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BUSINESS COMBINATION
 12 Months Ended
May 30, 2025
BUSINESS COMBINATION  
BUSINESS COMBINATION

4. 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 $22.2 million, which consisted of the following:

 

(In thousands)

 

Fair Value

 

Cash

 

$10,631

 

Common stock under transfer restriction

 

 

9,381

 

Escrow payable

 

 

2,381

 

Working capital adjustments (1)

 

 

(240)
Total

 

$22,153

 

 

(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 represented the present value of total escrow amount, net of certain indemnification, and was initially recorded within accrued expenses and other current liabilities and other long-term liabilities, respectively. The total escrow amount at the acquisition date included: (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, the Company initially recorded $0.7 million within prepaid expenses and other current assets and $2.1 million within Other non-current assets.

 

During the year ended May 30, 2025, the Company updated the purchase consideration, which reflects a reduction in the receivable related to the working capital adjustment from $0.8 million to $0.2 million and a reduction in escrow payable related to indemnification from $2.8 million to $2.5 million, based on negotiations with the seller. As a result, the total purchase consideration has been adjusted from $21.9 million to $22.2 million. Accordingly, the goodwill balance has increased from $10.4 million to $10.7 million. During the year ended May 30, 2025, the Company released $0.7 million of cash previously held in escrow related to working capital adjustments.

 

During the year ended May 30, 2025, the Company recorded immaterial adjustments to certain assets and liability balances and finalized the fair value of the assets acquired and liabilities assumed at the acquisition date in the table below:

 

(In thousands)

 

Fair Value

 

Cash

 

$16

 

Accounts receivable

 

 

1,285

 

Inventory

 

 

2,558

 

Goodwill

 

 

10,719

 

Property and equipment

 

 

165

 

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

 

 

(2,180)
Deferred revenue

 

 

(489)
Operating lease liabilities, current and noncurrent

 

 

(714)
Deferred tax liabilities, net

 

 

(2,080)
Total

 

$22,153

 

 

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 year ended May 30, 2025 and were expensed in the period incurred within selling, general and administrative expense in the Company's Consolidated Statements of Operations.

 

The Company's Consolidated Statement of Operations for the year ended May 30, 2025 included $18.6 million in revenue and $3.8 million in net income 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.