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.
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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 |
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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.
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