AgEagle Aerial Systems Inc 8-K/A, filed Dec 10, 2021
AgEagle Aerial Systems Inc. (UAVS)
About this 8-K/A
AgEagle Aerial Systems Inc filed this 8-K/A on December 10, 2021, reporting on events of October 18, 2021.
Items reported
- Item 9.01: Financial statements and exhibits
UNITED
STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
(Amendment No. 1)
CURRENT REPORT PURSUANT
TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
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Explanatory Note
On October 18, 2021, AgEagle Aerial Systems Inc. (the “Company”) entered into a stock purchase agreement (the “senseFly S.A. Purchase Agreement”) with Parrot Drones S.A.S. (“Parrot”) pursuant to which the Company agreed to acquire 100% of the issued and outstanding capital stock of senseFly S.A. (“senseFly S.A.”) from Parrot. senseFly S.A. provides fixed-wing drone solutions for commercial and government markets.
On October 18, 2021, AgEagle Aerial, Inc., a wholly-owned subsidiary of the Company (“AgEagle Aerial”), and the Company entered into a stock purchase agreement (the “senseFly Inc. Purchase Agreement”) with Parrot Inc. (“Parrot U.S.”) pursuant to which AgEagle Aerial agreed to acquire 100% of the issued and outstanding capital stock of senseFly Inc. (“senseFly Inc.”) from Parrot U.S. senseFly Inc. provides fixed-wing drone solutions for commercial and government markets.
The financial terms of the senseFly S.A. and senseFly Inc. (together “senseFly”) stock purchase agreements (the “Transaction”) are viewed as consolidated in certain circumstances.
On October 21, 2021, the Company filed a Current Report on Form 8-K (the “Original Form 8-K”) reporting, among other items, the consummation of the Transaction.
This Amendment No. 1 on Form 8-K (“Form 8-K/A”) amends the Original Form 8-K to provide the audited financial statements of senseFly S.A. and senseFly Inc. and proforma financial information required by Items 9.01(a) and (b) of Form 8-K, respectively.
Section 9 - Financial Statements and Exhibits
| Item 9.01 | Financial Statements and Exhibits. |
| (a) | Financial Statements of Businesses Acquired. |
The audited financial statements of senseFly S.A. as of and for the years ended December 31, 2020 and 2019, the related notes and the independent auditor’s report of Ernst & Young Ltd thereon, are included as Exhibit 99.1 to this Form 8-K/A and are incorporated herein by reference.
The audited financial statements of senseFly Inc. as of and for the years ended December 31, 2020 and 2019, the related notes and the report from the independent registered public accounting firm of D. Brooks and Associates CPAs, P.A. thereon, are included as Exhibit 99.2 to this Form 8-K/A and are incorporated herein by reference.
| (b) | Pro Forma Financial Information. |
The unaudited pro forma condensed consolidated statements of operations for the years ended December 31, 2020 and 2019, as well as the unaudited interim period ended September 30, 2021, and the unaudited condensed consolidated balance sheet as of September 30, 2021 and related unaudited notes to the condensed consolidated financial statements, are included as Exhibit 99.3 to this Form 8-K/A and are incorporated herein by reference.
The Company is furnishing unaudited pro forma financial information in this Form 8-K/A for informational purposes only to assist investors in formulating a comparative framework within which to analyze the Company’s financial performance. The unaudited pro forma financial information is not indicative of the results of operations that would have been achieved if the Transaction had taken place at the beginning of January 1, 2021, 2020 and 2019 and do not purport to project the future operating results of the consolidated company. In addition, the pro forma information is based upon the Company’s preliminary purchase price allocation and is subject to change.
| (c) | Exhibits |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| Dated: December 10, 2021 | AGEAGLE AERIAL SYSTEMS INC. | |
| By: | /s/ Nicole Fernandez-McGovern | |
| Name: | Nicole Fernandez-McGovern | |
| Title: | Chief Financial Officer | |
EXHIBIT 23.1
Consent of Independent Auditors
We hereby consent to the incorporation by reference in the Registration Statement on Form S-3 No. (File No. 333-252801) of AgEagle Aerial Systems Inc., of our report dated October 22, 2021, relating to the financial statements as of December 31, 2020 and 2019 and for each of the two years in the period ended December 31, 2020 of senseFly S.A., which will appear in this Current Report on Form 8-K/A of AgEagle Aerial Systems Inc. on or about December 9, 2021.
