v3.26.1
Business Combinations
 12 Months Ended
Dec. 31, 2025
Business Combination [Abstract]  
Business Combinations
Note 4. Business Combinations
 
EM4 Acquisition
 

On March 18, 2024 (the “Acquisition Date”), the Company completed its acquisition of EM4, a designer, manufacturer and seller of packaged photonic components and sub-systems for aerospace and industrial markets. The EM4 acquisition was expected to accelerate the Company’s strategy to package lasers, detectors, and ASICs into modules and sub-systems.
 

The Company acquired 100% of the membership interests of EM4 from G&H Investment Holding, Inc. (“G&H”), for an aggregate purchase price of approximately $4.2 million in cash, net of working capital adjustments, and up to $6.75 million in contingent future payments to G&H, subject to the achievement of certain financial performance targets. The fair value of the contingent consideration at the Acquisition Date was estimated to be $0.1 million. The Company utilized a Monte Carlo simulation model to estimate the probability-weighted fair value of the contingent consideration. This transaction has been accounted for as a business combination. The acquisition-related costs incurred as part of the transaction were not material.
 

Recording of Assets Acquired and Liabilities Assumed
 

Price allocation includes preliminary estimates of deferred tax balances and certain tax liabilities, for which the Company is in the process of collecting documentation to ascertain potential amounts, and fair value of certain working capital components.
 

The following table summarizes the purchase price allocation to assets acquired (in thousands):
 
   
Recorded Value
  
Cash and cash equivalents
  
$
557
  
Accounts receivable
    
1,064
  
Contract asset
    
1,644
  
Inventories, net
    
3,539
  
Prepaid expenses and other current assets
    
252
  
Property plant and equipment
    
1,888
  
Operating lease right-of-use assets
    
2,072
  
Total assets acquired
    
11,016
  
Current liabilities
    
(3,148
)
Operating lease liabilities, non-current
    
(1,628
)
Total liabilities assumed
    
(4,776
)
Net assets acquired
  
$
6,240
  
 

Since the consideration paid by the Company to acquire EM4’s business was lower than the estimated fair value of net assets acquired, the Company recognized a $1.5 million gain from the acquisition of EM4. The following factors contributed towards the purchase price paid by the Company being lower than the estimated fair value of the net assets acquired: (a) EM4 had historically been incurring losses; (b) G&H viewed EM4 as non-core; (c) although G&H pursued a competitive auction process for the business, the ultimate timeline to completion was drawn-out due to the complexity of the transaction structure; and (d) during the later stages of the sale process, after the Company was selected as the winning bidder, EM4’s business was impacted by the cancellation of certain material government programs, as well as delays in certain other purchase orders, which also served to significantly reduce the estimated probability of the contingent future payments to G&H. In the first quarter of 2024, the gain from the acquisition of EM4 was estimated to be $1.8 million, but in the fourth quarter of 2024 the Company and G&H agreed to certain adjustments to EM4’s closing balance sheet which resulted in a $0.3 million reduction in purchase price and a commensurate increase in the gain from the acquisition of EM4.
 

The results of operations related to EM4 are included in the Company’s consolidated statements of operations beginning from the Acquisition Date.