Business Acquisition

On May 3, 2018, the acquisition date, we acquired all of the outstanding ownership interests of VIEVU, a public safety camera and cloud-based evidence management system provider for law enforcement agencies.

The estimated purchase price of $17.6 million consisted of $5.0 million in cash, net of cash acquired of $0.1 million, and $2.4 million, or 58,843 shares, of our common stock issued to VIEVU’s parent company, Safariland, LLC (“Safariland”). Additionally, the purchase price consisted of contingent consideration of up to $6.0 million, or 141,226 additional shares of common stock, if certain conditions relating to retention of certain VIEVU customers are met as of the first and second anniversaries of the acquisition date. The fair value of the contingent consideration as of the acquisition date was $5.8 million. The purchase price also included the fair value of a long-term Product Development and Supplier Agreement (the “Supply Agreement”) with Safariland, pursuant to which Safariland will be our preferred provider of holsters for its CEW products. The estimated fair value of the Supply Agreement as of the acquisition date was $4.5 million, a portion of which was recorded within accrued liabilities and the remaining portion recorded within other long-term liabilities.

Pursuant to ASC 805, the acquisition of VIEVU has been accounted for as a business combination, under the acquisition method of accounting, which resulted in acquired assets and assumed liabilities being measured at their estimated fair values as of the acquisition date. As of the acquisition date, goodwill was measured as the excess of consideration transferred, which is also generally measured at fair value, over the net acquisition date fair values of the assets acquired and liabilities assumed. The final purchase price and purchase price allocation will be determined when we have completed the detailed valuations and necessary calculations. The final purchase price and purchase price allocation could differ materially from the preliminary allocation disclosed below. The final allocation may include (1) changes in the fair value of the contingent consideration and Supply Agreement, and (2) changes in fair values of assets and liabilities, including intangible assets and goodwill.

The major classes of assets and liabilities to which we have allocated the purchase price, on a preliminary basis, were as follows (in thousands):



Accounts receivable	$	1,776
Inventory	2,626
Prepaid expenses and other assets	362
Property and equipment	459
Contract assets	1,472
Intangible assets	4,510
Goodwill	10,285
Accounts payable and accrued liabilities	(3,345		)
Deferred revenue	(543		)
Total purchase price	$	17,602

We have assigned the goodwill to the Software and Sensors segment. Identifiable definite-lived intangible assets were assigned a total weighted average amortization period of 5.1 years. VIEVU has been included in our consolidated results of operations subsequent to the acquisition date. Revenue and loss from operations included in our condensed consolidated financial statements from the acquisition date through September 30, 2018 were $5.4 million and $2.6 million, respectively. Pro forma results of operations for VIEVU have not been presented because they are not material to the consolidated results of operations. In connection with the acquisition, we incurred and expensed costs of approximately $0.8 million, which included legal, accounting and other third-party expenses related to the transaction. Subsequent to the acquisition date, we recorded an expense of $0.5 million related to purchase commitments assumed in the VIEVU business combination that exceeded estimated future demand. In October 2018, a customer experienced a camera overheating incident on a VIEVU camera. As a result, we anticipate that this customer will transition to Axon technology sooner than previously expected. This may have an impact on our purchase commitment liability or on our inventory reserve during the quarter ending December 31, 2018; however, we cannot reasonably estimate a range of possible losses at this time.