/s/ Ernst & Young Ltd
Geneva, Switzerland
December 9, 2021
Exhibit 23.2
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We hereby consent to the incorporation by reference in the Registration Statement on Form S-3 No. (File No. 333-252801) of AgEagle Aerial Systems Inc., of our report dated November 18, 2021, relating to the financial statements as of December 31, 2020 and 2019 and for each of the two years in the period ended December 31, 2020 of senseFly Inc., which appear in this Current Report on Form 8-K/A of AgEagle Aerial Systems Inc.
D. Brooks and Associates CPAs, P.A.
Palm Beach Gardens, FL
December 9, 2021
EXHIBIT 99.1
EXHIBIT 99.2
EXHIBIT 99.3
| AgEagle Aerial Systems Inc. and Subsidiaries |
| Pro Forma Condensed Consolidated Balance Sheet |
| As of September 30, 2021 |
| (Unaudited) |
| AgEagle Aerial | AgEagle Aerial | |||||||||||||||||||
| Systems Inc. | senseFly | Systems Inc. | ||||||||||||||||||
| And Subsidiaries | Consolidated | Pro Forma | And Subsidiaries | |||||||||||||||||
| Historical | Historical | Adjustments | Note 4 | Pro Forma | ||||||||||||||||
| ASSETS | ||||||||||||||||||||
| Current Assets: | ||||||||||||||||||||
| Cash | $ | 32,221,558 | $ | 499,939 | $ | (12,084,537 | ) | (A) | $ | 20,636,960 | ||||||||||
| Accounts receivable | 672,263 | 3,064,004 | — | 3,736,267 | ||||||||||||||||
| Inventories, net | 1,737,628 | 1,830,938 | — | 3,568,566 | ||||||||||||||||
| Prepaid and other current assets | 1,001,271 | 721,632 | — | 1,722,903 | ||||||||||||||||
| Notes receivable | 700,000 | — | — | 700,000 | ||||||||||||||||
| Total current assets | 36,332,720 | 6,116,513 | (12,084,537 | ) | 30,364,696 | |||||||||||||||
| Property and equipment, net | 382,936 | 354,020 | — | 736,956 | ||||||||||||||||
| Right of use asset | 1,010,397 | — | — | 1,010,397 | ||||||||||||||||
| Intangible assets, net | 6,310,818 | 40,348 | 7,803,505 | (B) | 14,154,671 | |||||||||||||||
| Goodwill | 64,573,288 | — | 12,102,512 | (B) | 76,675,800 | |||||||||||||||
| Other assets | 25,000 | 218,437 | — | 243,437 | ||||||||||||||||
| Total assets | $ | 108,635,159 | $ | 6,729,318 | $ | 7,821,480 | $ | 123,185,957 | ||||||||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||||||||||||||
| Current Liabilities: | ||||||||||||||||||||
| Accounts payable | $ | 1,186,800 | $ | 5,769,603 | $ | — | $ | 6,956,403 | ||||||||||||
| Accrued expenses and other liabilities | 1,009,221 | 723,992 | (44,375 | ) | (C) | 1,688,838 | ||||||||||||||
| Deferred revenue | 615,860 | — | — | 615,860 | ||||||||||||||||
| Current portion of lease liability | 251,799 | — | — | 251,799 | ||||||||||||||||
| Current portion of liabilities related to acquisition agreement | 4,000,000 | — | 4,500,000 | (D) | 8,500,000 | |||||||||||||||
| Current portion of interest-bearing liabilities | — | 458,000 | — | 458,000 | ||||||||||||||||
| Other current provisions | — | 676,554 | — | 676,554 | ||||||||||||||||
| Total current liabilities | 7,063,680 | 7,628,149 | 4,455,625 | 19,147,454 | ||||||||||||||||
| Deferred tax liability | — | — | — | (E) | — | |||||||||||||||
| Long term portion of lease liability | 767,491 | — | — | 767,491 | ||||||||||||||||
| Long term portion of liabilities related to acquisition agreement | 6,625,000 | — | 5,000,000 | (D) | 11,625,000 | |||||||||||||||
| Long term portion of interest-bearing liabilities | — | 3,522,653 | (2,537,184) | (F) | 985,469 | |||||||||||||||
| Total Liabilities | 14,456,171 | 11,150,802 | 8,668,807 | 32,525,414 | ||||||||||||||||
| Stockholders’ Equity: | ||||||||||||||||||||
