Business Combination

6 Months Ended

Jun. 30, 2014

Business Combination

Note 5. Business combination

On March 29, 2013 (the “closing date”) the Company acquired certain assets and assumed certain liabilities related to the semiconductor Optical Components Business Unit (the “OCU”) of LAPIS Semiconductor Co., Ltd., a wholly owned subsidiary of Rohm Co., Ltd (“LAPIS”) of Japan with the intention of operating the OCU as an ongoing business. The business is now known as NeoPhotonics Semiconductor.

Total consideration for NeoPhotonics Semiconductor was $24.3 million, including cash of $15.0 million paid through June 30, 2013 and notes payable of $11.1 million (see Note 8), partially offset by a net receivable from Lapis of $1.9 million that was received subsequent to June 30, 2013. The cash paid includes $2.0 million that was withheld and placed into escrow to cover certain indemnity obligations.

In connection with the acquisition, the Company incurred approximately $5.2 million in acquisition-related transaction costs during the six months ended June 30, 2013 related to investment banking, legal, accounting and other professional services and transfer taxes related to real property acquired. The acquisition costs were expensed as incurred and were included in operating expenses in the Company’s condensed consolidated statement of operations.

The Company accounted for its acquisition of the NeoPhotonics Semiconductor assets and assumed liabilities as a business combination. NeoPhotonics Semiconductor’s tangible and identifiable intangible assets acquired and liabilities assumed were recorded based upon their estimated fair values as of the closing date of the acquisition. The estimated fair values of the identifiable assets acquired and liabilities assumed approximated the purchase price; therefore, no goodwill was recorded. The following table summarizes the acquisition accounting and the tangible and intangible assets acquired as of the date of acquisition and subsequent adjustments (in thousands):

Total purchase consideration:
Cash paid	$	13,128
Notes payable		11,130
	$	24,258
Liabilities assumed:
Pension and retirement obligations	$	6,471
Other compensation-related liabilities		1,083
Other current liabilities		1,265
	$	8,819
Fair value of assets acquired:
Inventory	$	13,309
Other current assets		35
Land, property, plant and equipment		14,433
Intangible assets acquired:
Developed technology		2,120
Customer relationships		3,180
	$	33,077

The following unaudited supplemental pro forma information presents the combined results of operations of NeoPhotonics Corporation and NeoPhotonics Semiconductor for the six months ended June 30, 2013 as though the companies had been combined as of the beginning of the period presented. The pro forma financial information includes elimination of $5.2 million of transaction costs and $1.9 million of revenue and $1.8 million of costs related to sales from NeoPhotonics Semiconductor to the Company.

The unaudited pro forma results do not assume any operating efficiencies as a result of the consolidation of operations (in thousands, except per share data):

	Six Months Ended June 30, 2013
Revenue	$	143,744
Net loss	$	(10,796	)
Basic and diluted net loss per share	$	(0.35	)