Boingo Wireless, Inc.
BOINGO WIRELESS INC (Form: 10-Q, Received: 11/10/2014 15:10:58)

Table of Contents  

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UNITED STATES SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 10-Q

 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended September  30, 2014

 

OR

 

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from               to              

 

Commission file number: 001-35155

 

BOINGO WIRELESS, INC.

(Exact name of registrant as specified in its charter)

 

 

 

 

Delaware

 

95-4856877

(State or other jurisdiction of

 

(I.R.S. Employer

incorporation or organization)

 

Identification No.)

 

 

 

 

 

10960 Wilshire Blvd., Suite 800

 

 

Los Angeles, California

 

90024

(Address of principal executive offices)

 

(Zip Code)

 

(310) 586-5180

(Registrant’s telephone number, including area code)

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days.  Yes No

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes No

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

 

 

 

 

Large accelerated filer

 

Accelerated filer

 

 

 

Non-accelerated filer

 

Smaller Reporting Company

(Do not check if a smaller reporting company)

 

 

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No

 

As of October 31 , 2014, there were 36,086,026 shares of the registrant’s common stock outstanding.

 

 

 


 

Table of Contents  

TABLE OF CONTENTS

 

 

 

 

 

 

 

 

Page

PART I — FINANCIAL INFORMATION  

 

 

 

 

 

 

Item 1.  

Financial Statements (unaudited)

 

 

 

 

 

 

Condensed Consolidated Balance Sheets

 

 

 

 

 

 

Condensed Consolidated Statements of Operations

 

 

 

 

 

 

Condensed Consolidated Statement s of Comprehensive Income (Loss)

 

 

 

 

 

 

Condensed Consolidated Statement of Stockholders’ Equity

 

 

 

 

 

 

Condensed Consolidated Statements of Cash Flows

 

 

 

 

 

 

Notes to the Condensed Consolidated Financial Statements

 

 

 

 

 

Item 2.  

Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

21 

 

 

 

 

Item 3.  

Quantitative and Qualitative Disclosure about Market Risk

 

34 

 

 

 

 

Item 4.  

Controls and Procedures

 

34 

 

 

 

 

PART II — OTHER INFORMATION  

 

 

 

 

 

 

Item 1.  

Legal Proceedings

 

34 

 

 

 

 

Item 1A.  

Risk Factors

 

35 

 

 

 

 

Item 6.  

Exhibits

 

36 

 

 

 

 

SIGNATURES  

 

37 

 

 

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Table of Contents  

PART I — FINANCIAL INFORMATIO N

 

Item 1. Financial Statement s

 

Boingo Wireless, Inc.

Condensed Consolidated Balance Sheet s

(Unaudited)

(In thousands, except per share amounts)

 

 

 

 

 

 

 

 

 

 

 

 

September 30,

 

December 31,

 

 

 

2014

 

2013

 

Assets

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

4,030 

 

$

27,338 

 

Restricted cash

 

 

115 

 

 

545 

 

Marketable securities

 

 

17,261 

 

 

32,962 

 

Accounts receivable, net

 

 

23,913 

 

 

16,326 

 

Prepaid expenses and other current assets

 

 

3,667 

 

 

2,566 

 

Deferred tax assets

 

 

1,192 

 

 

1,192 

 

Total current assets

 

 

50,178 

 

 

80,929 

 

Property and equipment, net

 

 

106,118 

 

 

67,560 

 

Goodwill

 

 

42,403 

 

 

42,403 

 

Intangible assets, net

 

 

20,585 

 

 

23,413 

 

Other assets

 

 

1,398 

 

 

1,210 

 

Total assets

 

$

220,682 

 

$

215,515 

 

 

 

 

 

 

 

 

 

Liabilities and stockholders’ equity

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

Accounts payable

 

$

10,856 

 

$

11,642 

 

Accrued expenses and other liabilities

 

 

20,083 

 

 

17,055 

 

Deferred revenue

 

 

25,478 

 

 

19,292 

 

Total current liabilities

    

 

56,417 

    

 

47,989 

 

Deferred revenue, net of current portion

 

 

27,223 

 

 

21,591 

 

Deferred tax liabilities

 

 

3,646 

 

 

3,369 

 

Other liabilities

 

 

1,153 

 

 

2,133 

 

Total liabilities

 

 

88,439 

 

 

75,082 

 

 

 

 

 

 

 

 

 

Commitments and contingencies (Note 9)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

 

 

Preferred stock, $0.0001 par value; 5,000 shares authorized; no shares issued and outstanding  

 

 

 

 

 

Common stock, $0.0001 par value; 100,000 shares authorized; 36,056 and 35,226  shares  issued and  outstanding at September 30, 2014 and December 31, 2013, respectively

 

 

 

 

 

Additional paid-in capital

 

 

187,935 

 

 

182,927 

 

Accumulated deficit

 

 

(56,360)

 

 

(43,363)

 

Accumulated other comprehensive loss

 

 

(214)

 

 

 —

 

Total common stockholders’ equity

 

 

131,365 

 

 

139,568 

 

Non-controlling interests

 

 

878 

 

 

865 

 

Total stockholders’ equity

 

 

132,243 

 

 

140,433 

 

Total liabilities and stockholders’ equity

 

$

220,682 

 

$

215,515 

 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.  

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Boingo Wireless, Inc.

