. JOINT VENTURE

In the

second

quarter of

2015,

the Company entered into a series of transactions includ

ing the acquisition of a fiber optic network on the North Slope arctic area of Alaska and the establishment of AQ-JV to own, operate and market, part of that network. The network provides reliable fiber-optic connectivity where only high-cost microwave and high-latency satellite communications was previously available. Through QA-JV, this network has been made available to other telecom carriers in the market.

Acquisition

of Fiber Optic Network

The Company, through its wholly-owned subsidiary ACS Cable Systems, LLC, acquired a fiber optic cable system (including conduit, licenses, permits and right-of-ways) running from the Kuparuk Operating Center to the Trans-Alaska Pipeline System Pump Statio

(the “Fiber Optic System”). The purchase price was

$11,000,

$5,500

of which was paid by the Company at closing and the balance of which was paid on

April 7, 2016.

The Company sold to the previous owner a

year IRU on certain fibers from the Fiber Optic System. The sales price was

$400,

all of which was paid at closing. The Company also entered into agreements for the exchange of IRUs, pipeline access, conduit and future capacity, and the prepayment of certain fees and services.

Transactions with QHL

The Company sold certain fiber strands from the Fiber Optic System to QHL for

$5,300,

$2,650

of which was pai

d to the Company by QHL at closing and the balance of which was paid on

March 31, 2016.

The Company and QHL also exchanged

year IRU agreements.

Formation of Joint Venture

April 2, 2015,

the Company, through its wholly-owned subsidiary ACS Cable Systems, LLC, entered into a joint venture agreement with QHL to form

AQ-JV for the purpose of expanding the fiber optic network, and making the network available to other telecom carriers. The joint venture

may

also participate in and facilitate other capital and service initiatives in the telecom industry. The Company and QHL each contributed to the Joint Venture IRUs with a combined value of

$1,844

(

$922

by each party). Each party also contributed cash of

$250

The Company contributed an additional IRU with a value of

$461.

In the

first

quarter of

2016,

the Company and QHL executed an amendment to the operating agreement which provides the Company access to

percent of the Joint Venture’s initial in-field lit capacity in compensation for the Company’s contribution of the additional IRU at the joint venture’s formation. This amendment is effective as of the establishment date of the joint venture on

April 2, 2015.

In the

second

quarter of

2016,

the Company and QHL each made an additional

$75

capital contribution to the joint venture. In the

third

quarter of

2017,

the Company and QHL each made an additional

$75

capital contribution to the joint venture. The Company and QHL each hold a

percent voting interest in QA-JV.

The Company determined that the Joint Venture is a Variable Interest Entity as defined in ASC

810,

“

Consolidation

.” The Company consolidates the financial results of QA-JV based on its determination that, the

percent voting interest of each party notwithstanding, for accounting purposes it holds a controlling financial interest in, and is the primary beneficiary of, the joint venture. This determination was based on (i) the Company’s expected future utilization of certain assets of the joint venture in the operation of the Company’s business; (ii) the Company’ engineering, design, installation, service and maintenance expertise in the telecom industry and its existing relationships and presence in the Alaska telecom market are expected to be significant factors in the successful operation of the joint venture; and (iii) the Company’s role as joint venture manager and its right to a management fee equal to a percentage of the joint venture’s collected gross revenue. There was

gain or loss recognized by the Company on the initial consolidation of the joint venture. The Company has accounted for and reported QHL’s

percent ownership interest in QA-JV as a noncontrolling interest.

The table below provides certain financial information about the

joint venture included on the Company’s consolidated balance sheet at

September 30, 2017

and

December 31, 2016.

Cash

may

be utilized only to settle obligations of the joint venture. Because the joint venture is an LLC, and the Company has

not

guaranteed its operations, the joint venture’s creditors do

not

have recourse to the general credit of the Company.

	2017		2016
Cash	$	190	$	67
Fiber and IRUs, net of accumulated depreciation of $186 and $112	$	1,955	$	2,029

The operating results and cash flows of

the joint venture in the

three

and

nine

-month periods of

2017

and

2016

were

not

material to the Company’s consolidated financial results.