4. ACQUISTIONS

Acquisition of Hearing Help Express

In October 2016, the Company purchased 20 percent of Hearing Help Express (HHE). The Company paid a total of $693. Based on the facts and circumstances surrounding the management of the business and the funding of working capital needs, the Company determined the guidance in ASC 810 applied based on the Company’s ability to control the operations of Hearing Help Express and the likelihood that the Company bears the largest risk and reward of its financial results. The Company has consolidated Hearing Help Express in the Company’s consolidated financial statements.

The Company accounted for the transaction as a business combination in the fourth quarter of 2016. The transaction allows the Company entry into the sale of products directly to consumers in the United States. In accordance with ASC 805, the purchase price is being allocated based on estimates of the fair value of assets acquired and liabilities assumed.

The purchase price was allocated as follows:


Cash	$	157
Inventory		341
Accounts Receivable		333
Property, Plant and Equipment		9
Intangible Assets		2,920
Goodwill		1,004
Other Assets		500
Note Payable		(2,000)
Deferred Revenue		(717)
IRS Note		(461)
Non-Controlling Interest		(650)
Other Payables		(743)
	$	693

Additionally, the Company had an option to purchase the remaining 80% of the business for $650 plus an earn-out that has been valued at $185 and exercised the option on January 17, 2017. The transaction is expected to close in the first half of 2017, subject to customary closing conditions.

Goodwill represents the excess of the purchase price over the fair value of the net tangible and intangible assets acquired. The establishment of goodwill was primarily due to the expected revenue growth that is attributable to increased market penetration from future customers.

The Company has recognized additional revenue of $1,025 and losses of approximately $3 relating to the sales of the hearing devices and accessories from October 19, 2016 through December 31, 2016.

Acquisition costs of $216 were incurred and recorded during the year ended December 31, 2016 and are included in other expenses, net in the consolidated statements of operations. We consider the majority of the acquisition costs to be of the non-operating, miscellaneous nature, as they were incurred as part of a non-operating activity, a business acquisition

Acquisition of Assets of PC Werth

On November 3, 2015, the Company acquired the assets of PC Werth Ltd, a leading supplier of hearing healthcare products and equipment to the United Kingdom’s National Health Service (NHS), through its IntriCon UK subsidiary. Under the terms of the agreement, the Company paid PC Werth Ltd a total of $197 in cash and assumed payables of $393.

The Company accounted for the transaction as a business combination in the fourth quarter of 2015. In accordance with ASC 805, the purchase price is being allocated based on estimates of the fair value of assets acquired and liabilities assumed.

The purchase price was allocated as follows:


Inventory	$	155
Property, Plant and Equipment		39
Intellectual Property		39
Goodwill		357
Payables		(393)
	$	197

Goodwill represents the excess of the purchase price for the PC Werth acquisition over the fair value of the net tangible and intangible assets acquired. The establishment of goodwill was primarily due to the expected revenue growth that is attributable to increased market penetration from future customers.

The Company has recognized additional revenue of $414 and net losses of approximately $265 relating to the sales of the hearing devices and accessories from November 2015 through December 31, 2015.

Acquisition costs of $143 were primarily incurred and recorded during the year ended December 31, 2015 and are included in other expenses, net in the consolidated statements of operations. We consider the majority of the acquisition costs to be of the non-operating, miscellaneous nature, as they were incurred as part of a non-operating activity, a business acquisition.

Unaudited Supplemental Pro Forma Financial Information

The following unaudited supplemental pro forma information combines the Company’s results with those of PC Werth Ltd (predecessor to IntriCon UK) and Hearing Help Express as if the acquisitions had occurred at the beginning of each of the periods presented. The Company notes Hearing Help Express’s earnings were not included within the pro forma table below for 2015 and 2014 as this company was in bankruptcy and these years were not reflective of the normal operations of Hearing Help Express. This unaudited pro forma information is not intended to represent or be indicative of the Company’s consolidated results of operations or financial condition that would have been reported for the periods presented had the acquisitions been completed at the beginning on each of the periods presented, and should not be taken as indicative of the Company’s future consolidated results of operations or financial condition.


		December 31,		December 31,		December 31
Unaudited		2016		2015		2014
Revenue	$	73,828	$	80,698	$	79,951
Net earnings attributable to IntriCon Shareholders		(4,749)		955		1,563
Net earnings per share
Basic	$	(0.73)	$	0.16	$	0.27
Diluted	$	(0.73)	$	0.15	$	0.26

The Company believes the above historical pro forma results are not indicative of what future results of IntriCon UK and Hearing Help Express could be due to both companies being purchased out of bankruptcy and due to the many usual and infrequent charges that occurred for both of these companies during the periods noted above.