On January 7, 2021, the Company entered into a Stock Purchase Agreement, by and among the Company, NimbeLink, the sellers set forth therein (the Sellers) and Scott Schwalbe in his capacity as seller representative (the Purchase Agreement). NimbeLink is an industrial Internet of Things (IoT) company focused on the design, development and delivery of edge-based cellular connectivity solutions for enterprise customers. The acquisition of NimbeLink supports the Company's transition toward becoming a more system-level company and will play an important role in the Company's overall growth strategy to broaden market diversification, especially within the industrial IoT space.

Pursuant to the Purchase Agreement, at the closing on January 7, 2021, the Company acquired all of the outstanding stock of NimbeLink for an upfront cash purchase price of approximately $15.0 million, subject to working capital and other customary adjustments of $1.0 million and $0.7 million in deferred cash payments due to the Sellers fifteen months after the close of the transaction. In addition, NimbeLink’s former security holders may receive up to $8.0 million in contingent consideration, subject to the acquired business's achievement of certain revenue targets in 2021. The Company assumed unvested common stock options of continuing employees and service providers.

The following is an allocation of purchase price as of the closing date based upon a preliminary estimate of the fair value of the assets acquired and liabilities assumed by the Company in the acquisition (in thousands):


Cash	$	1,806
Accounts receivable		1,127
Inventory		1,671
Prepaids and other current assets		141
Property and equipment		151
Right of use assets		402
Other assets		194
Identified intangible assets		14,065
Accounts payable		(654	)
Accrued compensation		(139	)
Accrued expenses and other current liabilities		(432	)
Short-term lease liabilities		(78	)
Long-term lease liabilities		(324	)
Deferred tax liabilities		(2,330	)
Identifiable net assets acquired		15,600
Goodwill		7,145
Total purchase price	$	22,745

The following is a summary of identifiable intangible assets acquired and the related expected lives for the finite-lived intangible assets (in thousands):


Category	Estimated life (in years)	Fair value
Finite-lived intangible assets
Market-related intangibles	5	$	1,700
Customer relationships	5		8,950
Developed technology	12		2,600
Covenants to non-compete	2		115
Indefinite-lived intangible assets
In-process research and development	N/A		700
Total identifiable intangible assets acquired		$	14,065

Management prepared the purchase price allocations and in doing so considered or relied in part upon reports of a third party valuation expert to calculate the fair value of certain acquired assets, which primarily included identifiable intangible assets and inventory, and the portions of the purchase consideration expected to be paid to NimbeLink securityholders in the future, as described above. Certain NimbeLink securityholders that are employees are not required to remain employed in order to receive the deferred payments and contingent consideration; accordingly, the fair value of the deferred payments and contingent consideration have been accounted for as a portion of the purchase consideration.

Estimates of fair value require management to make significant estimates and assumptions. The Company recorded an additional $0.1 million and $1.7 million during the three and nine months ended September 30, 2021, respectively, to reflect the fair value of the contingent consideration based on the forecasted revenue targets as of September 30, 2021. Contingent consideration payable as of September 30, 2021 was $7.6 million. The contingent consideration balance was recorded to deferred purchase price liabilities in other current liabilities in the Company's condensed consolidated balance sheet. The change in the fair value of contingent consideration was recorded as a component of operating expenses in the condensed consolidated statement of operations for the three and nine months ended September 30, 2021.

The goodwill recognized is attributable primarily to the acquired workforce, expected synergies, and other benefits that the Company believes will result from integrating the operations of the NimbeLink business with the operations of the Company. Certain liabilities included in the purchase price allocations are based on management’s best estimates of the amounts to be paid or settled and based on information available at the time the purchase price allocations were prepared. There have been no adjustments between the preliminary purchase price allocations reflected as of March 31, 2021 and the purchase price allocation reflected as of September 30, 2021.

