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ACQUISITION

May 24, 2017,

we completed our acquisition of Ambrell, a manufacturer of precision induction heating systems. Ambrell's systems are used to conduct fast, efficient, repeatable non-contact heating of metals or other electrically conductive materials, in order to transform raw materials into finished parts. The Ambrell acquisition will complement our current thermal technologies and broaden our diverse customer base, allowing expansion within many non-ATE related markets, such as consumer product packaging, fiber-optics, automotive and other markets.

The purchase price for Ambrell was

$22,000

in cash paid at closing, subject to a customary post-closing working capital adjustment. Additional consideration in the form of earnouts

may

be paid based upon a multiple of adjusted EBITDA for

2017

and

2018,

as further discussed below. The acquisition was completed by acquiring all of the outstanding capital stock of Ambrell. Total acquisition costs incurred to complete this transaction were

$849.

Acquisition costs were expensed as incurred and included in general and administrative expense.

The acquisition of Ambrell has been accounted for as a business combination using purchase accounting, and, accordingly, the results of Ambrell have been included in our consolidated results of operations from the date of acquisition. The allocation of the purchase price for Ambrell is

not

yet complete. As a result, the values reflected below are preliminary and we expect them to change. The preliminary allocation of the Ambrell purchase price was based on estimated fair values as of

May 24, 2017.

We are currently working with

third

-party valuation specialists to assist us with determining the fair value of intangible assets acquired, the related deferred tax liabilities, our liability for contingent consideration and any step up in the fair value of inventories acquired. We have

not

yet received their final report. In addition, the final fair values assigned to acquired property and equipment are also preliminary as we have

not

yet had adequate time to complete our review of salvage values and estimated useful lives. We are also in the process of reviewing the final working capital adjustment and are currently working through certain discrepancies in the calculation between ourselves and the seller. Adjustments to these preliminary amounts will be included in the final allocation of the purchase price for Ambrell, which we expect to finalize in the

third

quarter of

2017.

These adjustments could be material.

The excess of the purchase price over the identifiable intangible and net tangible assets was allocated to goodwill and is

not

deductible for tax purposes. Goodwill is attributed to synergies that are expected to result from the operations of the combined businesses.

The total preliminary purchase price of

$24,334

was comprised of:

Cash paid to acquire the capital stock of Ambrell	$	22,742
Estimated fair value of contingent consideration		2,302
Estimated working capital adjustments		(710	)

Total preliminary purchase price	$	24,334

As noted above, the consideration paid for the acquisition of Ambrell includes contingent consideration based on the future adjusted EBITDA of Ambrell. Adjusted EBITDA is earnings (or loss) from operations before interest expense, benefit or provision for income taxes, depreciation and amortization, and excludes other non-recurring income and expense items as defined in Exhibit B of the stock purchase agreement for Ambrell. The

first

earnout, to be paid after calendar year

2017

is completed, will be an amount equal to

Ambrell's adjusted EBITDA for

2017

minus the

$22,000

paid at closing. The

second

earnout, to be paid after calendar year

2018

is completed, is an amount equal to

Ambrell's adjusted EBITDA for

2018

minus the sum of the

$22,000

paid at closing and any earnout paid with respect to

2017.

The

2017

and

2018

earnouts, in the aggregate, are capped at

$18,000.

We based our initial valuation of the contingent consideration on the range of projected estimated EBITDA of

$1,485

$3,175

for

2017

and

$1,835

$3,479

for

2018.

This resulted in a range of payouts between

$2,988

and

$5,688.

We discounted the range of payouts by an estimated cost of capital of

18.5%

and probability weighted the results to arrive at an estimated fair value of

$2,302,

which was recorded as a contingent consideration liability as of the acquisition date. As previously noted, we are currently working with valuation specialists to finalize the estimate of the fair value of contingent consideration as of the acquisition date, and have

not

yet received their final report.

The total preliminary purchase price of

$24,334

has been allocated as follows:

Goodwill	$	16,820
Identifiable intangible assets		9,500
Tangible assets acquired and liabilities assumed:
Cash		70
Trade accounts receivable		3,621
Inventories		1,917
Other current assets		200
Property and equipment		614
Accounts payable		(1,420	)
Accrued expenses		(1,280	)
Customer advances		(554	)
Deferred tax liability		(5,154	)

Total preliminary purchase price	$	24,334

We estimated the fair value of identifiable intangible assets acquired using a combination of the income, cost and market approaches. As part of the preliminary valuation analysis, we identified intangible assets, including technology, trade names, customer relationships and backlog. The fair value of the identifiable intangible assets is determined primarily using the income approach, which requires a forecast of all expected future cash flows. Since all information required to perform a detailed valuation of Ambrell’s intangible assets is

not

yet available, we used certain assumptions based on historical and industry data for our preliminary valuation. As previously noted, we are currently working with valuation specialists to finalize the estimate of the fair value of identifiable intangible assets as of the acquisition date, and have

not

yet received their final report. The following table summarizes the estimated fair value of Ambrell’s identifiable intangible assets and their estimated useful lives and uses the straight-line method of amortization:

	Fair Value		Weighted Average Estimated Useful Life
			(in years)
Customer relationships	$	6,500		6
Patented technology		1,500		10
Customer backlog		1,000		1
Ambrell trade name		500		4

Total intangible assets	$	9,500		6

As discussed above, these preliminary estimates of fair value and estimated useful lives will likely differ from final amounts we will calculate after completing our final valuation analysis, including receiving the final report from the valuation specialists we have engaged to assist us in this area. The difference could be material. A

10%

change in the valuation of intangible assets would cause a corresponding increase or decrease in the balance of goodwill and annual amortization expense of approximately

$158,

assuming an overall weighted-average useful life of

years.

For the period from

May 24, 2017

June 30, 2017,

Ambrell contributed

$1,995

of net revenues and

$30

of net income.

The following unaudited pro forma information gives effect to the acquisition of Ambrell as if the acquisition occurred on

January 1, 2016.

These proforma summaries do

not

reflect any operating efficiencies or costs savings that

may

be achieved by the combined businesses. These proforma summaries are presented for informational purposes only and are

not

necessarily indicative of what the actual results of operations would have been had the acquisition taken place as of that date, nor are they indicative of future consolidated results of operations:

	Three Months Ended June 30,					Six Months Ended June 30,
	2017		2016			2017		2016
Net revenues	$	18,896	$	15,737		$	37,688	$	28,767
Net earnings (loss)	$	1,936	$	(3	)	$	3,841	$	(409	)
Diluted earnings (loss) per share	$	0.19	$	(0.00	)	$	0.37	$	(0.04	)

The pro forma results shown above do

not

reflect the impact on general and administrative expense of investment advisory costs, legal costs and other costs of

$849

incurred by us as a direct result of the transaction.