On April 13, 2022 (the “Acquisition Date”), the Company completed its acquisition of Freedom Photonics, a designer and manufacturer of high-performance lasers and related photonic products. The Freedom Photonics acquisition is expected to help the Company secure intellectual property and the supply of a key enabling component as part of the Company’s vertical integration strategy.

Pursuant to the terms of the Merger Agreement between the Company and Freedom Photonics, the Company acquired all of the issued and outstanding units of capital of Freedom Photonics for an aggregate purchase price of approximately $34.2 million payable primarily in Class A common stock of the Company. In conjunction with the acquisition, the Company issued share-based compensation awards to certain employees and selling shareholders of Freedom Photonics, which may result in future stock-based compensation expense, subject to achievement of certain service and performance conditions. The results of operations related to Freedom Photonics are included in the Company’s consolidated statements of operations beginning

from the Acquisition Date. As part of the transaction, the Company incurred $1.4 million of acquisition-related costs, which were expensed and included in general and administrative expenses in the periods in which the costs were incurred.

Preliminary estimates of fair values included in the consolidated financial statements are expected to be finalized within a year following the Acquisition Date. These are related to certain working capital adjustments and finalization of the estimates relating to deferred tax balances which will occur after the filing of the current tax returns. After the measurement period, any subsequent adjustments will be reflected in the consolidated statements of operations.

The following table summarizes the preliminary purchase price allocation to assets acquired and liabilities assumed, including identification of measurement period adjustments (in thousands):


	Preliminary Recorded Value
Cash and cash equivalents	$	1,063
Accounts receivable	3,235
Contract asset	1,913
Inventories, net	127
Prepaid expenses and other current assets	70
Property and equipment	1,353
Operating lease right-of-use assets	449
Other non-current assets	22
Intangible assets (1)	15,600
Goodwill (2)	15,520
Total assets acquired	39,352
Current Liabilities	(4,036)
Non-current liabilities	(1,135)
Total liabilities assumed	(5,171)
Net assets acquired	$	34,181

(1) Tradename was measured using the relief-from-royalty method. The remaining identifiable intangible assets were measured using the income approach. Significant inputs used as part of the valuation of intangible assets include revenue forecasts, present value factors, expected product margins and costs to complete the IPR&D.

(2) Goodwill is the excess of the consideration transferred over the net assets recognized and represents the expected future economic benefits as a result of other assets acquired that could not be individually identified and separately recognized. Goodwill is not amortized. The factors that made up the goodwill recognized included assembled workforce and component cost savings. The entire amount of goodwill is expected to be deductible for tax purposes and is allocated to the ATS segment, which is also deemed the reporting unit.


	Useful Life	Preliminary Recorded Value
Customer backlog	≤ 2 years	$	650
Customer relationships	4 years	2,950
Developed technology	8 years	4,000
In-process research and development (IPR&D) (1)		7,500
Tradename	4 years	500
Total intangible assets		$	15,600

(1) IPR&D intangibles are treated as indefinite-lived until the completion or abandonment of the associated R&D project, at which time the appropriate useful lives will be determined.

The following unaudited pro forma financial information summarizes the combined results of operations for the Company and Freedom Photonics as if the companies were combined as of the beginning of fiscal year 2021. The unaudited pro forma information includes adjustments to amortization and depreciation for intangible assets and property and equipment acquired, the purchase accounting effect on transaction costs, and stock-based compensation costs.

The table below reflects the impact of adjustments to the unaudited pro forma results for the three and six months ended June 30, 2022 and 2021 that are directly attributable to the acquisition (in thousands):



	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
	(Unaudited)
(Decrease) / increase to expenses as a result of transaction costs	$	(417)	$	—	$	(2,582)	$	2,795
(Decrease) / increase to expenses as a result of stock-based compensation expense	525		4,271		4,159		11,277

•Transaction costs of $2.8 million are assumed to have occurred on January 1, 2021, and are recognized as if incurred in the first quarter of 2021;

•Employee compensation in connection with the retention awards, incentive plan awards, sign-on bonuses, and deferred shares are assumed to have started on January 1, 2021, and recognized as incurred based on their respective periods.

The unaudited pro forma information presented below is for informational purposes only and is not necessarily indicative of our consolidated results of operations of the combined business had the acquisition actually occurred at the beginning of fiscal year 2021 or the results of our future operations of the combined businesses (in thousands).



	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
	(Unaudited)
Revenue	$	10,481	$	11,385	$	22,511	$	21,534
Net loss	(95,470)		(40,823)		(185,410)		(126,631)