The fair value of the customer relationships was determined using the multi-period excess earnings method (MPEEM). MPEEM estimates the value of an intangible asset by quantifying the amount of residual (or excess) cash flows generated by the asset, and discounting those cash flows to the present. Future cash flows for contractual and non-contractual customers were estimated based on forecasted revenue and costs, taking into account the growth rates and contributory charges. The fair value of market-related intangible assets, developed technology, and in-process research and development (IPR&D) was determined using the Relief-from-Royalty method. The Relief-from-Royalty method is a specific application of the discounted-cash-flow method, which is a form of the income approach. It is based on the principle that ownership of the intangible asset relieves the owner of the need to pay a royalty to another party in exchange for rights to use the asset. Key assumptions to estimate the hypothetical royalty rate include observable royalty rates, which are royalty rates in negotiated licenses and market-based royalty rates which are royalty rates found in available market data for licenses involving similar assets. Developed technology will begin amortizing immediately and IPR&D will begin amortizing upon the completion of each project. During the nine months ended September 30, 2021, all IPR&D projects were completed and transferred to developed technology, with a twelve-year estimated life. The fair value of non-compete intangible assets was estimated using the with-or-without method. The with-and-without method estimates the value of an intangible asset by quantifying the loss of economic profits under a hypothetical condition where only the subject intangible does not exist and needs to be re-created. Projected revenues, operating expenses and cash flows are calculated in each "with" and "without" scenario and the difference in the cash flow is discounted to present value. Inventory was valued at net realizable value. Raw materials were valued at book value and finished goods were valued assuming hypothetical revenues from finished goods adjusted for disposal costs, profit attributable to the seller and holding costs. An inventory step-up of $0.4 million is included in the purchase price allocation above.

The Company assumed liabilities in the acquisition which primarily consist of accrued employee compensation and certain operating liabilities. The liabilities assumed in these acquisitions are included in the respective purchase price allocations above.

Goodwill recorded in connection with the NimbeLink acquisition was $7.1 million. The Company does not expect to deduct any of the acquired goodwill for tax purposes.

The following unaudited pro forma financial information presents the combined results of operations for each of the periods presented as if the NimbeLink acquisition had occurred at the beginning of 2020 (in thousands):


	Three months ended September 30,						Nine months ended September 30,
	2021			2020			2021			2020
Net revenue - pro forma combined	$	15,455		$	15,323		$	50,161		$	45,244
Net loss - pro forma combined		(3,069	)		(1,140	)		(5,442	)		(3,988	)

The following adjustments were included in the unaudited pro forma combined net revenues (in thousands):


	Three months ended September 30,				Nine months ended September 30,
	2021		2020		2021		2020
Net revenue	$	15,455	$	13,010	$	50,129	$	35,672
Add: Net revenue - acquired businesses		—		2,313		32		9,572
Net revenues - pro-forma combined	$	15,455	$	15,323	$	50,161	$	45,244

The following adjustments were included in the unaudited pro forma combined net income (loss) (in thousands):


	Three months ended September 30,						Nine months ended September 30,
	2021			2020			2021			2020
Net income (loss)	$	(3,069	)	$	(261	)	$	(5,441	)	$	(2,199	)
Add: Results of operations of acquired business		—			(338	)		(310	)		228
Less: pro forma adjustments
Amortization of historical intangibles		—			26			—			73
Amortization of acquired intangibles		—			(583	)		(38	)		(1,800	)
Inventory fair value adjustments		—			—			353			(353	)
Interest income		—			—			(6	)		—
Interest expense		—			16			—			63
Net loss - pro forma combined	$	(3,069	)	$	(1,140	)	$	(5,442	)	$	(3,988	)

The unaudited pro forma financial information has been adjusted to reflect the amortization expense for acquired intangibles, removal of historical intangible asset amortization and recognition of expense associated with the step-up of inventory.

The pro forma data is presented for illustrative purposes only, and the historical results of NimbeLink are based on its books and records prior to the acquisition, and is not necessarily indicative of the consolidated results of operations of the combined business had the acquisition actually occurred at the beginning of fiscal year 2020. In addition, future results may vary significantly from the pro forma results reflected herein and should not be relied upon as an indication of the results of future operations of the combined business. The unaudited pro forma financial information does not reflect any operating efficiencies and cost savings that may be realized from the integration of the acquired entity. Revenue generated from acquired NimbeLink products for the three and nine months ended September 30, 2021 was the main driver of the increase in revenue from the Enterprise market, as disclosed in Note 17. Net income of $0.5 million and $0.4 million for the three and nine months ended September 30, 2021, respectively, was included in the Company's condensed consolidated statements of operations related to NimbeLink. The Company does not consider the revenue and net loss related to the acquired entity to be indicative of results of the acquisition due to integration activities since the acquisition date.

Also see Note 7, Goodwill and Intangible Assets for further information on goodwill and intangible assets related to the NimbeLink acquisition.