Condensed Consolidated Statements of Operation s

(Unaudited)

(In thousands, except per share amounts)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

Nine Months Ended

 

 

 

September 30,

 

September 30,

 

 

    

2014

    

2013

    

2014

    

2013

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenue

 

$

30,822 

 

$

28,607 

 

$

85,670 

 

$

77,980 

 

Costs and operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

Network access

 

 

15,058 

 

 

13,670 

 

 

41,230 

 

 

34,375 

 

Network operations

 

 

6,245 

 

 

4,495 

 

 

17,862 

 

 

13,199 

 

Development and technology

 

 

3,965 

 

 

2,622 

 

 

10,805 

 

 

8,484 

 

Selling and marketing

 

 

3,778 

 

 

3,294 

 

 

11,629 

 

 

10,106 

 

General and administrative

 

 

4,304 

 

 

3,201 

 

 

13,344 

 

 

11,502 

 

Amortization of intangible assets

 

 

959 

 

 

541 

 

 

2,812 

 

 

1,456 

 

Total costs and operating expenses

 

 

34,309 

 

 

27,823 

 

 

97,682 

 

 

79,122 

 

(Loss) income from operations

 

 

(3,487)

 

 

784 

 

 

(12,012)

 

 

(1,142)

 

Interest and other income (expense), net

 

 

11 

 

 

(2)

 

 

12 

 

 

70 

 

(Loss) income before income taxes

 

 

(3,476)

 

 

782 

 

 

(12,000)

 

 

(1,072)

 

Income tax expense (benefit)

 

 

75 

 

 

258 

 

 

378 

 

 

(382)

 

Net (loss) income

 

 

(3,551)

 

 

524 

 

 

(12,378)

 

 

(690)

 

Net income attributable to non-controlling interests

 

 

264 

 

 

170 

 

 

619 

 

 

476 

 

Net (loss) income attributable to common stockholders

 

$

(3,815)

 

$

354 

 

$

(12,997)

 

$

(1,166)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net (loss) income per share attributable to common stockholders:

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

(0.11)

 

$

0.01 

 

$

(0.36)

 

$

(0.03)

 

Diluted

 

$

(0.11)

 

$

0.01 

 

$

(0.36)

 

$

(0.03)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average shares used in computing net (loss) income per share attributable to common stockholders:

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

35,881 

 

 

35,593 

 

 

35,619 

 

 

35,620 

 

Diluted

 

 

35,881 

 

 

37,129 

 

 

35,619 

 

 

35,620 

 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

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Boingo Wireless, Inc.

Condensed Consolidated Statements of Comprehensive Income (Loss)

(Unaudited)

(In thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

Nine Months Ended

 

 

September 30,

 

September 30,

 

    

2014

    

2013

    

2014

    

2013

 

 

 

 

 

 

 

 

 

 

 

 

 

Net (loss) income

 

$

(3,551)

 

$

524 

 

$

(12,378)

 

$

(690)

Other comprehensive loss, net of tax

 

 

 

 

 

 

 

 

 

 

 

 

Foreign currency translation adjustments

 

 

(197)

 

 

 —

 

 

(197)

 

 

 —

Comprehensive (loss) income

 

 

(3,748)

 

 

524 

 

 

(12,575)

 

 

(690)

Comprehensive loss attributable to non-controlling interest

 

 

281 

 

 

170 

 

 

636 

 

 

476 

Comprehensive (loss) income attributable to common stockholders

 

$

(4,029)

 

$

354 

 

$

(13,211)

 

$

(1,166)

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

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Boingo Wireless, Inc.

Condensed Consolidated Statement of Stockholders’ Equit y

(Unaudited)

(In thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    

 

    

 

    

 

    

 

 

    

Accumulated

    

 

    

 

 

 

 

Common

 

Common

 

Additional

 

 

 

 

Other

 

Non-

 

Total

 

 

 

Stock

 

Stock

 

Paid-in

 

Accumulated

 

Comprehensive

 

controlling

 

Stockholders’

 

 

 

Shares

 

Amount

 

Capital

 

Deficit

 

Loss

 

Interests

 

Equity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at December 31, 2013

 

35,226 

 

$

 

$

182,927 

 

$

(43,363)

 

$

 

$

865 

 

$

140,433 

 

Issuance of common stock under stock incentive plans

 

830 

 

 

 

 

860 

 

 

 

 

 

 

 

 

860 

 

Shares withheld for taxes

 

 —

 

 

 

 

(1,413)

 

 

 

 

 

 

 

 

(1,413)

 

Stock-based compensation expense

 

 

 

 

 

5,501 

 

 

 

 

 

 

 

 

5,501 

 

Excess tax benefit from stock-based compensation

 

 —

 

 

 —

 

 

60 

 

 

 —

 

 

 —

 

 

 —

 

 

60 

 

Non-controlling interests distributions

 

 

 

 

 

 

 

 

 

 

 

(623)

 

 

(623)

 

Net (loss) income

 

 

 

 

 

 

 

(12,997)

 

 

 

 

619 

 

 

(12,378)

 

Other comprehensive loss

 

 

 

 

 

 

 

 —

 

 

(214)

 

 

17 

 

 

(197)

 

Balance at September 30, 2014

 

36,056 

 

$

 

$

187,935 

 

$

(56,360)

 

$

(214)

 

$

878 

 

$

132,243 

 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

 

 

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Boingo Wireless, Inc.

