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Business Combinations | 12 Months Ended
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Dec. 31, 2021
Business Combinations [Abstract] |
Business Combinations | Note 4. Business Combinations 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 due to the achievement of revenue targets in 2021. The Company also assumed unvested common stock options of continuing employees and service providers. Acquisition Consideration The following table summarizes the fair value of purchase consideration to acquire NimbeLin k (in thousands):
Cash |  |  | 15,991 |
Deferred payments(1) |  |  | 728 |
Contingent consideration(2) |  |  | 5,986 |
Replacement options(3) |  |  | 40 |
Total purchase consideration |  | $ | 22,745 |
(1) The fair value of the holdback payment was determined by discounting to present value, payments totaling $0.7 million expected to be made to NimbeLink fifteen months after the close of the transaction. (2) The fair value of contingent consideration is based on applying the Monte Carlo simulation method to forecast achievement under various contingent consideration events which may result in up to $8 million in payments subject to the acquired business’s satisfying certain revenue targets in 2021. Key inputs in the valuation include forecasted revenue, revenue volatility and discount rate. Underlying forecast mathematics were based on Geometric Brownian Motion in a risk-neutral framework and discounted back to the applicable period in which the accumulative thresholds were achieved at discount rates commensurate with the risk and expected payout term of the contingent consideration. (3) Represents the pre-combination stock compensation expense for replacement options issued to NimbeLink employees. Purchase Price Allocation The following is an allocation of purchase price as of the closing date based upon an 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 |
Assumptions in the Allocations of Purchase Price 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 $2.0 million during the year ended December 31, 2021 to reflect the change in the fair value of the contingent consideration based on the actual revenue recognized during the year ended December 31, 2021. Contingent consideration and the holdback payment as of December 31, 2021, was $8.0 million and $0.7 million, respectively. The contingent consideration and holdback liabilities were recorded to deferred purchase price liabilities in other current liabilities in the Company's consolidated balance sheet. The change in the fair value of contingent consideration was recorded as a component of operating expenses in the consolidated statements of operations for the year ended December 31, 2021. The contingent consideration and holdback payment is expected to be paid in the second quarter of 2022. 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 December 31, 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 year ended December 31, 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. Supplemental proforma financial information 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):
|  | For the Years Ended December 31, |
|  | 2021 |  |  | 2020 |
Net revenue - pro forma combined |  | $ | 64,305 |  |  | $ | 60,994 |
Net loss - pro forma combined |  |  | (10,088 | ) |  |  | (5,593 | )
The following adjustments were included in the unaudited pro forma combined net revenues (in thousands):
|  | For the Years Ended December 31, |
|  | 2021 |  |  | 2020 |
Net revenue |  | $ | 64,273 |  |  | $ | 48,502 |
Add: Net revenue - acquired businesses |  |  | 32 |  |  |  | 12,492 |
Net revenues - pro-forma combined |  | $ | 64,305 |  |  | $ | 60,994 |
The following adjustments were included in the unaudited pro forma combined net income (loss) (in thousands):
|  | For the Years Ended December 31, |
|  | 2021 |  |  | 2020 |
Net income (loss) |  | $ | (10,087 | ) |  | $ | (3,279 | )
Add: Results of operations of acquired business |  |  | (310 | ) |  |  | 291 |
Less: pro forma adjustments |  |  |  |  |  |
Amortization of historical intangibles |  |  | — |  |  |  | 92 |
Amortization of acquired intangibles |  |  | (38 | ) |  |  | (2,407 | )
Inventory fair value adjustments |  |  | 353 |  |  |  | (353 | )
Interest income |  |  | (6 | ) |  |  | — |
Interest expense |  |  | — |  |  |  | 63 |
Net loss - pro forma combined |  | $ | (10,088 | ) |  | $ | (5,593 | )
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 year ended December 31, 2021 was the main driver of the increase in revenue from the Enterprise market, as disclosed in Note 18. Net income of $0.7 million for the year ended December 31, 2021, related to NimbeLink, was included in the Company's consolidated statements of operations. 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 8, Goodwill and Intangible Assets for further information on goodwill and intangible assets related to the NimbeLink acquisition.

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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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