3. Acquisitions

Elauwit Networks, LLC

On August 1, 2018, we acquired the assets of Elauwit Networks, LLC (“Elauwit”) for $28,000 plus other contingent consideration. Elauwit provides data and video services to multi-unit dwelling properties including student housing, condominiums, apartments, senior living, and hospitality industries throughout the U.S. In addition, Elauwit builds and maintains the network that supports these services for property owners and managers and provides support for residents and employees.

The acquisition has been accounted for under the acquisition method of accounting in accordance with FASB ASC 805, Business Combinations. As such, the assets acquired and liabilities assumed are recorded at their acquisition-date fair values. The total purchase price was $29,537, which includes contingent consideration fair valued at $961. At the closing date, we paid cash of $15,576. $13,000 of the purchase price was held back for the following: (i) $11,000 held back for third-party consents not obtained at closing for certain customer agreements, which will be released as Elauwit delivers third-party consents with respect to such customer agreements; and (ii) a $2,000 indemnification holdback that is being retained for a period of 12 months following the closing of the acquisition. As of December 31, 2018, we paid $9,048 of the amounts held back for third-party consents. We paid the remaining $1,952 for amounts held back for third-party consents in January 2019. The contingent consideration could require payments in the aggregate amount of up to $15,000 that would be due and payable subject to certain conditions and the successful achievement of annual revenue targets for the acquired business during the 2019 and 2020 fiscal years. We do not expect to make any payments related to the 2018 annual revenue targets as the targets were not met as of December 31, 2018. The contingent consideration is subject to acceleration under certain corporate events.

The fair value of the contingent consideration is based on Level 3 inputs. Further changes in the fair value of the contingent consideration will be recorded through operating income (loss). The contingent consideration was valued at the date of acquisition using the Monte Carlo method reflecting the average expected monthly revenue, an annual risk-free rate of 2.78%, and an annual revenue volatility rate of 40%.

The identifiable intangible assets were primarily valued using the excess earnings, relief from royalty, and loss-of-revenue methods using discount rates ranging from 8.0% to 21.0% and a 1.0% royalty rate, where applicable. The amortizable intangible assets are being amortized on a straight-line basis over their estimated useful lives. We allocated the excess of the purchase price over the fair value of assets acquired and liabilities assumed to goodwill, which is deductible for tax purposes. The goodwill arising from the Elauwit acquisition is attributable primarily to expected synergies and other benefits, including the acquired workforce, from combining Elauwit with us.

ASC 805 provides for a measurement period not to exceed one year from the acquisition date to adjust the provisional amounts recognized at the acquisition date to reflect new information obtained about facts and circumstances that existed as of the acquisition date that, if known, would have affected the measurement of the amounts recognized as of that date. To date, we have not recorded any material measurement period adjustments. The following summarizes the preliminary purchase price allocation:


			Weighted Average
			Estimated Useful
	Estimated Fair Value		Life (years)
Consideration:
Cash paid	$	15,576
Holdback consideration		13,000
Contingent consideration		961
Total consideration	$	29,537
Recognized amounts of identifiable assets acquired and liabilities assumed:
Accounts receivable	$	4,494
Prepaid expenses and other current assets		1,687
Property and equipment		195
Other non-current assets		177
Accounts payable		(2,049)
Accrued expenses and other liabilities		(683)
Deferred revenue		(3,854)
Other non-current liabilities		(307)
Net tangible liabilities acquired		(340)
Backlog		7,030	5.0
Customer relationships		2,490	10.0
Partner relationships		1,200	10.0
Transition services agreement		540	2.0
Non-compete agreement		1,380	3.0
Goodwill		17,237
Total purchase price	$	29,537

The following table presents the results of Elauwit included in the Company’s revenue and net loss:


	Year Ended December 31,
	2018		2017		2016
Revenue	$	11,228	$	—	$	—
Net loss		(2,349)		—		—

Pro forma results (Unaudited)

The following table presents the unaudited pro forma results of the Company for the years ended December 31, 2018 and 2017 as if the acquisition of Elauwit had occurred on January 1, 2017 and therefore includes Elauwit’s revenue and net income (loss), as adjusted, for those periods. These results are not intended to reflect the actual operations of the Company had the acquisition occurred on January 1, 2017. Income taxes were calculated based on the effective tax rates for 2018 and 2017, excluding the tax effects on the equity component of Convertible Notes recorded in 2018. Acquisition transaction costs have been excluded from the pro forma net loss.


	Year Ended December 31,
	2018		2017(2)
Revenue	$	268,693	$	229,503
Net loss		(739)		(20,827)
Net loss attributable to common stockholders		(2,224)		(21,417)

Net loss per share attributable to common stockholders
Basic	$	(0.05)	$	(0.54)
Diluted	$	(0.05)	$	(0.54)

(2) As noted above, prior period amounts have not been adjusted upon adoption of ASC 606 under the modified retrospective method.