NOTE 3 - BUSINESS COMBINATION:
On
May 31, 2024 (The “Closing date”), the Company closed a purchase transaction with the shareholders of Acroname Inc. (“Acroname”),
a US company specializing in advanced automation and control technologies, to acquire 100% of its equity, for a total cash consideration
of $9.1 million, of which $1.3 in consideration of the amount of cash held by Acroname at closing. In addition, the Company shall be obligated
to pay Acroname’s former shareholders earnout payments of up to $7.2 million in cash, of which payment of $1.5 million upon completion
of a development of a certain product by June 2026, and the remaining payment depending on the achievement of certain revenue, EBITDA
and cashflow targets in 2024 and 2025.
The
following table summarizes the fair value of the consideration transferred to Acroname shareholders:
| | |
U.S. dollars in
thousands | |
| Cash payment | |
| 9,160 | |
| Fair value of earnout liability (*) | |
| 2,036 | |
| Total consideration | |
| 11,196 | |
| (*) | The Company recorded earn out liability in connection with its
business combination at fair value on the acquisition date. |
The
results of operations of Acroname have been included in the consolidated financial statements since the Closing date. The amounts of revenues
related to Acroname that are included in the Company’s condensed consolidated statements of operations and comprehensive loss during
the six and three months ended June 30, 2025, are $2,421 thousand and $988 thousand, respectively. The amounts of net loss related to
Acroname that are included in the Company’s condensed consolidated statements of operations and comprehensive loss during the six
and three months ended June 30, 2025, are $1,197 thousand and $752 thousand, respectively (including amortization of tangible and intangible
assets in the amount of $588 and $294 thousand). The
following table summarizes the final purchase price allocation to the fair value of the assets acquired and liabilities assumed:
| | |
Allocation | |
| | |
of Purchase | |
| | |
Price | |
| | |
U.S. dollars in
thousands | |
| | |
| |
| Cash and cash equivalents | |
| 1,360 | |
| Accounts Receivables | |
| 294 | |
| Inventory (1) | |
| 2,635 | |
| Other current assets | |
| 123 | |
| Property and equipment | |
| 25 | |
| Operating lease right-of-use assets | |
| 650 | |
| | |
| | |
| Core Technology (2) | |
| 4,653 | |
| Customer relationships (3) | |
| 597 | |
| Goodwill (4) | |
| 1,847 | |
| Total assets acquired | |
| 12,184 | |
| Operating leases liabilities | |
| (650 | ) |
| Other liabilities | |
| (338 | ) |
| Total liabilities assumed | |
| (988 | ) |
| | |
| | |
| Net assets acquired | |
| 11,196 | |
| (1) | The estimated fair value of the finished goods inventory was deriving from its cost value, as of the valuation
date, with the addition of the gross profit of Acroname, and after deducting the direct selling expenses with relation to the inventory,
and the marketing profit. |
| (2) | The acquired company is deemed to have an underlying technology of a value, through its continued use
or re-use in many products or many generations of a singular product (a product family). The fair value of Core Technology was estimated
by applying the income approach, specifically the Multi Period Excess Earnings method. Core Technology is amortized over a period of 5.6
years. The discount rate for Acroname’s technology was estimated at 25.3% reflecting the WACC. |
| (3) | The fair value of the Customer relationships was estimated by applying the income approach, specifically
the distributor method. The Customer relationships are amortized over a period of 5.6 years. The discount rate for Acroname’s Customer
relationships was estimated at 25.3% reflecting the WACC. |
| (4) | Goodwill is primarily related to the workforce, expected synergies such as potential cost savings in operations
as a result of the business combination as well as potential future development of the mutual development projects. The goodwill is deductible
for tax purposes. All of the $1,847 thousand of goodwill was assigned to Cross Industry business (“CIB”) segment. |
|