Condensed Consolidated Statements of Cash Flow s

(Unaudited)

(In thousands)

 

 

 

 

 

 

 

 

 

 

 

Nine Months Ended

 

 

 

September 30,

 

 

    

2014

    

2013

 

Cash flows from operating activities

 

 

 

 

 

 

 

Net loss

 

$

(12,378)

 

$

(690)

 

Adjustments to reconcile net loss including non-controlling interests to net cash provided by operating activities:

 

 

 

 

 

 

 

Depreciation and amortization of property and equipment

 

 

19,650 

 

 

13,611 

 

Amortization of intangible assets

 

 

2,812 

 

 

1,456 

 

Impairment loss

 

 

406 

 

 

 

Stock-based compensation

 

 

5,210 

 

 

3,199 

 

Excess tax benefits from stock-based compensation

 

 

(60)

 

 

(1,796)

 

Change in fair value of contingent consideration

 

 

(358)

 

 

 

Change in deferred income taxes

 

 

277 

 

 

 

Changes in operating assets and liabilities, net of effect of acquisition:

 

 

 

 

 

 

 

Accounts receivable

 

 

(7,609)

 

 

(2,057)

 

Prepaid expenses and other assets

 

 

(1,246)

 

 

(296)

 

Accounts payable

 

 

1,234 

 

 

(509)

 

Accrued expenses and other liabilities

 

 

(1,118)

 

 

(1,695)

 

Deferred revenue

 

 

11,818 

 

 

1,332 

 

Net cash provided by operating activities

 

 

18,638 

 

 

12,560 

 

Cash flows from investing activities

 

 

 

 

 

 

 

Decrease in restricted cash

 

 

430 

 

 

 

Purchases of marketable securities

 

 

(27,156)

 

 

(33,399)

 

Proceeds from sales of marketable securities

 

 

42,857 

 

 

38,464 

 

Purchases of property and equipment

 

 

(55,021)

 

 

(19,150)

 

Payments for business acquisition, net of cash acquired

 

 

(147)

 

 

(4,874)

 

Net cash used in investing activities

 

 

(39,037)

 

 

(18,959)

 

Cash flows from financing activities

 

 

 

 

 

 

 

Excess tax benefits from stock-based compensation

 

 

60 

 

 

1,796 

 

Proceeds from exercise of stock options

 

 

860 

 

 

540 

 

Repurchase and retirement of common stock

 

 

 

 

(2,556)

 

Payments of capital leases and notes payable

 

 

(544)

 

 

(96)

 

Payments of acquired notes payable and financed liabilities

 

 

 

 

(6,079)

 

Payment of contingent consideration and other acquisition related consideration

 

 

(1,255)

 

 

 

Payments of withholding tax on net issuance of restricted stock units

 

 

(1,413)

 

 

 

Payments to non-controlling interests

 

 

(623)

 

 

(598)

 

Net cash used in financing activities

 

 

(2,915)

 

 

(6,993)

 

Effect of exchange rates on cash

 

 

 

 

 

Net decrease in cash and cash equivalents

 

 

(23,308)

 

 

(13,392)

 

Cash and cash equivalents at beginning of period

 

 

27,338 

 

 

58,138 

 

Cash and cash equivalents at end of period

 

$

4,030 

 

$

44,746 

 

Supplemental disclosure of non-cash investing and financing activities

 

 

 

 

 

 

 

Property and equipment costs in accounts payable, accrued expenses and other liabilities

 

$

13,272 

 

$

4,679 

 

Acquisition of equipment under capital leases

 

 

361 

 

 

 

Assets acquired in business acquisition

 

 

 

 

17,317 

 

Liabilities assumed in business acquisition

 

 

 

 

12,443 

 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

 

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Boingo Wireless, Inc.

Notes to the Condensed Consolidated Financial Statement s

(Unaudited)

(In thousands, except shares and per share amounts)

 

1. The business

 

Boingo Wireless, Inc. and its subsidiaries (collectively “we, “us”, “our” or “the Company”) is a leading global provider of mobile Internet solutions for smartphones, tablet computers, laptops, and other wireless-enabled consumer devices. The Company has more than a million small cell networks for cellular distributed antenna system (“DAS”) and Wi-Fi access that reach more than one billion consumers annually. Boingo Wireless, Inc. was incorporated on April 16, 2001 in the State of Delaware. We have a diverse monetization model that enables us to generate revenues from wholesale partnerships, retail sales, and advertising across these small cell networks. Wholesale offerings include Wi-Fi roaming, private label Wi-Fi, location based services, and DAS, which are cellular extension networks. Retail products include Wi-Fi subscriptions and day passes that provide access to more than one million commercial hotspots worldwide, and Internet Protocol television (“IPTV”) services and residential broadband for military barracks. Advertising revenue is driven by Wi-Fi sponsorships at airports, hotels, cafes and restaurants, and public spaces. Our customers include some of the world’s largest carriers, telecommunications service providers and global consumer brands, as well as Internet savvy consumers on the go and troops stationed at military bases.

 

2. Summary of significant accounting policies

 

Basis of presentation

 

The accompanying interim unaudited condensed consolidated financial statements and related notes for the three and nine months ended September 30, 2014 and 2013 are unaudited. The unaudited interim condensed consolidated financial information has been prepared in accordance with the rules and regulations of the SEC for interim financial information. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles (“GAAP”) in the United States of America (“U.S.”) for complete financial statements. These financial statements should be read in conjunction with the audited consolidated financial statements and the accompanying notes for the year ended December 31, 2013 contained in our annual report on Form 10-K filed with the SEC on March 17, 2014. The unaudited interim condensed consolidated financial statements have been prepared on the same basis as the annual consolidated financial statements and in the opinion of management, reflects all adjustments, consisting of normal recurring adjustments, necessary for a fair statement of our results of operations and cash flows for the three and nine months ended September 30, 2014 and 2013, and our financial position as of September 30, 2014. The year-end balance sheet data was derived from audited consolidated financial statements, but does not include all disclosures required by GAAP. Interim results are not necessarily indicative of the results to be expected for an entire year or any other future year or interim period.

