NOTE 17:-

BUSINESS COMBINATION

In November 2023, the Company acquired DPI, a US based expert systems integrator with a strong focus on the US Department of Defense and the US government sectors.

In accordance with the acquisition method of accounting, the total estimated purchase price consideration for the DPI acquisition was $19,231, subject to working capital adjustments, comprised of the following components:

A closing payment totaling $2,461, made through the issuance of ordinary shares;

ii.

A deferred payment of $820 in ordinary shares, set to be issued as per the terms outlined in the purchase agreement (“Holdback Amount”);

iii.

$4,787 cash paid by the Company to partially settle DPI's outstanding debt and transaction costs; and

iv.

$11,163 Contingent earn-out payments, to be settled using the Company's ordinary shares (“Earn-out Consideration”).

The Earn-out Consideration amounts are based on the financial results of DPI in each of the years ending December 31, 2024, 2025 and 2026 and have a maximum outcome of Company’s ordinary shares issuance to DPI’s seller of 2,419,755.

As of December 31, 2023, the fair value of the Holdback Amount and Earn-out Consideration was $11,621. The Company estimated the fair value of the Earn-out Consideration by utilizing a Monte Carlo simulation and the fair value of the Holdback Amount by multiplying the market share price of the Company in the held-back amount of shares. Changes in the Holdback Amount and Earn-out Consideration fair value are recorded in the consolidated statements of income (loss) under Other operating expenses (income), net.

Under the preliminary purchase price consideration allocation, the Company allocated the purchase price consideration to tangible and identified intangible assets acquired and liabilities assumed based on the preliminary estimates of their fair values (with the exception of exceptions in the purchase method such as contract assets, lease liabilities and assets, tax balances etc.), which were determined using generally accepted valuation techniques based on estimates and assumptions made by management at the time of the acquisition. Such estimates are subject to change during the measurement period which is limited to up to one year from the acquisition date. Any adjustments to the preliminary purchase price consideration allocation identified during the measurement period will be recognized in the period in which the adjustments are determined.

In addition to the purchase price consideration, the Company committed to issue up to 705,245 of the Company’s ordinary shares, to be issued to the seller over a period of approximately three years post-acquisition date, subject to continued service and DPI reaching certain financial results, alongside to the payment of the Earn-Out Consideration (“Service Based Earn-Out”). The Service Based Earn-Out was classified as an equity grant and measured based on the Company's closing share price as of the acquisition date.

Moreover, if all earn-outs will be paid in full, and subject to other conditions, the seller of DPI will be entitled to a one-time bonus of $9,000 to be paid in the Company’s ordinary shares or cash, at the Company’s discretion under certain limitations (“Bonus Amount”). The Bonus Amount was classified as a liability grant. As of December 31, 2023, the Company has recognized a liability in the amount of $360, which was presented under Other long-term liabilities in its balance sheet.

For the year ended December 31, 2023, the Company has recognized $662 expenses related to the Service Based Earn-Out and the Bonus Amount.

As of December 31, 2023, there was $12,781 of unrecognized compensation cost related to the Service Based Earn-Out and the Bonus Amount. This amount is expected to be recognized over a period of three years.

Acquisition-related transaction costs are not included as components of consideration transferred but are accounted for as expenses in the period in which the costs are incurred. The Company incurred transaction costs of $1,550 and $438 during the years ended December 31, 2023 and 2022, respectively, which were included in Other operating expenses (income), net in the consolidated statements of income (loss).

The following table summarizes the preliminary value of assets acquired and liabilities assumed as of the acquisition date:

	Value
Cash and Cash equivalents		680
Trade receivables and contract assets		7,547
Inventories		4,952
Other current assets		1,809
Identified intangible assets		16,454
Goodwill		11,272
Other long-term assets		2,139
Total assets acquired		44,853

Credit facility		9,043
Other current liabilities		9,182
Deferred taxes		4,119
Long-term loan		2,000
Other long-term liabilities		1,278
Total liabilities assumed		25,622

Total purchase price consideration		19,231

Goodwill represents the purchase price consideration paid in excess of the net tangible and intangible assets acquired, and is attributable primarily to expected synergies, economies of scale and the assembled workforce of DPI etc. Goodwill is allocated to the Satellite Networks operating segment and is not deductible for income tax purposes.

The following table summarizes the preliminary estimate of the identified intangible assets and their estimated useful lives as of the acquisition date:

	Fair Value		Average expected useful life
Customer relationships		10,922		15 years
Technology		1,193		8 years
Trademark		1,775		15 years
Backlog		2,564		1.25 years
		16,454

The stand-alone results of operations of DPI have been included in the consolidated financial statements since the acquisition date. DPI’s revenue and net income included in the Company’s consolidated statement of income (loss) from the acquisition date through December 31, 2023 were $6,194 and $479, respectively.

The following unaudited pro forma combined financial information table presents the results of operations of the Company and DPI as if the acquisition of DPI has been completed on January 1, 2022. The unaudited pro forma financial information includes adjustments primarily related to amortization of the acquired intangible assets, neutralization of transaction costs, recognition of retention bonuses, recognition of share-based compensation associated with issuance of stock options to DPI’s key employees and with the Service Based Earn-Out and the Bonus Amount, which are subject to continued service, as noted above. In addition, the unaudited pro forma financial information assumes no change in the fair value of the Holdback Amount and the Earn-out Consideration.

The unaudited pro forma results have been prepared for illustrative purposes only and are not necessarily indicative of what the actual results of operations of the Company and DPI, combined, would have been due to any synergies, economies of scale, the assembled workforce of DPI etc.

	Year Ended December 31,
	Unaudited
	2023		2022
Revenues		297,596		286,636
Net income (loss)		16,316		(9,200	)