Quarterly report pursuant to Section 13 or 15(d)

Goodwill and Business Acquisition

Goodwill and Business Acquisition
3 Months Ended
Mar. 31, 2024
Goodwill and Business Acquisition [Abstract]  



We account for acquisitions in accordance with FASB ASC 805, “Business Combinations” (“ASC 805”), and goodwill in accordance with ASC 350, “Intangibles — Goodwill and Other” (“ASC 350”). The excess of the purchase price over the estimated fair value of net assets acquired in a business combination is recorded as goodwill.


Airobotics Transaction


On January 23, 2023, the Company, completed the acquisition of Airobotics, pursuant to the Agreement of Merger, dated as of August 4, 2022 (the “Original Airobotics Agreement”), and that certain Amendment to Agreement of Merger, dated November 13, 2022 (the “Airobotics Amendment,” and together with the Original Airobotics Agreement, the “Airobotics Agreement”), by and among the Company, Talos Sub Ltd., an Israeli company and a wholly owned subsidiary of the Company (“Merger Sub”), and Airobotics. In accordance with the terms of the Airobotics Agreement, Merger Sub merged with and into Airobotics (the “Merger”), with Airobotics continuing as the surviving company of the Merger and as a wholly owned subsidiary of the Company.


At the effective time of the Merger (the “Effective Time”), each ordinary share of Airobotics, par value NIS 0.01 per share (the “Airobotics Ordinary Shares”), issued and outstanding (other than shares owned by Airobotics or its subsidiaries (dormant or otherwise) or by the Company or Merger Sub) was converted into, and exchanged for 0.16806 (the “Exchange Ratio”) fully paid and nonassessable shares of Common Stock of the Company Common Stock, without interest and subject to applicable tax withholdings (“Merger Consideration”). All fractional shares of the Company Common Stock that would have otherwise been issued to a holder of Airobotics Ordinary Shares as part of the Merger Consideration were rounded up to the nearest whole share based on the total number of shares of the Company’s Common Stock issued to such holder of Airobotics Ordinary Shares. Holders of Airobotics Ordinary Shares received approximately 2.8 million shares as consideration (excluding approximately 1.7 million shares underlying equity awards to be outstanding following the Merger).


As provided in the Airobotics Agreement, each outstanding option, warrant or other right, whether vested or unvested, to purchase Airobotics Ordinary Shares (each, an “Airobotics Stock Option,” and collectively, the “Airobotics Stock Options”) issued pursuant to the Airobotics Ltd. 2015 Israeli Share Option Plan and 2020 Incentive Equity Plan (the “Airobotics Plans”), was assumed by Ondas and converted as of the Effective Time into an option, warrant or right, as applicable, to purchase shares of Company Common Stock. Subject to the terms of the relevant Airobotics Stock Option, each Airobotics Stock Option is deemed to constitute an option, warrant, or other right, as applicable, to purchase, on substantially the same terms and conditions as were applicable under such Airobotics Stock Option, a number of shares of Company Common Stock equal to the number of shares of Company Common Stock (rounded up to the nearest whole share) that the holder of such Airobotics Stock Option would have been entitled to receive pursuant to the Merger had such holder exercised such option, warrant, or right to purchase full Airobotics Ordinary Shares immediately prior to the Effective Time at a price per share of Company Common Stock (rounded down to the nearest whole cent) equal to (i) the former per share exercise price for Airobotics Ordinary Shares otherwise purchasable pursuant to such Airobotics Stock Option, divided by (ii) the Exchange Ratio.


As a result of the Merger, the Company is dual listed on The Nasdaq Stock Market and the Tel Aviv Stock Exchange (“TASE”). The first trading day of the Company’s shares on TASE was January 26, 2023. On February 8, 2024, the Company took steps to voluntarily delist the Company’s Common Stock from trading on TASE. Pursuant to Israeli law, the delisting of the Company’s Common Stock is expected to take effect three months following the date of the Company’s request to the TASE to delist the Company’s Common Stock, which occurred on February 8, 2024. The Company's Common Stock was voluntarily delisted from the TASE on May 9, 2024. The Company’s Common Stock will continue to be listed for trading on Nasdaq, and all of the shares traded on the TASE are expected to be transferred to Nasdaq where they can continue to be traded. See the Current Report on Form 8-K filed with the SEC on February 8, 2024 for further details.