 

Principles of consolidation

 

The unaudited condensed consolidated financial statements include our accounts and the accounts of our majority owned subsidiaries. We consolidate our 70% ownership of Concourse Communications Detroit, LLC, our 70% ownership of Chicago Concourse Development Group, LLC and our 75% ownership of Boingo Holding Participacoes Ltda. in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 810, Consolidation . Other parties’ interests in consolidated entities are reported as non-controlling interests. All intercompany balances and transactions have been eliminated in consolidation.

 

Business combinations

 

The results of businesses acquired in a business combination are included in the Company’s condensed consolidated financial statements from the date of the acquisition. Purchase accounting results in assets and liabilities of

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an acquired business being recorded at their estimated fair values on the acquisition date. Any excess consideration over the fair value of assets acquired and liabilities assumed is recognized as goodwill.

 

The Company performs valuations of assets acquired and liabilities assumed for a business acquisition and allocates the purchase price to its respective net tangible and intangible assets. Determining the fair value of assets acquired and liabilities assumed requires management to use significant judgment and estimates including the selection of valuation methodologies, estimates of future revenues and cash flows, discount rates, royalty rates and selection of comparable companies. The Company engages the assistance of valuation specialists in concluding on fair values of assets and liabilities assumed in a business combination.

 

Transaction costs associated with business combinations are expensed as incurred, and are included in general and administrative expenses in the condensed consolidated statements of operations. There were no significant transaction costs associated with business combinations for the three and nine months ended September 30, 2014. There were no significant transaction costs associated with business combinations for the three months ended September 30, 2013. Transaction costs associated with business combinations were $192 for the nine months ended September 30, 2013.

 

Segment and geographical information

 

We operate as one reportable segment; a service provider of mobile Internet solutions across our managed and operated network and aggregated network for mobile devices such as laptops, smartphones, tablet computers and other wireless-enabled consumer devices. This single segment is consistent with the internal organization structure and the manner in which operations are reviewed and managed by our Chief Executive Officer, the chief operating decision maker.

 

Revenue is predominately generated and all significant long-lived tangible assets are held in the U.S. We do not disclose sales by geographic area because to do so would be impracticable. The following is a summary of our revenue by primary revenue source:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

Nine Months Ended

 

 

 

September 30,

 

September 30,

 

 

    

2014

    

2013

    

2014

    

2013

 

Revenue:

 

 

 

 

 

 

 

 

 

 

 

 

 

Wholesale

 

$

15,138 

 

$

14,328 

 

$

39,133 

 

$

38,222 

 

Retail subscription

 

 

8,426 

 

 

8,860 

 

 

24,881 

 

 

25,658 

 

Retail single-use

 

 

2,661 

 

 

2,386 

 

 

8,027 

 

 

7,802 

 

Advertising and other

 

 

4,597 

 

 

3,033 

 

 

13,629 

 

 

6,298 

 

Total revenue

 

$

30,822 

 

$

28,607 

 

$

85,670 

 

$

77,980 

 

 

Marketable securities

 

Our marketable securities consist of available-for-sale securities with original maturities exceeding three months. In accordance with FASB ASC 320,  Investments—Debt and Equity Securities, we have classified securities, which have readily determinable fair values and are highly liquid, as short-term because such securities are expected to be realized within a one-year period. At September 30, 2014 and December 31, 2013, we had $17,261 and $32,962, respectively, in marketable securities.

 

Marketable securities are reported at fair value with the related unrealized gains and losses reported as other comprehensive income (loss) until realized or until a determination is made that an other-than-temporary decline in market value has occurred. No significant unrealized gains and losses have been reported during the periods presented. Factors considered by us in assessing whether an other-than-temporary impairment has occurred include the nature of the investment, whether the decline in fair value is attributable to specific adverse conditions affecting the investment, the financial condition of the investee, the severity and the duration of the impairment and whether we have the ability to hold the investment to maturity. When it is determined that an other-than-temporary impairment has occurred, the investment is

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written down to its market value at the end of the period in which it is determined that an other-than-temporary decline has occurred. The cost of marketable securities sold is based upon the specific identification method. Any realized gains or losses on the sale of investments are reflected as a component of interest and other income (expense), net.

 

For the nine months ended September 30, 2014 and 2013, we had no significant realized gains or losses from investments in marketable securities classified as available-for-sale. As of September 30, 2014 and December 31, 2013, we had no unrealized gains or losses in accumulated other comprehensive loss.

 

Revenue recognition

 

We generate revenue from several sources including: (i) platform service arrangements with wholesale customers that provide software licensing, network access, and professional services fees, (ii) wholesale customers that are telecom operators under long-term contracts for access to our DAS at our managed and operated locations, (iii) retail customers under subscription plans for month-to-month network access that automatically renew, and retail single-use access from sales of hourly, daily or other single-use access plans, and (iv) display advertisements and sponsorships on our walled garden sign-in pages. Software licensed by our wholesale platform services customers can only be used during the term of the service arrangements and has no utility to them upon termination of the service arrangement.

