Acquisition

On November 14, 2019, the Company acquired Nutronics, Inc. (Nutronics), a private company, pursuant to the Stock Purchase Agreement between nLIGHT, Inc. and selling stockholders of Nutronics, Inc. and sellers as of that date. The total acquisition consideration consisted of $17.4 million in cash. Based in Longmont, Colorado, Nutronics is a leading developer of coherently combined lasers and beam control systems (BCS) for high-energy laser (HEL) systems serving the defense market.

The acquisition was accounted for using the acquisition method of accounting in accordance with the FASB Accounting Standards Codification (ASC) Topic No. 805, Business Combinations. The acquired assets and liabilities of Nutronics were recorded at their respective fair values, including an amount for goodwill representing the difference between the acquisition consideration and the fair value of the identifiable net assets.

The consolidated statements of operations include the financial results of Nutronics for the stub period subsequent to the acquisition date of November 14, 2019 to the Company's fiscal year end, December 31, 2019. For the stub period, Nutronics contributed $2.6 million of revenue and $0.3 million of gross profit to the Company's consolidated results of operations.

For the year ended December 31, 2019, the Company incurred approximately $0.5 million in transaction costs related to the acquisition, which primarily consisted of consulting, legal, accounting and valuation-related expenses. These expenses were recorded in sales, general and administrative expense in the accompanying consolidated statements of operations.

The acquisition price was allocated to the tangible and identified intangible assets acquired and liabilities assumed as of the closing date of the acquisition based upon their respective fair values. The fair values assigned to assets acquired and liabilities assumed were based on management’s best estimates and assumptions as of the reporting date and are considered preliminary pending finalization of valuation analyses pertaining to intangible assets acquired. Changes to amounts recorded as assets or liabilities may result in corresponding adjustments to goodwill. The table below summarizes the assets acquired and liabilities assumed (in thousands):



		Valuation at
		November 14, 2019
Cash		$	33
Accounts receivable		635
Contract assets		456
Inventory		255
Other current assets		201
Property, plant and equipment		1,019
Security deposits		46
	Tangible assets acquired	2,645

Accounts payable		(278		)
Other liabilities		(477		)
Deferred revenue		(141		)
	Liabilities assumed	(896		)
	Total tangible assets acquired and liabilities assumed	1,749
Intangible assets		7,200
Goodwill		8,484
	Net assets acquired	$	17,433

The intangible assets as of the November 14, 2019 acquisition date were as follows (in thousands):



	Amount		Weighted-Average Useful Life (in years)
Development programs	$	7,200	3.1

Identifiable intangible assets

Customer-related development programs represent the fair value of future projected revenues that will be derived from the research and development awards to existing customers of the acquired company. The fair value of the developed programs was determined based on the Income Approach, utilizing the excess earnings methodology and resulted in a value of $7.2 million which will be amortized over their useful lives. The excess earnings method provides an estimate of the fair value of the development program assets by deducting economic costs from revenue expected to be generated by the assets. These estimated cash flows are then discounted to the present value equivalent. Key assumptions of the valuation included total revenue attributable to the development programs, cost margins, operating expenses, tax rates and discount rates.

Goodwill

The excess of purchase price over the fair value amounts assigned to the assets acquired and liabilities assumed represents the amount of goodwill resulting from the acquisition. The Company believes the factors that contributed to goodwill include synergies that are specific to the consolidated business such as the acquisition of a talented workforce that expands its expertise in governmental grants-related development programs. The Company does not expect any portion of the goodwill to be deductible for tax purposes. The goodwill attributable to the acquisition has been recorded as a non-current asset and is not amortized, but is subject to an annual review for impairment. The goodwill was allocated to the Company's Advanced Development reporting unit.

Segments

Upon the acquisition of Nutronics, we assessed our operating and reportable segments as well as our reporting units for goodwill impairment consideration in accordance with FASB's ASC Topics 280, Segment Reporting, and 350, Intangibles-Goodwill and Other. See Note 18 for additional information.

Pro forma information

Pro forma financial information has not been provided for the purchase as it was not material to the Company’s overall financial position.