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BUSINESS COMBINATION

9 Months Ended

Feb. 28, 2025

BUSINESS COMBINATION

BUSINESS COMBINATION

2. 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			(240	)
Total		$	22,153

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 noncurrent assets.

During the three months ended November 29, 2024, 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 three months ended February 28, 2025, the Company released $0.7 million of cash previously held in escrow related to working capital adjustments.

The following table summarizes the preliminary fair value of the assets acquired and liabilities assumed at the acquisition date, after measurement period adjustments:

(In thousands)		Fair Value
Cash		$	16
Accounts receivable			1,285
Inventory			2,829
Goodwill			10,742
Property and equipment			129
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			(2,240	)
Deferred revenue			(489	)
Operating lease liabilities, current and noncurrent			(714	)
Deferred tax liabilities, net			(2,278	)
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 not significant and $0.5 million for the three and nine months ended February 28, 2025, respectively, and were expensed in the period incurred within selling, general and administrative expense in the Company's Condensed Consolidated Statements of Operations.

The Company's Condensed Consolidated Statement of Operations includes $8.9 million in revenue and $0.4 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 acquisition was determined to be not significant as of the date of acquisition.

The purchase consideration allocation remains preliminary, and as additional information becomes available, the Company may further revise it during the remainder of the measurement period.