Note 3 - Business Combinations

3 Months Ended

Jun. 30, 2016

Notes to Financial Statements

Business Combination Disclosure [Text Block]

3. Business Combinations

 

RadioPulse, Inc.

     On May 1, 2015, we acquired RadioPulse, Inc., or RadioPulse, for a total consideration of $15.7 million. Based in South Korea, RadioPulse is a fabless semiconductor company that develops, manufactures and sells wireless network technology solutions based on the ZigBee

®

 protocol, which combines microcontrollers and radio frequency devices. RadioPulse’s solutions are designed to enable a broad range of power-sensitive applications in the industrial, medical, consumer, smart grid and Internet of Things, or IoT, markets. RadioPulse offers a complementary product portfolio to our product lines. The consideration included cash consideration paid at closing of $14.7 million and $1.0 million related to an adjustment to eliminate debt owed to us for funds advanced prior to closing. The acquisition also included potential earnout payments aggregating up to $6.0 million payable over three years based on certain financial thresholds related to net revenues, gross profit and net income in calendar years 2015, 2016 and 2017. Based on our valuation, the fair value of the liability for the earnout payment was estimated to be nil as of June 30, 2016 and March 31, 2016. In connection with the acquisition, we incurred and expensed $248,000 in legal and consulting costs and $249,000 in acquisition-related compensation costs during fiscal 2016.

     The following table summarizes the values of the assets acquired and liabilities assumed at the acquisition date (in thousands):

	Purchase Consideration Allocation
Cash, restricted cash and cash equivalents	$	196
Accounts receivable		1,497
Inventories		534
Property, plant and equipment		24
Prepaid expenses and other current assets		547
Identifiable intangible assets		2,867
Short-term borrowings		(2,354	)
Accounts payable		(614	)
Accruals and other liabilities		(1,926	)
Total identifiable net liabilities		771
Goodwill		14,887
Total purchase consideration	$	15,658

     Identifiable intangible assets consisted of developed intellectual property, in-process research and development expenses, customer relationships, and contract backlog. The value reflected in the table represents the purchase price allocation. The valuation of the acquired intangibles was classified as a level 3 measurement under the fair value measurement guidance because the valuation was based on significant unobservable inputs and involved management judgment and assumptions about market participants and pricing. We did not recognize any liability with respect to the contingent consideration based upon our analysis.

Identified intangible assets resulting from the RadioPulse acquisition consisted of the following (in thousands):

				Estimated
	Fair Value		Amortization	Useful Life
	(In thousands)		Method	(In months)
	(unaudited)
Developed intellectual property	$	1,005	Accelerated		60
In-process research and development expenses (1)		1,188	Straight-line		60
Customer relationships		500	Accelerated		36
Contract backlog		174	Straight-line		6
Total	$	2,867

(1) Amortization starts after the completion of the research and development activities of the related projects.

     In determining the fair value of the acquired intangible assets, we determined the appropriate unit of measure, the exit market and the highest and best use for the assets. The income approach was used to estimate the fair value. The income approach indicates the fair value of an asset based on the value of the cash flows that the asset can be expected to generate in the future through a discounted cash flow method. The income approach was used to determine the fair values of developed intellectual property, in-process research and development expenses, contract backlog and customer relationships. The goodwill arising from the acquisition was largely attributable to the synergies expected to be realized after our acquisition and integration of RadioPulse and to the workforce acquired in the transaction. The goodwill is not deductible for tax purposes.

     The results of operations and financial position of RadioPulse were immaterial compared to our financial statements and therefore pro-forma financial statements have not been separately presented.