 

We recognize revenue when an arrangement exists, services have been rendered, fees are fixed or determinable, no significant obligations remain related to the earned fees and collection of the related receivable is reasonably assured.

 

Services provided to wholesale partners under platform service arrangements generally contain several elements including: (i) a term license to use our software to access our Wi-Fi network, (ii) access fees for network usage, and (iii) professional services for software integration and customization and to maintain the Wi-Fi service. The term license, monthly minimum network access fees and professional services are billed on a monthly basis based upon predetermined fixed rates. Once the term license for integration and customization are delivered, the fees from the arrangement are recognized ratably over the remaining term of the platform service arrangement. The initial term of platform service license agreements is generally between one to five years and the agreements generally contain renewal clauses. Revenue for network access fees in excess of the monthly minimum amounts is recognized when earned. All elements within existing platform service arrangements are generally delivered and earned concurrently throughout the term of the respective service arrangement.

 

Revenue generated from access to our DAS networks consists of build-out fees and recurring access fees under certain long-term contracts with telecom operators. Build-out fees paid upfront are generally deferred and recognized ratably over the term of the estimated customer relationship period, once the build-out is complete. Minimum monthly access fees for usage of the DAS networks are non-cancellable and generally escalate on an annual basis. These minimum monthly access fees are recognized ratably over the term of the telecom operator agreement. The initial term of our contracts with telecom operators and wholesale partners generally range from two to ten years and the agreements generally contain renewal clauses. Revenue from network access fees in excess of the monthly minimums is recognized when earned.

 

In instances where the minimum monthly network access fees escalate over the term of the wholesale service arrangement, an unbilled receivable is recognized when performance is within our control and when we have reasonable assurance that the unbilled receivable balance will be collected.

 

We adopted the provisions of Accounting Standards Update (“ASU”) 2009-13, Revenue Recognition (Topic 605)—Multiple-Deliverable Revenue Arrangements (“ASU 2009-13”), on a prospective basis on January 1, 2011. For multiple-deliverable arrangements entered into prior to January 1, 2011 that are accounted for under ASC 605-25, Revenue Recognition—Multiple- Deliverable Revenue Arrangements , we defer recognition of revenue for the full arrangement and recognize all revenue ratably over the wholesale service period for platform service arrangements and the term of the estimated customer relationship period for DAS arrangements, because we do not have evidence of fair value for the undelivered elements in the arrangement. For multiple-deliverable arrangements entered into or materially modified after January 1, 2011 that are accounted for under ASC 605-25, we evaluate whether or not separate units of accounting exist and then allocate the arrangement consideration to all units of accounting based on the relative selling price method using estimated selling prices because vendor specific objective evidence and third party evidence is not

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available. We recognize the revenue associated with the separate units of accounting upon completion of such services or ratably over the wholesale service period for platform service arrangements and the term of the estimated customer relationship period for DAS arrangements.

 

Subscription fees from retail customers are paid monthly in advance and revenue is deferred for the portions of monthly recurring subscription fees collected in advance. We provide refunds for our Wi-Fi and IPTV services on a case-by-case basis.  These amounts are not significant and are recorded as contra-revenue in the period the refunds are made. Subscription fee revenue is recognized ratably over the subscription period. Revenue generated from retail single-use access is recognized when earned.

 

Advertising revenue is generated from advertisements on our managed and operated or partner networks. In determining whether an arrangement exists, we ensure that a binding arrangement is in place, such as a standard insertion order or a fully executed customer-specific agreement. Obligations pursuant to our advertising revenue arrangements typically include a minimum number of units or the satisfaction of certain performance criteria. Advertising and other revenue is recognized when the services are performed.

 

Foreign currency translation

 

Our Brazilian subsidiary uses the Brazilian Real as its functional currency. Assets and liabilities of our Brazilian subsidiary are translated to U.S. dollars at period-end rates of exchange, and revenues and expenses are translated at average exchange rates prevailing for each month. The resulting translation adjustments are made directly to a separate component of other comprehensive loss, which is reflected in stockholders’ equity in our condensed consolidated balance sheet. As of September 30, 2014 and December 31, 2013, the Company had $(214) and $0, respectively, of cumulative foreign currency translation adjustments, net of tax in accumulated other comprehensive loss.

 

Some of our subsidiaries also enter into transactions and have monetary assets and liabilities that are denominated in a currency other than the entities’ respective functional currencies. Gains and losses from the revaluation of foreign currency transactions and monetary assets and liabilities are included in the condensed consolidated statements of operations.

 

Recent accounting pronouncements

 

In August 2014, the FASB issued ASU 2014-15, Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern , which explicitly requires management to assess an entity’s ability to continue as a going concern in connection with each annual and interim period. Management will assess if there is substantial doubt about an entity’s ability to continue as a going concern within one year of the date the financial statements are issued. Disclosures will be required if conditions give rise to substantial doubt. The standard will be effective for the first annual period ending after December 15, 2016. Early adoption is permitted. We are currently evaluating the expected impact of this new standard.

 

In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers , which is intended to improve and converge the financial reporting requirements for revenue from contracts with customers between U.S. GAAP and International Accounting Standards. In accordance with this new standard, an entity would recognize revenue to depict the transfer of promised goods or services. The standard establishes a five-step model and related application guidance, which will replace most existing revenue recognition guidance in U.S. GAAP. The standard will be effective for annual and interim periods in fiscal years beginning after December 15, 2016. Early adoption is not permitted. An entity may choose to adopt the new standard either retrospectively or through a cumulative effect adjustment as of the start of the first period for which it applies the new standard. We are currently evaluating the expected impact of this new standard on our reporting of revenue contracts in our consolidated financial statements.   