| Total stockholders’ equity | 94,178,988 | (4,421,484 | ) | 903,039 | (A)(B)(C)(D)(F)(G) | 90,660,543 | ||||||||||||||
| Total liabilities and stockholders’ equity | $ | 108,635,159 | $ | 6,729,318 | $ | 7,821,480 | $ | 123,185,957 | ||||||||||||
| The accompanying notes are an integral part of these unaudited pro forma condensed consolidated financial statements. |
| AgEagle Aerial Systems Inc. and Subsidiaries |
| Pro Forma Condensed Consolidated Statement of Operations |
| Nine Months Ended September 30, 2021 |
| (Unaudited) |
| AgEagle Aerial | AgEagle Aerial | |||||||||||||||||||
| Systems, Inc. | senseFly | Systems, Inc. | ||||||||||||||||||
| And Subsidiaries | Consolidated | Pro Forma | And Subsidiaries | |||||||||||||||||
| Historical | Historical | Adjustments | Note 4 | Pro Forma | ||||||||||||||||
| Revenues | $ | 5,660,662 | $ | 9,183,613 | $ | — | $ | 14,844,275 | ||||||||||||
| Cost of sales | 2,885,008 | 3,245,325 | — | 6,130,333 | ||||||||||||||||
| Gross Profit | 2,775,654 | 5,938,288 | — | 8,713,942 | ||||||||||||||||
| Operating Expenses: | ||||||||||||||||||||
| General and administrative | 8,183,236 | 2,937,460 | 1,377,984 | (C)(G) | 12,498,680 | |||||||||||||||
| Professional fees | 2,244,804 | — | — | 2,244,804 | ||||||||||||||||
| Research and development | 2,115,367 | 4,584,580 | — | 6,699,947 | ||||||||||||||||
| Sales and marketing | 1,813,069 | 2,710,416 | — | 4,523,485 | ||||||||||||||||
| Total Operating Expenses | 14,356,476 | 10,232,456 | 1,377,984 | 25,966,916 | ||||||||||||||||
| Loss from Operations | (11,580,822 | ) | (4,294,168 | ) | (1,377,984 | ) | (17,252,974 | ) | ||||||||||||
| Other Income (Expenses): | ||||||||||||||||||||
| Interest (expense) income, net | 12,850 | (28,722 | ) | — | (15,872 | ) | ||||||||||||||
| Paycheck Protection Program Loan Forgiveness | 108,532 | — | — | 108,532 | ||||||||||||||||
| Loss on disposal of fixed assets | (3,712 | ) | — | — | (3,712 | ) | ||||||||||||||
| Other Income, net | 83,548 | (57,263 | ) | — | 26,285 | |||||||||||||||
| Total Other Expenses | 201,218 | (85,985 | ) | — | 115,233 | |||||||||||||||
| Loss Before Income Taxes | (11,379,604 | ) | (4,380,153 | ) | (1,377,984 | ) | (17,137,741 | ) | ||||||||||||
| Provision for income taxes | — | — | — | — | ||||||||||||||||
| Net Loss Available to Common Stockholders | $ | (11,379,604 | ) | $ | (4,380,153 | ) | $ | (1,377,984 | ) | $ | (17,137,741 | ) | ||||||||
| Net Loss Per Common Share - Basic and Diluted | $ | (0.17 | ) | $ | — | $ | — | $ | (0.25 | ) | ||||||||||
| Weighted Average Number of Shares Outstanding During the Period -- Basic and Diluted | 68,243,666 | — | — | 68,243,666 | ||||||||||||||||
| The accompanying notes are an integral part of these unaudited pro forma condensed consolidated financial statements. |
| AgEagle Aerial Systems Inc. and Subsidiaries |
| Pro Forma Condensed Consolidated Statement of Operations |
| Year Ended December 31, 2020 |
| (Unaudited) |
| AgEagle Aerial | AgEagle Aerial | |||||||||||||||||||
| Systems, Inc. | senseFly | Systems, Inc. | ||||||||||||||||||
| And Subsidiaries | Consolidated | Pro Forma | And Subsidiaries | |||||||||||||||||
| Historical | Historical | Adjustments | Note 4 | Pro Forma | ||||||||||||||||
| Revenues | $ | 1,285,383 | $ | 12,445,021 | $ | — | $ | 13,730,404 | ||||||||||||
| Cost of sales | 711,650 | 5,397,115 | — | 6,108,765 | ||||||||||||||||
| Gross Profit | 573,733 | 7,047,906 | — | 7,621,639 | ||||||||||||||||
| Operating Expenses: | ||||||||||||||||||||
