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Business Acquisitions

6 Months Ended

Jun. 30, 2021

11. BUSINESS ACQUISITIONS

Skyline Partners Technology LLC

On January 29, 2021, the Company completed the acquisition of Fastback for cash consideration paid of $1.32 million and the issuance of $1.50 million aggregate principal amount of term notes and $11.15 million aggregate principal amount of convertible notes that are convertible into common stock at a conversion price of $5.22 per share, subject to adjustment. See Note 13 – Debt Agreements for further discussion of the notes. Fastback’s products complement and enhance the Company’s 5g connectivity offerings. All resulting goodwill is expected to be tax deductible.

The Company has accounted for the purchase using the acquisition method of accounting for business combinations under ASC 805. Accordingly, the purchase price has been allocated to the underlying assets and liabilities in proportion to their respective fair values. The excess of the consideration transferred over the estimated fair values of the net assets acquired was recorded as goodwill. The following table summarizes the acquired assets and assumed liabilities and the preliminary acquisition accounting for the fair value of the assets and liabilities recognized in the Condensed Consolidated Balance Sheet at June 30, 2021:

(Amounts in thousands)	Fair Value
Cash	$	9
Accounts receivable		245
Inventory		358
Prepaid expenses		1,914
Property & equipment		202
Intangible assets:
Intellectual Property		3,502
Software		96
Goodwill		9,527
Total assets		15,853
Accounts payable		1,055
Accrued liabilities		174
Notes payable		210
Contract liabilities, current		213
Accrued warranty liability – long term		236
Total purchase consideration	$	13,965

This purchase price allocation is preliminary and is pending the finalization of the third-party valuation analysis and working capital, as the Company has not yet completed the detailed valuation analyses as of the filing date of this Form 10-Q.

Sky Sapience Ltd.

On February 25, 2021, the Company completed the acquisition of SKS. The total preliminary purchase price consideration amounted to $11.78 million, subject to working capital and other post-closing adjustments, representing (i) cash paid on the closing date of $2.71 million, (ii) 2,555,209 shares of the Company’s common stock with a fair value of $9.07 million or $3.55 per share, of which an aggregate of 1,151,461 shares is being held in an escrow fund for the purpose of satisfying any post-closing indemnification claims against the sellers under the share purchase agreement. SKS’s products complement and enhance the Company’s tethered drone product portfolio for commercial communications, defense and national security markets. All resulting goodwill is expected to be tax deductible.

(Amounts in thousands)	Fair Value
Cash	$	320
Accounts receivable		60
Inventory		1,229
Prepaid expenses		15
Other current assets		334
Property & equipment		148
Operating lease right-of-use assets		472
Intangible assets:
Goodwill		13,115
Total assets		15,693
Accounts payable		710
Accrued liabilities		431
Contract liabilities, current		2,309
Operating lease liabilities, current		194
Operating lease liabilities - long term		267
Total purchase consideration	$	11,782

RVision, Inc.

On April 1, 2021, the Company completed the acquisition of RVision. The Company acquired 100% of the outstanding capital stock of RVision in exchange for 2,000,000 shares of its common stock with a fair value of $5.5 million or $2.75 per share. Pursuant to the terms of the acquisition, the Company filed a registration statement under the Securities Act of 1933, as amended (the “Securities Act”), to register the resale of 1,000,000 of such shares of common stock, and agreed to include the remaining shares in any registration statement the Company files under the Securities Act for a primary offering within one year of the closing date, subject to certain exceptions. RVision’s products complement and enhance the Company’s communication offerings and provides additional access to governmental and private sector commercial industries. All resulting goodwill is expected to be tax deductible.

(Amounts in thousands)	Fair Value
Cash	$	449
Accounts receivable		47
Prepaid expenses		53
Inventory		825
Property & equipment		16
Operating lease right-of-use asset		270
Intangible assets:
Goodwill		5,629
Total assets		7,289
Accounts payable		54
Accrued liabilities		219
Operating lease liabilities, current		74
Contract liabilities, current		793
Notes payable		453
Operating lease liabilities – long term		196
Total purchase consideration	$	5,500

Innovation Digital, LLC

On June 3, 2021, the Company completed the acquisition of Innovation Digital. The total preliminary purchase price consideration amounted to $8.94 million, representing cash consideration paid of $1.0 million, 3,165,322 shares of common stock with a fair value of $7.34 million or $2.32 per share, and a promissory note in the principal amount of $0.60 million that is convertible into common stock at a conversion price of $2.35. Pursuant to the terms of the acquisition, the Company has agreed to filed a registration statement under the Securities Act of 1933, as amended (the “Securities Act”), to register the resale of the 3,165,322 shares of common stock. See Note 13 – Debt Agreements for further discussion of the notes. Innovation digital enhances the Company’s portfolio of intellectual property and licensing capabilities. All resulting goodwill is expected to be tax deductible.

(Amounts in thousands)	Fair Value
Property & equipment	$	6
Operating lease right-of-use asset		105
Other Non-Current Assets		2
Intangible assets:
Goodwill		9,046
Total assets		9,159
Accounts payable		78
Operating lease liabilities, current		32
Notes payable		31
Operating lease liabilities – long term		74
Total purchase consideration	$	8,944