 

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3. Acquisitions

 

Electronic Media Systems, Inc. and Advanced Wireless Group, LLC

 

On October 31, 2013, we acquired all outstanding stock of Electronic Media Systems, Inc. and all membership interests in its subsidiary, Advanced Wireless Group, LLC, not otherwise owned by Electronic Media Systems, Inc. such that we are now the beneficial owner of all membership interests of Advanced Wireless, Group, LLC (collectively, “AWG”). AWG operated public Wi-Fi in seventeen U.S. airports including Los Angeles International, Charlotte/Douglas International, Miami International, Minneapolis- St. Paul International, Detroit Metropolitan Airport, and Boston’s Logan International. We have included the operating results of AWG in our condensed consolidated financial statements since the date of acquisition.

 

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 $17,527, which includes cash paid at closing, net equity adjustments, holdback consideration to be paid and the fair value of additional contingent consideration that would be due and payable upon the successful extension of a specified airport Wi-Fi contract. On July 29, 2014, we paid $147 to the previous AWG shareholders as settlement for the net equity adjustments that were not finalized as of the acquisition date.

 

The fair value of the contingent consideration is based on Level 3 inputs, which are discussed in Note 6. Further changes in the fair value of the contingent consideration are recorded through operating (loss) income. On July 29, 2014, we paid the contingent consideration in the amount of $1,000 to the previous AWG shareholders. We allocated the excess of the purchase price over the fair value of assets acquired and liabilities assumed to goodwill, which is primarily not deductible for tax purposes. The goodwill arising from the AWG acquisition is attributable primarily to expected synergies and other benefits, including the acquired workforce, from combining AWG with us.

 

The contingent consideration was valued at the date of acquisition using a discount rate of 3.1%. The identifiable intangible assets were primarily valued using the excess earnings, relief from royalty, with-and-without and replacement cost methods using discount rates ranging from 12.0% to 14.0% and royalty rates of 0.5%.

 

During the nine months ended September 30, 2014, we finalized our purchase price allocation, which was preliminary as of December 31, 2013 due to estimated net equity adjustments and the filing of AWG’s final short period 2013 tax returns, both of which impacted the final purchase price allocation. As these purchase accounting adjustments were finalized during the measurement period, we retrospectively adjusted the provisional amounts recognized at the acquisition date to reflect the 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. As a result, goodwill decreased by $28, accrued expenses and other liabilities increased by $147, and accumulated deficit increased by $175 as of December 31, 2013 as compared to the audited consolidated financial statements contained in our annual report on Form 10-K filed with the SEC on March 17, 2014. The increase in accumulated deficit was the result of the valuation allowance that was established by the Company against its deferred tax assets as of December 31, 2013. The final purchase price allocation resulted in a $175 decrease in deferred tax liabilities and goodwill; accordingly, the Company had to increase the valuation allowance for deferred tax assets by $175, resulting in additional deferred tax expense for the year ended December 31, 2013.

 

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The amortizable intangible assets are being amortized straight-line over their estimated useful lives. The following summarizes the final purchase price allocation:

 

 

 

 

 

 

 

 

 

 

    

 

 

    

Weighted Average

 

 

 

Estimated Fair

 

Estimated Useful

 

 

 

Value

 

Life (years)

 

Consideration:

 

 

 

 

 

 

Cash paid

 

$

14,800 

 

 

 

Net equity adjustments

 

 

147 

 

 

 

Holdback consideration

 

 

1,600 

 

 

 

Contingent consideration

 

 

980 

 

 

 

Total consideration

 

$

17,527 

 

 

 

Recognized amounts of identifiable assets acquired and liabilities assumed:

 

 

 

 

 

 

Cash

 

$

215 

 

 

 

Restricted cash

 

 

515 

 

 

 

Accounts receivable

 

 

988 

 

 

 

Other current assets

 

 

609 

 

 

 

Property and equipment

 

 

2,297 

 

 

 

Accounts payable

 

 

(563)

 

 

 

Accrued expenses

 

 

(515)

 

 

 

Other current liabilities

 

 

(134)

 

 

 

Capital lease obligations

 

 

(932)

 

 

 

Other non-current liabilities

 

 

(130)

 

 

 

Deferred tax liabilities

 

 

(3,386)

 

 

 

Net tangible liabilities acquired

 

 

(1,036)

 

 

 

Existing airport contracts and relationships

 

 

4,700 

 

6.7 

 

Technology

 

 

270 

 

6.0 

 

Trademark and tradename

 

 

120 

 

3.0 

 

Non-compete agreement

 

 

3,590 

 

5.0 

 

Goodwill

 

 

9,883 

 

 

 

Total purchase price

 

$

17,527 

 

 

 

 

Endeka Group, Inc.

 

On February 22, 2013, we acquired all outstanding stock of Endeka Group, Inc. (“Endeka”). Endeka is a provider of commercial wireless broadband and IPTV services at certain military bases, as well as Wi-Fi services to certain federal law enforcement training facilities. We acquired Endeka because Endeka’s portfolio of venues and management team are natural additions to our managed network business. We have included the operating results of Endeka in our condensed consolidated financial statements since the date of acquisition.

