5. Acquisitions

NEEO Acquisition

On February 1, 2019, Control4 acquired all the outstanding shares of common stock of the Switzerland-based, NEEO AG (“NEEO”) for total consideration transferred of $14.5 million. In accordance with the purchase agreement, $1.3 million of the purchase price will be held for up to 18 months from the acquisition date to cover any of the sellers’ post-closing obligations, including without limitation any indemnification that may arise. The Company has classified the $1.3 million holdback in other long-term liabilities.

Total consideration transferred for the NEEO acquisition was allocated to tangible and identifiable intangible assets acquired and liabilities assumed. The Company has adjusted the preliminary allocation of consideration as included in Exhibit 99.2 of Form 8-K/A filed with the U.S. Securities and Exchange Commission on April 16, 2019, with corresponding impacts to the pro forma adjustments reported in the unaudited pro forma condensed combined balance sheet as of December 31, 2018. First, total consideration transferred was increased from $11.0 million to $14.5 million due to a pre-existing relationship between Control4 and NEEO that was effectively settled as a result of the acquisition. Second, a measurement period adjustment was made to remove the deferred tax liability of $1.7 million due to NEEO’s net deferred tax asset position.

The preliminary amount of consideration transferred is subject to potential adjustments in the event that the preliminary estimates of accrued liabilities or intangible assets are adjusted pending final valuation, and due to tax-related matters that could have a material impact on the consolidated financial statements. The Company expects the allocation of the consideration transferred to be final within the measurement period (up to one year from the acquisition date).

The following reflects the Company’s preliminary allocation of consideration transferred for the NEEO acquisition (in thousands):


	NEEO
	Acquisition
Cash	$	445
Accounts receivable		17
Inventory		577
Other assets acquired		542
Intangible assets		6,384
Goodwill		9,242
Total assets acquired		17,207
Accounts payable		758
Accrued liabilities		1,478
Pension liability		488
Total net assets acquired	$	14,483

Identifiable Intangible Assets

The Company acquired intangible assets that consisted of remote-control technology and other internally developed technologies, which had estimated fair values of $5.8 million and $0.6 million, respectively. The Company will amortize the intangible assets on a straight-line basis over their estimated useful lives of 5 years for the remote-control technology and 2-3 years for the other internally developed technologies. The amortization of these intangible assets is not deductible for income tax purposes.

Goodwill

Goodwill of $9.2 million represents the excess of consideration transferred over the fair value of assets acquired and liabilities assumed and is attributable to NEEO’s assembled workforce, expected synergies and new products. This goodwill is not deductible for income tax purposes.

Other

From the date of acquisition through March 31, 2019, the Company recorded losses of $0.2 million associated with NEEO but did not record any revenue. In addition, the Company incurred approximately $0.5 million in total acquisition-related costs, which are included in the accompanying condensed consolidated statements of operations as research and development and general and administrative expenses for the three months ended March 31, 2019.

Pro Forma Information

The unaudited pro forma information for the three months ended March 31, 2019 and 2018 presented below includes the effects of the NEEO acquisition as if it had been consummated as of January 1, 2018, with adjustments to give effect to pro forma events that are directly attributable to the acquisition, including adjustments related to the amortization of acquired intangible assets, stock-based compensation expense, interest expense and estimated tax impacts. These adjustments are based upon information and assumptions available at the time of filing this Quarterly Report on Form 10-Q. The unaudited pro forma information does not reflect any operating efficiency or potential cost savings that could result from the consolidation of NEEO. Accordingly, the unaudited pro forma information is presented for informational purposes only and is not necessarily indicative of the actual results of the combined company if the acquisition had occurred at the beginning of the period presented, nor is it indicative of the future results of operations.


	Three Months Ended
	March 31,
	2019		2018

Revenue	$	60,447	$	59,306
Income (loss) from operations		(3,242)		(247)
Net income (loss)	$	(2,386)	$	(241)
Net income (loss) per common share:
Basic	$	(0.09)	$	(0.01)
Diluted	$	(0.09)	$	(0.01)

Distributor Acquisitions

During the three months ended March 31, 2019, the Company began working directly with home automation integrators in Ireland, New Zealand, and Switzerland to better serve and support customers in those countries. The Company transferred $1.4 million in consideration for the acquisition of these distributors. This consideration was allocated to $0.7 million of inventory, $0.1 million of other assets, and $0.6 million of goodwill.

The Company determined these acquisitions were not significant.