| Selling expenses | 40,003 | — | — | 40,003 | ||||||||||||||||
| General and administrative | 2,732,274 | 3,533,572 | — | 6,265,846 | ||||||||||||||||
| Professional fees | 2,703,371 | — | — | 2,703,371 | ||||||||||||||||
| Research and development | 29,392 | 4,753,758 | — | 4,783,150 | ||||||||||||||||
| Sales and marketing | — | 5,204,103 | — | 5,204,103 | ||||||||||||||||
| Total Operating Expenses | 5,505,040 | 13,491,433 | — | 18,996,473 | ||||||||||||||||
| Loss from Operations | (4,931,307 | ) | (6,443,527 | ) | — | (11,374,834 | ) | |||||||||||||
| Other Income (Expenses): | ||||||||||||||||||||
| Interest (expense) income, net | — | (415,702 | ) | — | (415,702 | ) | ||||||||||||||
| Loss on disposal of fixed assets | (594 | ) | — | — | (594 | ) | ||||||||||||||
| Other Income, net | (549 | ) | — | — | (549 | ) | ||||||||||||||
| Total Other Expenses | (1,143 | ) | (415,702 | ) | — | (416,845 | ) | |||||||||||||
| Loss Before Income Taxes | (4,932,450 | ) | (6,859,229 | ) | — | (11,791,679 | ) | |||||||||||||
| Provision for income taxes | — | — | — | — | ||||||||||||||||
| Net Loss | $ | (4,932,450 | ) | $ | (6,859,229 | ) | $ | — | $ | (11,791,679 | ) | |||||||||
| Deemed dividends on redemption of Series D Preferred Stock | (3,763,591 | ) | — | — | (3,763,591 | ) | ||||||||||||||
| Deemed dividends on Series C Preferred Stock and Series D warrants | (4,050,838 | ) | — | — | (4,050,838 | ) | ||||||||||||||
| Deemed dividends on issuance and repurchase of Series E Preferred Stock | (1,227,120 | ) | — | — | (1,227,120 | ) | ||||||||||||||
| Series D Preferred stock dividends | (69,778 | ) | — | — | (69,778 | ) | ||||||||||||||
| Net Loss Available to Common Stockholders | $ | (14,043,777 | ) | $ | (6,859,229 | ) | $ | — | $ | (20,903,006 | ) | |||||||||
| Net Loss Per Common Share - Basic and Diluted | $ | (0.35 | ) | $ | — | $ | — | $ | (0.51 | ) | ||||||||||
| Weighted Average Number of Shares Outstanding During the Period -- Basic and Diluted | 40,688,019 | — | — | 40,688,019 | ||||||||||||||||
| The accompanying notes are an integral part of these unaudited pro forma condensed consolidated financial statements. |
| AgEagle Aerial Systems Inc. and Subsidiaries |
| Pro Forma Condensed Consolidated Statement of Operations |
| Year Ended December 31, 2019 |
(Unaudited) |
|
AgEagle Aerial |
AgEagle Aerial | |||||||||||||||||||
| Systems, Inc. | Systems, Inc. | |||||||||||||||||||
| And Subsidiaries | senseFly Consolidated | Pro Forma | And Subsidiaries | |||||||||||||||||
| Historical | Historical | Adjustments | Note 4 | Pro Forma | ||||||||||||||||
| Revenues | $ | 296,677 | $ | 16,764,720 | $ | — | $ | 17,061,397 | ||||||||||||
| Cost of sales | 202,049 | 9,116,931 | — | 9,318,980 | ||||||||||||||||
| Gross Profit | 94,628 | 7,647,789 | — | 7,742,417 | ||||||||||||||||
| Operating Expenses: | ||||||||||||||||||||
| Selling expenses | 65,015 | — | — | 65,015 | ||||||||||||||||
| General and administrative | 1,850,225 | 4,054,554 | — | 5,904,779 | ||||||||||||||||
| Professional fees | 662,633 | — | — | 662,633 | ||||||||||||||||
| Research and development | 38,948 | 5,267,892 | — | 5,306,840 | ||||||||||||||||
| Sales and marketing | — | 5,488,033 | — | 5,488,033 | ||||||||||||||||
| Total Operating Expenses | 2,616,821 | 14,810,479 | — | 17,427,300 | ||||||||||||||||
| Loss from Operations | (2,522,193 | ) | (7,162,690 | ) | — | (9,684,883 | ) | |||||||||||||
| Other Income (Expenses): | ||||||||||||||||||||
| Interest (expense) income, net | — | 126,585 | — | 126,585 | ||||||||||||||||
