During the first quarter of 2021, the Company acquired Inspectrology, LLC (“Inspectrology”), a supplier of overlay metrology for controlling lithography and etch processes in the compound semiconductor market for $24,015 in cash and an earnout subject to achievement of certain revenue targets earned for fiscal year 2021 and fiscal year 2022. As of January 1, 2022, $2,287 of the earnout has been achieved and was recorded in operating expenses. There is potential earnout for up to an additional payment of $5,000 based on fiscal 2022 results. Certain payments, including the earnout, are subject to the principals remaining with the Company for a period of one to three years.

The following table summarizes the preliminary fair value of assets acquired and liabilities assumed at the date of acquisition:

Cash and cash equivalents	$	220
Account receivables		4,071
Inventories		2,587
Prepaid expenses and other current assets		104
Property, plant and equipment		86
Identifiable intangible assets		10,290
Total assets acquired		17,358
Accounts payable		(1,048	)
Payroll and related expenses		(512	)
Deferred revenue		(386	)
Other current liabilities		(576	)
Net assets acquired		14,836
Goodwill		9,179
Total purchase consideration	$	24,015

On October 25, 2019, the Company became Onto Innovation Inc. upon the effectiveness of the merger (the “2019 Merger”) between Nanometrics Incorporated (“Nanometrics”) and Rudolph Technologies, Inc. (“Rudolph”). The Company accounted for the 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 or 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. 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

	Estimated	Weighted Average
	Fair Value	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.