 

The acquisition has been accounted for under the acquisition method of accounting in accordance with FASB ASC 805. As such, the assets acquired and liabilities assumed are recorded at their acquisition-date fair values. The total purchase price was $6,498, which includes cash paid at closing, holdback consideration to be paid and the fair value of additional contingent consideration comprised of two components: (i) a payment (“Build Payment”) if the amount of the capital expenditures incurred for the substantial completion of a specified build project is less than a target; and (ii) a payment (“Milestone Payment”) based on revenue generated by certain contracts in fiscal year 2014. There is no maximum to the contingent consideration payments for the Milestone Payment. We do not expect to make any payments associated with the Build Payment. The Milestone Payment will be paid on or around February 28, 2015.

 

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The fair value of the contingent consideration is based on Level 3 inputs. Further changes in the fair value of the contingent consideration are recorded through operating (loss) income. We allocated the excess of the purchase price over the fair value of assets acquired and liabilities assumed to goodwill, which is not deductible for tax purposes. The goodwill arising from the Endeka acquisition is attributable primarily to expected synergies and other benefits, including the acquired workforce, from combining Endeka with us.

 

The contingent consideration was valued at the date of acquisition using a discounted cash flow method with probability weighted cash flows and a discount rate of 50.5%. The identifiable intangible assets were primarily valued using the excess earnings, relief from royalty, and replacement cost methods using discount rates ranging from 40.0% to 50.0% and royalty rates ranging from 0.5% to 1.5%, where applicable.

 

The amortizable intangible assets are being amortized straight-line over their estimated useful lives. The following summarizes the final purchase price allocation:

 

 

 

 

 

 

 

 

 

 

    

Estimated Fair

    

Estimated Useful

 

 

 

Value

 

Life (years)

 

Consideration:

 

 

 

 

 

 

Cash paid

 

$

4,894 

 

 

 

Holdback consideration

 

 

275 

 

 

 

Contingent consideration

 

 

1,329 

 

 

 

Total consideration

 

$

6,498 

 

 

 

Recognized amounts of identifiable assets acquired and liabilities assumed:

 

 

 

 

 

 

Cash

 

$

20 

 

 

 

Other current assets

 

 

44 

 

 

 

Property and equipment

 

 

4,617 

 

 

 

Other assets

 

 

12 

 

 

 

Accounts payable

 

 

(992)

 

 

 

Other current liabilities

 

 

(211)

 

 

 

Notes payable and financed liabilities

 

 

(6,476)

 

 

 

Deferred tax liabilities

 

 

(2,637)

 

 

 

Net tangible liabilities acquired

 

 

(5,623)

 

 

 

Existing customer contracts and relationships

 

 

4,770 

 

10.0 

 

Technology

 

 

930 

 

6.0 

 

Trademark and tradename

 

 

300 

 

10.0 

 

Non-compete agreement

 

 

250 

 

2.0 

 

Other intangibles

 

 

95 

 

10.0 

 

Goodwill

 

 

5,776 

 

 

 

Total purchase price

 

$

6,498 

 

 

 

 

During the nine months ended September 30, 2014, we paid the holdback consideration in the amount of $275 to the previous Endeka shareholders.

 

Pro forma results

 

The following table presents the unaudited pro forma results of the Company for the three and nine months ended September 30, 2013 as if the acquisitions of AWG and Endeka had occurred on January 1, 2012. These results are not intended to reflect the actual operations of the Company had the acquisitions occurred on January 1, 2012. We did

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not record any incremental income taxes for pro forma net income (loss) because we established a valuation allowance in 2013.

 

 

 

 

 

 

 

 

 

 

 

    

Three Months Ended

    

Nine Months Ended

 

 

 

September 30, 2013

 

September 30, 2013

 

 

 

 

 

 

 

 

 

Revenue

 

$

30,804 

 

$

84,995 

 

Net income (loss)

 

$

88 

 

$

(2,375)

 

 

4. Cash and cash equivalents

 

Cash and cash equivalents consisted of the following:

 

 

 

 

 

 

 

 

 

 

 

    

September 30,

    

December 31,

 

 

 

2014

 

2013

 

Cash and cash equivalents:

 

 

 

 

 

 

 

Cash

 

$

2,078 

 

$

3,655 

 

Money market accounts

 

 

1,952 

 

 

23,683 

 

Total cash and cash equivalents

 

$

4,030 

 

$

27,338 

 

 

For the nine months ended September 30, 2014 and 2013, interest income was $ 105 and $1 45 , respectively, which is included in interest and other income (expense), net in the accompanying condensed consolidated statements of operations.

 

5. Property and equipment

 

Property and equipment consisted of the following:

 

 

 

 

 

 

 

 

 

 

 

    

September 30,

    

December 31,

 

 

 

2014

 

2013

 

Leasehold improvements

 

$

129,403 

 

$

97,462 

 

Construction in progress

 

 

36,163 

 

 

18,157 

 

Computer equipment

 

 

8,539 

 

 

7,372 

 

Software

 

 

14,905 

 

 

10,452 

 

Office equipment

 

 

419 

 

 

412 

 

Total property and equipment

 

 

189,429 

 

 

133,855 

 

Less: accumulated depreciation and amortization

 

 

(83,311)

 

 

(66,295)

 

Total property and equipment, net

 

$

106,118 

 

$

67,560 

 

 

Depreciation and amortization of property and equipment is allocated as follows in the accompanying condensed consolidated statements of operations:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

Nine Months Ended

 

 

 

September 30,

 

September 30,

 

 

    

2014

    

2013

    

2014

    

2013

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Network access

 

$

5,027 

 

$

3,058 

 

$

13,400 

 

$

9,140 

 

Network operations

 

 

1,370 

 

 

1,116 

 

 

3,739 

 

 

2,932 

 

Development and technology

 

 

852 

 

 

507 

 

 

2,331 

 

 

1,395 

 

General and administrative

 

 

86 

 

 

63 

 

 

180 

 

 

144 

 

Total depreciation and amortization of property and equipment

 

$

7,335 

 

$

4,744 

 

$

19,650 

 

$

13,611 

 

 

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During the three and nine months ended September 30, 2014, the Company recognized $406 of impairment losses, which is included within development and technology expenses in the accompanying condensed consolidated statements of operations, related to a change in the use of certain software developed for internal use that indicated that the carrying value of those assets will not be recoverable.