The following table summarizes the consideration paid for Airobotics and the final allocation of the purchase consideration to the estimated fair value of the assets acquired and liabilities assumed at the acquisition date.


Purchase price consideration      
Common Stock – 2,844,291 Shares   $ 5,261,938  
Vested Stock Options – 773,244 Shares     700,690  
Warrants – 586,440 Shares    
Total purchase price consideration   $ 5,962,628  
Estimated fair value of assets:        
Cash and cash equivalents and restricted cash   $ 1,049,454  
Accounts receivable     112,245  
Inventory     1,494,707  
Other current assets     835,664  
Property and equipment     3,015,602  
Right of use asset     339,104  
Intangible assets     5,977,926  
Other long-term assets     62,851  
Estimated fair value of liabilities assumed:        
Accounts payable     969,242  
Customer Prepayments     1,602,535  
Government grant liability     1,783,403  
Other loans     1,140,301  
Other payables     1,156,057  
Lease liabilities     385,450  
Loan from related party     2,032,875  
Net Assets Acquired   $ 3,817,690  
Goodwill   $ 2,144,938  


The exercise price of the warrants included in the purchase price consideration far exceeded the Company’s stock price at the date of acquisition, thus the value of warrants was deemed de minimis.


The intangible assets acquired include the developed technology, marketing-related assets, and customer relationships (see Note 6 – Intangible Assets). The final purchase price allocation has changed from the preliminary allocation because of changes in the valuation of property and equipment and intangibles. During the year ended December  31, 2023, measurement period adjustments were made of (1) $68,483 to reduce the estimated fair value of property and equipment and increase goodwill, respectively, and (2) $80,000 to reduce the valuation of the customer relationships intangible asset and increase goodwill, respectively.


Goodwill represents the assembled workforce, acquired capabilities, and future economic benefits resulting from the acquisition. No portion of the goodwill is deductible for tax purposes.


Our results for the three months ended March 31, 2024 include results from Airobotics. Our results for the three months ended March 31, 2023 include results from Airobotics between January 24, 2023 and March 31, 2023. The following unaudited pro forma information presents the Company’s results of operations as if the acquisition of Airobotics had occurred on January 1, 2022. The pro forma results do not purport to represent what the Company’s results of operations actually would have been if the transactions had occurred on January 1, 2022 or what the Company’s operating results will be in future periods.


Three months ended
March 31,
    2024     2023  
Revenue, net   $ 625,009     $ 2,628,027  
Net loss   $ (9,876,084 )   $ (14,883,364 )
Basic Earnings Per Share   $ (0.16 )   $ (0.30 )
Diluted Earnings Per Share   $ (0.16 )   $ (0.30 )


Goodwill Impairment


The Company has recognized goodwill as part of the American Robotics acquisition in 2021 and Airobotics acquisition in 2023. The changes in the carrying amount of goodwill for the three months ended March 31, 2024 and year ended December 31, 2023, are as follows:


Balance as of January 1, 2023   $ 25,606,983  
Goodwill acquired     2,144,938  
Balance as of December 31, 2023 and March 31, 2024   $ 27,751,921  


Goodwill is tested for impairment in the fourth quarter after the annual forecasting process. In December 2023, the Company bypassed the qualitative analysis and proceeded directly to a quantitative analysis. The Company engaged a third-party service provider to carry out a valuation of the OAH reporting unit. Using a discounted cash flow analysis and updated forecasts for revenue and cash flows, it was determined that the fair value of the OAH reporting unit was higher than the carrying value as of December 31, 2023, and no impairment to goodwill was necessary as of December 31, 2023.