		2,209,006
Accounts payable and other current liabilities		(117,013)

Total identifiable net assets	$	2,560,425

The goodwill of $2,209,006 arising from the acquisition of NMS consists largely of the synergies expected from combining the existing research and development operations of the Company and NMS’s technical knowledge in developing CMM operating software. The goodwill is expected to be deductible for tax purposes.

Coord3

On February 27, 2015, the Company acquired 100% of the outstanding share capital of Coord3, a subsidiary of Coord3 Industries s.r.l. Coord3 is an Italian-based supplier of a full range of CMMs with a global customer base. By combining the full range of Coord3's CMMs with the Company’s laser scanners and NMS’s CMM operating software, the Company is able to offer price competitive, fully integrated scanning CMM solutions worldwide.

The total consideration payable in the acquisition of Coord3 is 1,959,000 euros (equivalent to approximately $2,210,174). The Company paid 1,659,200 euros (equivalent to approximately $1,871,744) on February 27, 2015 and 300,000 euros (equivalent to approximately $338,430) is payable 18 months following the closing of the Coord3 purchase to the extent not used to cover indemnification obligations.

The following table summarizes the acquisition date fair values of the assets and liabilities acquired.



Cash	$	9,521
Accounts receivable		4,343,621
Inventories		3,092,826
Other assets		1,055,542
Goodwill		5,375,048
Other intangibles		5,850,000
Accounts payable and other current liabilities		(5,225,261)
Taxes payable		(7,530,866)
Loans payable		(2,108,658)
Deferred taxes		(1,836,271)
Other long term liabilities		(815,328)

Total identifiable net assets	$	2,210,174

The goodwill of $5,375,048 arising from the acquisition consists largely of the synergies expected from combining the operations of the Company and Coord3. None of the goodwill is expected to be deductible for tax purposes.

The Company acquired current and long-term taxes payable as part of the purchase of Coord3. The tax liabilities represent income and payroll related taxes that are payable in accordance with government authorized installment payment plans. These installment plans require varying monthly payments through January 2021.

Other long-term liabilities include $785,000 of long-term contractual and statutory severance liabilities acquired as part of the purchase of Coord3 that represent amounts that will be payable to employees upon termination of employment.

Proforma Information

The following pro forma information for fiscal 2015 and 2014 is based on the assumption that the acquisitions of NMS and Coord3 occurred on July 1, 2014 and July 1, 2013, respectively (in thousands, except per share amounts):



		2015		2014
Revenue	$	84,091	$	76,513
Net Income (Loss)	$	(470)	$	1,895

Income (Loss) Per Common Share
Basic	$	(0.05)	$	0.21
Diluted	$	(0.05)	$	0.21

As a result of the acquisitions, as of June 30, 2015, the Company has incurred acquisition related costs of approximately $1.6 million for legal, accounting, and valuation consulting fees which are included in Selling, General and Administrative expenses.

These pro forma results of operations have been prepared for comparative purposes only, and they do not purport to be indicative of the results of operations that actually would have resulted had the acquisitions occurred on the date indicated or that may result in the future.