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Acquisition | 12 Months Ended
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Dec. 31, 2020
Business Combinations [Abstract] |
Acquisition | (9) Acquisition (a) Sonar Acquisition: In December 2019, the Company acquired 100% of the outstanding stock of Sonar, an enterprise text and messaging sales engagement and analytics company based in California for total consideration of the following:
| • | Approximately $8.5 million in cash, paid at closing; and
| • | 1.0 million shares of Class B common stock, to be issued over the three-year period following the acquisition date, with the timing of issuance subject to certain conditions and with any shares not previously issued to be issued on the fifth anniversary of the acquisition date. The 1.0 million shares of Class B common stock were valued at approximately $3.8 million based on the closing price of Marchex’s Common Stock on Nasdaq on the acquisition date. The issuance of the Class B common stock is not contingent.
| • | Up to 389,000 shares of Class B common stock based upon the achievement of certain financial target goals.
The Company accounted for the Sonar acquisition as a business combination. As a result of the acquisition, the Company expanded its customer base, as well as enhanced growth opportunities in verticals and new customer channels. A summary of the consideration for the acquisition is as follows (in thousands):
Cash |  | $ | 8,496 |
Fair value of equity consideration |  |  | 3,803 |
Future consideration |  |  | 1,016 |
Total |  | $ | 13,315 |
The fair value of the 1.0 million shares of Class B common stock to be issued over the three-year period following the acquisition date, with the timing of issuance subject to certain conditions and with any shares not previously issued to be issued on the fifth anniversary of the acquisition date, was calculated based on the closing price of Marchex’s Common Stock on Nasdaq on the acquisition date and is recorded on the Company’s balance sheet within additional paid-in capital. The future consideration also included an earnout arrangement that would have required the Company to pay up to a maximum of 389,000 shares of Class B common stock to the former shareholders of Sonar based upon the achievement of targeted financial goals by Sonar in 2020. The potential undiscounted amount of all future payments that the Company could have been required to make under the contingent earnout arrangement was between0 and 389,000 shares of Class B common stock. These targets were not met in 2020. In connection with the acquisition, a portion of the cash consideration was placed in escrow to secure indemnification obligations for a period of 12 months from the closing date. The escrow amounts were included as part of the purchase price consideration and were released subsequent to the contractual parameters of the agreement. The following summarizes the estimated fair value of the assets acquired and the liabilities assumed at the acquisition date (in thousands):
Cash and cash equivalents |  | $ | 480 |
Accounts receivable |  |  | 141 |
Prepaid expenses and other current assets |  |  | 42 |
Property and equipment |  |  | 25 |
Identifiable intangible assets |  |  | 5,052 |
Liabilities assumed |  |  | (171 | )
Deferred tax liabilities |  |  | (1,184 | )
Net assets acquired |  |  | 4,385 |
Goodwill |  |  | 8,930 |
Total |  | $ | 13,315 |
The acquired intangibles of approximately $5.1 million consist primarily of technology, non-compete agreements, customer relationships, and tradenames which will be amortized over 24 to 60 months (weighted average of 4.6 years) using the straight-line method. Goodwill represents the expected synergies with our existing business, the acquired assembled workforce, potential new customers and potential future cash flows after the acquisition of Sonar. The goodwill is not deductible for federal tax purposes. (b) Fair value measurements - Acquisition-related liabilities: The following summarizes the changes in the estimated fair value of acquisition-related liabilities (in thousands):
Acquisition-related liabilities (Level 3): |  |  |  |
Balance at December 31, 2018 (1): |  | $ | 1,509 |
Contingent consideration - Sonar acquisition (2) |  |  | 1,016 |
Change in fair value (3) |  |  | (941 | )
Balance at December 31, 2019 |  | $ | 1,584 |
Change in fair value (3) |  |  | (1,584 | )
Total acquisition-related liabilities as of December 31, 2020 (4): |  | $ | — |
(1) The balance at December 31, 2018 related to contingent consideration specific to the Telmetrics acquisition in 2018. |
(2) In connection with the Sonar acquisition, the Company recognized contingent consideration during the year ended December 31, 2019 of approximately $1.0 million in fair value. As of December 31, 2019, the amount recognized for the contingent consideration arrangement, the range of outcomes, and the assumptions used to develop the estimate had not changed. |
(3) During the year ended December 31, 2019 and 2020, the Company recognized a net change in fair value of the contingent consideration of approximately $941,000 and $1.6 million, and the change is recorded on the income statement in acquisition-related costs (benefit). The net change in fair value was primarily due to a change in the assumptions used in the original estimate of the liability. |
(4) There were not transfers between levels during the periods presented. |
(c) Sonar unaudited pro forma financial information: The following unaudited pro forma financial information summarizes the combined results of continuing operations of the Company and Sonar and is based on the historical results of continuing operations of the Company and Sonar. The unaudited pro forma financial information for the year ended December 31, 2019 combines the historical results of continuing operations for the Company for the year ended December 31, 2019 and Sonar historical results of operations during the pre-acquisition period from January 1, 2019 to December 12, 2019. The pro forma information includes adjustments for amortization of intangible assets, accretion of interest expense related to the future consideration, elimination of interest expense and income, and non-recurring acquisition related costs. The unaudited pro forma financial information is provided for informational purposes only and is not necessarily indicative of the combined results that would have occurred had the acquisition taken place on the dates indicated, nor is it necessarily indicative of results that may occur in the future. The amount of Sonar revenue and the amount of net loss included in the Company’s Consolidated Statements of Operations from the acquisition date for the year ended December 31, 2019 was not significant.
|  | (Unaudited) |
|  | (in thousands) |
|  | Year ended December 31, 2019 |
Revenue |  | $ | 56,704 |
Net loss applicable to common stockholders |  |  | (4,838 | )

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- Definition The entire disclosure for a business combination (or series of individually immaterial business combinations) completed during the period, including background, timing, and recognized assets and liabilities. The disclosure may include leverage buyout transactions (as applicable). + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -URI http://asc.fasb.org/topic&trid=2303972 + Details
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