| Other Income, net | (501 | ) | (178,880 | ) | — | (179,381 | ) | |||||||||||||
| Total Other Expenses | (501 | ) | (52,295 | ) | — | (52,796 | ) | |||||||||||||
| Loss Before Income Taxes | (2,522,694 | ) | (7,214,985 | ) | — | (9,737,679 | ) | |||||||||||||
| Provision for income taxes | — | — | — | — | ||||||||||||||||
| Net Loss | $ | (2,522,694 | ) | $ | (7,214,985 | ) | $ | — | $ | (9,737,679 | ) | |||||||||
| Series D Preferred stock dividends | (162,222 | ) | — | — | (162,222 | ) | ||||||||||||||
| Net Loss Available to Common Stockholders | $ | (2,684,916 | ) | $ | (7,214,985 | ) | $ | — | $ | (9,899,901 | ) | |||||||||
| Net Loss Per Common Share - Basic and Diluted | $ | (0.19 | ) | $ | — | $ | — | $ | (0.67 | ) | ||||||||||
| Weighted Average Number of Shares Outstanding During the Period -- Basic and Diluted | 14,714,533 | — | — | 14,714,533 | ||||||||||||||||
| The accompanying notes are an integral part of these unaudited pro forma condensed consolidated financial statements. |
Notes to the Unaudited Pro Forma Condensed Consolidated Financial Statements
Note 1. Basis of Presentation
The unaudited pro forma condensed consolidated financial statements have been prepared using AgEagle Aerial Systems Inc.’s (“the Company”), and senseFly S.A.’s and senseFly Inc.’s (together “senseFly”) historical financial information and present the pro forma effect of the acquisition and certain adjustments described herein in accordance with Article 11 of Regulation S-X. The historical financial information of the Company and senseFly has been prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”). The historical financial information of the Company and the information presented herein are in U.S. dollars (“USD”).
The unaudited pro forma condensed consolidated financial statements were prepared using the acquisition method of accounting in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standard Topic 805, Business Combinations (“ASC 805”) with the Company considered the acquirer of senseFly (“the Acquisition”) for accounting purposes. The pro forma condensed consolidated financial statements are provided for illustrative purposes only and are not intended to represent, and are not necessarily indicative of, what the operating results or financial position of the Company would have been had the Acquisition been completed on the dates indicated, nor are they necessarily indicative of the Company’s future operating results or financial position. The pro forma condensed consolidated balance sheet gives effect to the transaction as if the Acquisition occurred on September 30, 2021 and the pro forma condensed consolidated statement of operations gives effect to the transaction as if it occurred on January 1, 2021, 2020 and 2019. The pro forma financial information does not reflect the impacts of any potential operational efficiencies, asset dispositions, cost savings or economies of scale that the Company may achieve with respect to the Acquisition. Additionally, the unaudited pro forma condensed consolidated statements of operations do not include non-recurring charges or credits that result directly from the Acquisition. Differences between estimates used in the purchase price allocation included within these unaudited pro forma consolidated financial statements and the final purchase price allocation amounts will occur, and these differences could have a material impact on the accompanying unaudited pro forma condensed consolidated financial statements or future financial statements.
