On October 25, 2019, the Company became Onto Innovation Inc. and accounted for the merger (“2019 Merger”) as a reverse acquisition using the acquisition method of accounting in accordance with generally accepted accounting principles

(“GAAP”). GAAP requires that either Nanometrics Incorporated (“Nanometrics”) or Rudolph Technologies, Inc. (“Rudolph”) is designated as the acquirer for accounting and financial reporting purposes (“Accounting Acquirer”). Based on the evidence available, Rudolph was designated as the Accounting Acquirer while Nanometrics was the acquirer for legal purposes. Therefore, Rudolph’s historical results of operations replaced Nanometrics’ historical results of operations for all periods prior to the 2019 Merger.

The aggregate purchase price of $890,131 consisted of 25,060 shares of common stock valued at $884,801 and the fair value of assumed Nanometrics equity awards of $5,330. Under ASC 805, acquisition-related transaction costs (e.g., advisory, legal, investment banking and other professional fees) are not included as a component of consideration transferred but are accounted for as expenses in the periods in which such costs are incurred. Total transaction costs incurred by the Company were $9,907 during the year ended December 31, 2019 and are included in general and administrative expense in the Consolidated Statements of Operations.

During the quarter ended December 26, 2020, the Company finalized its fair value determination of the assets acquired and the liabilities assumed. The following table summarizes the final allocation of the total purchase consideration to the fair values of the assets acquired and liabilities assumed at the merger date.

Cash and cash equivalents	$43,882
Marketable securities	94,389
Account receivables	49,917
Inventories	98,478
Prepaid expenses and other current assets	6,659
Property, plant and equipment	77,451
Operating lease right-of-use assets	9,658
Identifiable intangible assets	374,900
Deferred income taxes	2,191
Other assets	850
Total assets acquired	758,375
Accounts payable	(23,361)
Payroll and related expenses	(20,290)
Deferred revenue	(5,931)
Other current liabilities	(10,679)
Income taxes payable	(2,007)
Other non-current liabilities	(90,113)
Net assets acquired	605,994
Goodwill	284,137
Total purchase consideration	$890,131

The inventory acquired consisted primarily of work in process, for which fair value was measured based on determining its net realizable value as such value represents an exit price in an orderly transaction between market participants, and raw materials. Factors that required judgment in determining the net realizable value for the inventory included determining estimated selling prices, cost to complete, costs to dispose, operating profit, and discount rates, among others. The Company recorded a $26,486 step-up of inventory to its fair value as of the 2019 Merger date.

	Estimated Fair Value	Weighted Average Useful Life (years)
Developed technology	$260,500	6.6
In-process research and development	46,600	indefinite
Customer relationships	53,000	13.1
Backlog	6,700	1.1
Trademarks and trade names	8,100	7.5
Total intangible assets	$374,900

Acquired intangible assets reported above are being amortized using the straight-line method over their estimated useful lives, which approximates the pattern of how the economic life is expected to be used. This includes amounts allocated to

customer relationships because of anticipated high customer retention rates that are common in the semiconductor capital equipment industry.

Developed technology relates to Nanometrics’ product family and was valued using the multi-period excess earnings method under the income approach. This method reflects the present value of the projected cash flows that are expected to be generated by the developed technology less charges representing the contribution of other assets to those cash flows. The average estimated useful life of developed technologies was determined to be 6.6 years and was based on the technology cycle related to each developed technology, as well as the cash flows over the respective forecast period.

The fair value of the in-process research and development (“IPRD”) was determined using the multi-period excess earnings method under the income approach. Such method reflects the present value of the projected cash flows that are expected to be generated by the IPRD, less costs to complete the development and charges representing the contribution of other assets to those cash flows. The Company has determined that the estimated useful life of the acquired in-process research and development is currently indeterminate; thus, it has been categorized as indefinite and will be reviewed annually for impairment, along with the Company’s other long-lived assets with indefinite lives, unless its estimated useful life is known.

Customer relationships represent the fair value of future projected revenue that will be derived from sales of products to new and existing customers and was valued using the distributor method under the income approach. This method reflects the present value of projected distributor margins to be derived from sales to existing customers less charges representing the contribution of other assets to those cash flows. The estimated useful life of the customer relationships was determined to be 13.1 years and was based on historical customer turnover rates.

Order backlog represents the fair value of future projected revenue that will be derived from outstanding orders from customers that have not yet been shipped and was valued using the multi-period excess earnings method under the income approach, which reflects the present value of such outstanding orders less charges representing the contribution of other assets to those cash flows. The estimated useful life of the order backlog was determined to be 1.1 years and was based on historical order fulfilment rates.

Trademarks and trade names relate to the “Nanometrics” trademarks and trade names and were fair valued by applying the relief-from-royalty method under the income approach. This method is based on the application of a royalty rate to forecasted revenue under the trademarks and trade names. The estimated useful life of the trademarks and trade names was determined to be 7.5 years and was based on the expected life of the trademarks and trade names and the cash flows anticipated over the forecast period.

The results of operations of Nanometrics are reported in the Company’s consolidated financial statements from the date of the 2019 Merger and included $66,261 of total net sales and an operating loss of $7,065 for the year ended December 31, 2019.

The following unaudited pro forma financial information summarizes the combined results of operations of Rudolph and Nanometrics, on a pro forma basis, as if the companies had combined at the beginning of fiscal year 2018. The pro forma financial information is presented for informational purposes only and may not necessarily reflect the actual results of operations that would have been achieved if the 2019 Merger had taken place on January 1, 2018, nor are they necessarily reflective of future results of operations. The pro forma information for all periods presented also includes adjustments to amortization charges for acquired intangible assets, depreciation charges for stepped-up fair value of acquired fixed assets, related tax effects and other adjustments.

The reported financial information for the year ended December 31, 2019 includes the results of Rudolph for the year then-ended and the results of Nanometrics from the merger date through December 31, 2019. The reported financial information for the year ended December 31, 2018 is the historical results of Rudolph:

	Year Ended
	December 31, 2019				December 31, 2018
	Reported		Pro Forma		Reported		Pro Forma
Net revenue	$	305,896	$	525,455	$	273,784	$	598,307
Net income attributable to Onto Innovation		1,910		901		45,096		36,246