BUSINESS COMBINATION

12 Months Ended

Dec. 31, 2023

BUSINESS COMBINATION

BUSINESS COMBINATION

14. BUSINESS COMBINATION

On July 5, 2023 (the “Acquisition Date”), the Company, through its wholly-owned subsidiary in Canada, PDF Solutions Canada, Ltd., acquired 100% of the equity interest in Lantern Machinery Analytics, Inc. headquartered in Canada, a privately-held provider of automated image analysis and feature extraction AI/ML software for critical inspection and metrology steps at battery cell development and manufacturing processes for the electric vehicle industry. This software will enhance the Company’s Exensio analytics software and product offerings to new and existing battery manufacturer customers. The total cash consideration for this acquisition was $1.8 million, net of cash acquired, for all of the outstanding equity of Lantern Machinery Analytics, Inc.

The Company accounted for this acquisition as a business combination in accordance with FASB ASC Topic 805, Business Combinations. This method requires that assets acquired and liabilities assumed in a business combination be recognized at their respective estimated fair values as of the Acquisition Date. The excess of purchase consideration over the fair value of net tangible and identifiable intangible assets acquired was recorded as goodwill. The goodwill recorded from this acquisition represents business benefits the Company anticipates from the acquired workforce and expectation for expanded sales opportunities to foster further business growth. Due to the nature of the transaction, the goodwill associated with the acquisition is not deductible for tax purposes. As of December 31, 2023, payment made for this acquisition, net of cash acquired, amounted to $1.8 million and was funded from available cash of the Company.

The allocation of the purchase price for this acquisition, as of the date of the acquisition, is as follows (in thousands, except amortization period):

			Amortization
	Amount		Period (Years)
Allocation of Purchase Price:
Assets
Fair value of tangible assets (including cash of $265)	$	450
Fair value of intangible assets:
Developed technology		1,010	8
Customer relationships		100	6
Goodwill		895	N/A
Total assets acquired		2,455
Liabilities
Deferred tax liabilities		294
Accounts payable and accrued expenses		73
Total liabilities assumed		367
Total purchase price allocation	$	2,088

Pro forma results of operations have not been presented because the effect of the acquisition was not material to the Company’s financial results.