BUSINESS COMBINATION

3 Months Ended

Aug. 30, 2024

BUSINESS COMBINATION

BUSINESS COMBINATION

2. BUSINESS COMBINATION

On July 31, 2024, the Company completed its acquisition of Incal Technology, Inc. (“Incal”), a company that specializes in packaged part reliability/burn-in test solutions. The acquisition date fair value of the consideration transferred for Incal was approximately $21.9 million, which consisted of the following:

(In thousands)	Fair Value
Cash	$	10,631
Common stock under transfer restriction		9,381
Escrow payable		2,680
Working capital adjustments (1)		(800	)
Total	$	21,892

(1) Included in Prepaid expenses and other current assets

As part of the purchase consideration, the Company issued 552,355 shares of its restricted common stock. The restricted stock issued to the shareholders of Incal is subject to a six-month holding period, during which time the shares cannot be transferred or sold without registration under the Securities Act of 1933, as amended, or pursuant to an available exemption. The fair value of the restricted shares was determined based on the closing price of the Company’s common stock on the acquisition date, adjusted for a discount related to the lack of marketability due to the transfer restrictions. The total fair value of the restricted shares issued as part of the consideration was $9.4 million.

The escrow payable of $2.8 million represents the present value of two components: (1) $2.1 million designated for the sellers’ indemnification obligations and expected to be settled after 15 months, and (2) $0.7 million designated for the sellers’ payment obligations and expected to be settled after 60 days. The escrow payable will be settled with cash of $2.8 million held in an escrow account for working capital adjustments and potential indemnification obligations in connection with the acquisition of Incal. Of the $2.8 million cash restricted in escrow, $0.7 million is included in Prepaid expenses and other current assets and $2.1 million is included in Other noncurrent assets.

The following table summarizes the preliminary fair value of the assets acquired and liabilities assumed at the acquisition date:

(In thousands)	Fair Value
Cash	$	16
Accounts receivable		1,285
Inventory		2,730
Goodwill		10,353
Property and equipment		129
Intangible assets		12,000
Operating lease right-of-use assets		810
Other assets, current and noncurrent		63
Accounts payable, accrued expenses and other liabilities, current and noncurrent		(2,013	)
Deferred revenue		(489	)
Operating lease liabilities, current and noncurrent		(714	)
Deferred tax liabilities, net		(2,278	)
Total	$	21,892

The goodwill recognized in connection with the acquisition is primarily attributable to anticipated synergies from future growth and will not be deductible for income tax purposes.

The following table summarizes the fair value of the separately identifiable intangible assets at the time of acquisition:

			Estimated Useful life
(In thousands)	Fair Value		(in years)
Developed technology	$	9,130		12
Trade names		1,050		10
Customer relationships		810		11
Non-compete agreements and others		1,010		1-3
Total intangible assets acquired	$	12,000

Acquisition-related costs were $0.5 million during the three months ended August 30, 2024, and were expensed in the period incurred within selling, general and administrative expense in the Company’s Condensed Consolidated Statements of Operations.

The Company’s Condensed Consolidated Statement of Operations include $0.2 million in revenue and $0.5 million in net loss contributed by Incal from the date of acquisition. Pro forma results of operations for this acquisition have not been presented, as the financial impact to the Company’s consolidated results of operations is not material.

The purchase consideration allocation is preliminary, and as additional information becomes available, the Company may further revise it during the remainder of the measurement period.