The historical financial information has been adjusted in the unaudited pro forma condensed consolidated financial statements to give effect to pro forma events that are (1) directly attributable to the Acquisition, (2) factually supportable, and (3) expected to have a continuing impact on the consolidated results of the combined companies.
Note 2. Description of the Transaction
The aggregate purchase price for the shares of senseFly S.A. is $21,000,000, less the amount of senseFly S.A.’s debt and subject to a customary working capital adjustment. The consideration is also subject to a $4,565,000 holdback to cover any post-closing indemnification claims and to satisfy any purchase price adjustments. The holdback is scheduled to be released in two equal installments, less any amounts paid or reserved for outstanding indemnity claims, on December 31, 2022 and December 31, 2023 in accordance with the terms of the senseFly S.A. Purchase Agreement.
The aggregate purchase price for the shares of senseFly Inc. is $2,000,000, less the amount of senseFly Inc.’s debt and subject to a customary working capital adjustment. The consideration is also subject to a $435,000 holdback to cover any post-closing indemnification claims and to satisfy any purchase price adjustments. The holdback is scheduled to be released in two equal installments, less any amounts paid or reserved for outstanding indemnity claims, on December 31, 2022 and December 31, 2023 in accordance with the terms of the senseFly Inc. Purchase Agreement.
A portion of the consideration under the senseFly S.A. Purchase Agreement is comprised of shares of common stock of the Company, par value $0.001 (“Common Stock”), having an aggregate value of $3,000,000 based on a volume weighted average trading price of the Common Stock over a ten consecutive trading day period prior to the date of issuance of the shares of Common Stock to Parrot (the “Shares”). The Shares are issuable 90 days after the closing date of the transaction. Pursuant to the terms of the senseFly S.A. Purchase Agreement and a Registration Rights Agreement, dated as of October 19, 2021, the Company has agreed to file a Form S-3 Registration Statement (the “Registration Statement”) covering the resale of the Shares with the Securities and Exchange Commission (the “SEC”) no later than ten business days following the date the Shares are issued to Parrot. The Company shall use its best efforts to cause the Registration Statement to be declared effective as soon as possible after the filing date, but in any event no later than 90 days after the filing date, and shall use its best efforts to keep the Registration Statement effective and in compliance with the provisions of the Securities Act (including by preparing and filing with the SEC such amendments, including post-effective amendments, and supplements to the Registration Statement and the prospectus used in connection therewith as may be necessary) until all Shares and other securities covered by such Registration Statement have been disposed of. Parrot is required to reimburse the Company up to $50,000 for reasonable legal fees and expenses incurred by the Company in connection with such registration.
Pursuant to the senseFly S.A. Purchase Agreement, Parrot, senseFly S.A. and the Company will enter into a transition services agreement and a technology license and support agreement. Pursuant to the 6-month transition services agreement, Parrot will provide senseFly S.A. with certain information technology and related transition services. Under the technology license and support agreement, Parrot is granting a perpetual license, subject to certain termination rights of the parties, to senseFly S.A. with respect to certain technology used in the fixed-wing drone manufacturing business of senseFly S.A.
