C. Acquisitions

MICRONETICS ACQUISITION

On June 8, 2012, the Company and Wildcat Merger Sub Inc., a newly formed, wholly-owned subsidiary of the Company (the “Merger Sub”), entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Micronetics, Inc. (“Micronetics”). On August 8, 2012, the transaction was closed. The Merger Sub merged with and into Micronetics with Micronetics continuing as the surviving company and wholly-owned subsidiary of the Company.

Headquartered in Hudson, NH, Micronetics is a leading designer and manufacturer of microwave and radio frequency (RF) subsystems and components for defense and commercial customers.

Pursuant to the terms of the Merger Agreement, at the closing of the merger on August 8, 2012, each share of common stock of Micronetics issued and outstanding immediately prior to the closing was converted into the right to receive $14.80 in cash, without interest (the “Merger Consideration”). All outstanding options to acquire shares of Micronetics common stock that were vested as of the closing were cancelled and the holders of such options were entitled to receive an amount of cash equal to the product of the total number of shares previously subject to such vested options and the excess of the Merger Consideration over the exercise price per share. All outstanding Micronetics stock options that were unvested at the closing were replaced by Mercury. The replacement stock options granted were determined based on a conversion ratio provided in the Merger Agreement. Micronetics existing bank debt was paid in full by Mercury on the closing date. Mercury funded the acquisition with cash on hand.

The following table presents the net purchase price and the preliminary fair values of the assets and liabilities of Micronetics:


	Amounts
Consideration transferred
Cash paid to shareholders and to settle vested options	$	69,830
Value allocated to unvested options		513
Less cash acquired		(2,109	)

Net purchase price	$	68,234

Estimated fair value of tangible assets acquired and liabilities assumed
Cash	$	2,109
Accounts receivable		3,592
Inventory		12,080
Fixed assets		5,301
Other current and non-current assets		2,893
Accounts payable and accrued expenses		(5,983	)
Long-term debt		(6,575	)
Deferred taxes		(8,053	)

Estimated fair value of net tangible assets acquired		5,364
Estimated fair value of identifiable intangible assets		18,500
Estimated fair value of goodwill		46,479

Estimated fair value of assets acquired	$	70,343
Less cash acquired		(2,109	)

Net purchase price	$	68,234

The amounts above represent the preliminary fair value estimates as of March 31, 2013 and are subject to subsequent adjustment as the Company obtains additional information during the measurement period ending August 7, 2013 and finalizes its fair value estimates. Any subsequent adjustments to these fair value estimates occurring during the measurement period will result in an adjustment to goodwill or income, as applicable.

The goodwill of $46,479 arising from the Micronetics acquisition largely reflects the potential synergies and expansion of the Company’s service offerings across product segments and markets complementary to the Company’s existing products and markets. The Micronetics acquisition provides the Company with additional capability and expertise related to microwave and radio frequency technology. The acquisition is directly aligned with the Company’s strategy of expanding its capabilities, services and offerings along the sensor processing chain.

For the three and nine months ended March 31, 2013, Micronetics’ revenue of $10,341 and $24,747, respectively, and net income of $830 and net loss of $3,683, respectively, were included in the Company’s consolidated statements of operations. The Company has not furnished pro forma financial information relating to the Micronetics acquisition because such information is not material to the Company’s financial results.