2.Acquisitions

In accordance with ASC Topic 805, “Business Combinations”, we account 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 of fiscal year 2015, a valuation analysis was performed and the resulting fair values at the date of acquisition are presented below. There was an adjustment period of one year from the date of acquisition to adjust the fair values of the assets and liabilities acquired, and to date, no such adjustment was required. We are currently involved in final negotiations for payments in both the NMS and Coord3 acquisitions, thus the purchase price remains subject to change. The accompanying Consolidated Statement of Operations for the fiscal year ended June 30, 2015, the year in which the acquisition occurred, includes revenue of $5,639,000 and a net loss of $532,000 related to the operations of NMS and Coord3 subsequent to the dates each acquisition closed.

NMS

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

The total consideration payable in the acquisition of NMS was €2,250,000 (equivalent to approximately $2,560,000). We paid €1,800,000 (equivalent to approximately $2,050,000) on January 29, 2015, €250,000 (equivalent to approximately $282,000) on February 27, 2015 and €100,000 (equivalent to approximately $113,000) on February 1, 2016. Approximately €100,000 remains payable at June 30, 2016 to the extent not used to cover indemnification obligations. We are currently negotiating the timing and the final amount of this payment.

The following table summarizes the acquisition date fair values of the assets and liabilities acquired (in thousands):



Receivables and other current assets	$	77
Intangible asset		391
Goodwill		2,209
Accounts payable and other current liabilities		(117)

Total identifiable net assets	$	2,560

The goodwill arising from the acquisition of NMS consists largely of the synergies expected from combining our existing research and development operations 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, we 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 our laser scanners and NMS’s CMM operating software, we are able to offer a price competitive, fully integrated scanning CMM solutions’ worldwide.

The total consideration payable in the acquisition of Coord3 was €1,959,000 (equivalent to approximately $2,210,000). We paid €1,659,200 (equivalent to approximately $1,872,000) on February 27, 2015 and €300,000 (equivalent to approximately $338,000) is payable 18 months following the closing of the Coord3 purchase to the extent not used to cover indemnification obligations. Due to certain events that occurred within the first 18 months after the acquisition was completed, the remaining portion of the purchase price has not been paid to date. Negotiations with the previous owner continues and final resolution is expected in fiscal 2017.

The following table summarizes the acquisition date fair values of the assets and liabilities acquired (in thousands):



Cash	$	9
Accounts receivable		4,344
Inventories		3,093
Other assets		1,055
Goodwill		5,375
Other intangibles		5,850
Accounts payable and other current liabilities		(5,225)
Taxes payable		(7,531)
Loans payable		(2,109)
Deferred taxes		(1,836)
Other long term liabilities		(815)

Total identifiable net assets	$	2,210

The goodwill arising from the acquisition consists largely of the synergies expected from combining our operations with those of Coord3. None of the goodwill is expected to be deductible for tax purposes.

We 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 $775,000 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.

Pro forma Information

The following unaudited pro forma information for fiscal 2015 and 2014 is based on the assumption that the acquisitions of NMS and Coord3 occurred on 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 of June 30, 2015, the year in which the acquisitions occurred, we incurred acquisition related costs of approximately $1,600,000 for legal, accounting and valuation consulting fees which are included in “Selling, general and administrative expenses” on our Consolidated Statement of Operations.

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.