The senseFly S.A. Purchase Agreement and the senseFly Inc. Purchase Agreement contain certain customary representations, warranties and covenants, including representations and warranties by the applicable seller with respect to the business, operations and financial condition of the target company. The purchase agreements also include post-closing covenants relating to the confidentiality and employee non-solicitation obligations of the respective seller, and the agreement of each such seller not to compete with certain aspects of the business of the target companies following the closing of the transaction. The purchase agreements further include post-closing covenants relating to employee non-solicitation obligations of the respective buyer. The completion of the transactions contemplated by each purchase agreement is subject to customary closing conditions, including, among others: (i) the absence of a material adverse effect on the target companies, (ii) the delivery by the parties of certain ancillary transaction documents, and (iii) the execution by certain key employees of senseFly S.A. of employment agreements. Subject to certain limitations, each of the parties will be indemnified for damages resulting from third party claims and breaches of the parties’ respective representations, warranties and covenants in the purchase agreements.
Note 3. Purchase Consideration and Preliminary Purchase Price Allocation
The fair value of the purchase consideration was allocated to the preliminary fair value of the net tangible assets acquired and to the separately identifiable intangible assets. The excess of the aggregate fair value of the net tangible assets and identified intangible assets has been treated as goodwill in accordance with ASC 805.
The Company has performed a preliminary valuation analysis of the fair market value of the assets to be acquired and liabilities to be assumed. Using the total consideration for the Acquisition, the Company has estimated the allocations to such assets and liabilities.
The preliminary purchase price allocation has been used to prepare pro forma adjustments in the pro forma balance sheet. The final purchase price allocation will be determined when the Company has completed the detailed valuations and necessary calculations. The final allocation could differ materially from the preliminary allocation used in the pro forma adjustments. The final allocation may include (1) changes in fair values of tangible assets; (2) changes in allocations to intangible assets such as trade names, developed technology and customer relationships, as well as goodwill; and (3) other changes to assets and liabilities.
The following table summarizes the allocation of the preliminary purchase price as of the acquisition date of October 18, 2021:
| Calculation of Goodwill: | ||||
| Net purchase price | $ | 23,228,006 | ||
| Less fair value of assets acquired: | ||||
| Cash & short-term investments | 1,152,862 | |||
| Other tangible assets | 2,169,127 | |||
| Identifiable intangibles | 7,803,505 | |||
| Fair value of assets acquired | $ | 11,125,494 | ||
| Goodwill | $ | 12,102,512 | ||
4. Pro Forma Adjustments
The pro forma adjustments in the unaudited pro forma condensed consolidated balance sheet as of September 30, 2021 and the unaudited pro forma condensed consolidated statements of operations for the periods ended September 30, 2021, December 31, 2020, and December 31, 2019 are as follows:
| (A) Adjustment to pay the sellers in the transaction as per the purchase agreement upon closing: | ||||
| Cash paid to Parrot and Parrot U.S. per the purchase agreement | $ | 12,084,537 | ||
| (B) Adjustments to record intangibles and goodwill per valuation report of senseFly as part of purchase price accounting: | ||||
| To record intangibles as identified per valuation report of senseFly | $ | 7,803,505 | ||
| To record goodwill as identified per valuation report of senseFly | 12,102,512 | |||
| (C) Adjustment to remove transaction expenses paid by senseFly prior to the closing: | ||||
| Removed cash paid to vendors related to the transaction during the interim period | $ | (44,375 | ) | |
| (D) Adjustments to book future payments to the sellers in the transaction as per the purchase agreement: | ||||
| Cash and stock to be paid 90-days after closing per the purchase agreement | $ | 4,500,000 | ||
| Holdback cash to be paid in equal parts on December 31, 2022 and 2023 per the purchase agreement | 5,000,000 | |||
| $ | 9,500,000 | |||
| (E) Represents the deferred tax impact associated with the incremental differences in book and tax basis created from the preliminary purchase price allocation resulting from the step up in fair value of intangible assets. This estimate of deferred income tax liabilities is preliminary and is subject to change based upon the final determination of the fair value of assets acquired and liabilities assumed. | $ | — | ||
| (F) Adjustment to record forgiveness of debt by seller as per the purchase agreement upon closing: | ||||
| Removed seller debt as per the purchase agreement | $ | (2,537,184 | ) | |
| (G) Adjustment to record amortization from new intangibles during the interim period: | ||||
| Added amortization from new intangibles per valuation report of senseFly | $ | 1,422,359 | ||