On May 18, 2020, IntriCon Pte. Ltd. (“Buyer”), a wholly-owned subsidiary of the Company, acquired all of the outstanding shares of Emerald Medical Services Pte., Ltd., a Singapore company (“Emerald”), pursuant to a Share Purchase Agreement dated the same date among Buyer, Emerald and the direct and indirect owners of Emerald. Emerald, based in Singapore, is a provider of joint development medical device manufacturing services for complex catheter applications.

In addition, Emerald has a 54% ownership interest in Emerald Extrusion Services LLC. (“EES), based in California. Based on this controlling financial interest, the Company has consolidated this entity based on the voting interest model under ASC 810, Consolidation.

On May 21, 2020, the Securities and Exchange Commission announced that it has adopted amendments to the financial disclosure requirements in Regulation S-X for acquisitions and dispositions of businesses. This guidance reduces the burden on companies by making more meaningful determinations on the significance of an acquired or disposed business by updating the significance test, among other things. As permitted, IntriCon has early adopted this guidance and applied the updates in performing the significance test for the Emerald acquisition. Based on the updated guidance, Emerald is not deemed significant to our consolidated financial statements and therefor, historic and pro forma financial statements are not required to be disclosed.

The total purchase price of $11,815 consisted of a cash payment paid at closing of $7,128, subject to a post-closing working capital adjustment of $291, the issuance of 80 thousand shares of the Company’s common stock valued at $982 issued at closing, which shares will be held in an escrow account for a period of 18 months to resolve any post-closing claims by the Buyer, as well as a liability for contingent consideration of $3,414. The liability for contingent consideration consists of a cash payment of $500 payable in the event that regulatory approval in Japan is obtained for a particular product within twelve months of closing, an earn-out payment of between $333 and $1,000 if Emerald has net revenues ranging from $9.0 million to $11.0 million during the first year after closing, and additional earn-out payments equal to 28% of net revenues arising from the sale of certain products or to certain customers for each of the first three years after closing. The liability for contingent consideration is a fair value measurement based on various level 3 inputs and assumptions including forecasts, probabilities of payment and discount rates. The liability for contingent consideration is subject to fair value adjustments each reporting period that will be recognized through the statement of operations.

In connection with the acquisition, the Company recorded acquisition costs of $493 for the three months ended June 30, 2020 related to legal, professional fees and other miscellaneous costs. These costs are recorded within acquisition costs within the consolidated condensed statements of operations.

Our consolidated condensed statements of operations for the three and six months ended June 30, 2020 include revenues of $1,146 and net income of $48, attributable to the acquirees for the period from May 19 through June 30, 2020.

We accounted for the acquisition in accordance with ASC 805, Business Combinations, with identifiable assets acquired and liabilities assumed recorded at their estimated fair value on the acquisition date. We have up to one year from the acquisition date to finalize the purchase price allocation. As such, these estimates may change which would likely result in an increase or decrease in goodwill. A preliminary purchase price allocation of the fair value of the assets acquired and liabilities assumed is included in the table below. A preliminary intangible asset of $6,400 was recorded as a part of purchase accounting related to the value of identifiable customer relationships acquired. These intangibles are being amortized over an 8 year useful life. A preliminary net deferred tax liability of $1,055 was established on the acquisition date related to book-tax differences from the amortization of the intangibles as well as certain other purchasing accounting adjustments. Preliminary goodwill of $4,041 was recorded, representing the benefits of increased operating scale and growth opportunities through currently unidentifiable customers. The goodwill balance is not amortizable for tax purposes.



Current assets	$	3,104
Machinery and equipment		172
Intangible assets		6,400
Goodwill		4,041
Noncurrent assets		169
Current liabilities		(983)
Noncurrent liabilities		(1,088)
Total consideration paid	$	11,815