 

6. Fair value measurement

 

ASC 820 establishes a three-tiered hierarchy that draws a distinction between market participant assumptions based on (i) quoted prices (unadjusted) in active markets for identical assets and liabilities (Level 1); (ii) inputs other than quoted prices in active markets that are observable either directly or indirectly (Level 2); and (iii) unobservable inputs that require us to use present value and other valuation techniques in the determination of fair value (Level 3). The following table sets forth our financial assets and liabilities that are measured at fair value on a recurring basis:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

At September 30, 2014

    

Level 1

    

Level 2

    

Level 3

    

Total

 

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

Money market accounts

 

$

1,952 

 

$

 

$

 

$

1,952 

 

Marketable securities

 

 

 

 

17,261 

 

 

 

 

17,261 

 

Total assets

 

$

1,952 

 

$

17,261 

 

$

 

$

19,213 

 

Liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

Contingent consideration

 

$

 

$

 

$

584 

 

$

584 

 

Total liabilities

 

$

 

$

 

$

584 

 

$

584 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

At December 31, 2013

    

Level 1

    

Level 2

    

Level 3

    

Total

 

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

Money market accounts

 

$

23,683 

 

$

 

$

 

$

23,683 

 

Marketable securities

 

 

 

 

32,962 

 

 

 

 

32,962 

 

Total assets

 

$

23,683 

 

$

32,962 

 

$

 —

 

$

56,645 

 

Liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

Contingent consideration

 

$

 

$

 

$

1,942 

 

$

1,942 

 

Total liabilities

 

$

 

$

 

$

1,942 

 

$

1,942 

 

 

Our marketable securities utilize Level 2 inputs and consist primarily of corporate securities which include commercial paper and corporate debt instruments including notes issued by foreign or domestic corporations which pay in U.S. dollars and carry a rating of A or better. We have evaluated the various types of securities in our investment portfolio to determine an appropriate fair value hierarchy level based upon trading activity and the observability of market inputs.  Due to variations in trading volumes and the lack of quoted market prices in active markets, our fixed maturities are classified as Level 2 securities. The fair value of our fixed maturity marketable securities is derived through the use of a third party pricing source using recent reported trades for identical or similar securities, making adjustments through the reporting date based upon available market observable data.

 

The Company used the income approach to value the contingent consideration as of September 30, 2014. The contingent consideration used a discounted cash flow method with probability weighted cash flows for Endeka. The following table presents a reconciliation of the beginning and ending amounts related to the fair value of contingent consideration, categorized as Level 3:

 

 

 

 

 

 

 

Beginning balance, January 1, 2014

    

$

1,942 

 

Payment of contingent consideration

 

 

(1,000)

 

Change in fair value

 

 

(358)

 

Ending balance, September 30, 2014

 

$

584 

 

 

 

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7. Accrued expenses and other liabilities

 

Accrued expenses and other liabilities consisted of the following:

 

 

 

 

 

 

 

 

 

 

 

    

September 30,

    

December 31,

 

 

 

2014

 

2013

 

Revenue share

 

$

3,959 

 

$

4,598 

 

Salaries and wages

 

 

2,217 

 

 

3,024 

 

Accrued for construction-in-progress

 

 

7,824 

 

 

2,717 

 

Accrued partner network

 

 

802 

 

 

736 

 

Deferred rent

 

 

806 

 

 

853 

 

Holdback liabilities

 

 

1,600 

 

 

1,875 

 

Contingent consideration

 

 

584 

 

 

980 

 

Other

 

 

2,291 

 

 

2,272 

 

Total accrued expenses and other liabilities

 

$

20,083 

 

$

17,055 

 

 

 

 

8. Income taxes

 

We calculate our interim income tax provision in accordance with ASC 270,  Interim Reporting , and ASC 740, Accounting for Income Taxes . At the end of each interim period, we estimate the annual effective tax rate and apply that rate to our ordinary quarterly earnings. The tax expense or benefit related to significant, unusual, or extraordinary items is recognized in the interim period in which those items occur. In addition, the effect of changes in enacted tax laws, rates, or tax status is recognized in the interim period in which the change occurs.

 

The computation of the annual estimated effective tax rate at each interim period requires certain estimates and significant judgment, including the expected operating income (loss) for the year, projections of the proportion of income (loss) earned and taxed in various states, permanent and temporary differences as a result of differences between amounts measured and recognized in accordance with tax laws and financial accounting standards, and the likelihood of recovering deferred tax assets generated in the current year. The accounting estimates used to compute the provision for income taxes may change as new events occur, additional information is obtained, or as the tax environment changes.

 

Income tax expense (benefit) of $ 378 and $(382) reflects an effective tax rate of ( 3 . 1 %) and 35.6% for the nine months ended September 30, 2014 and 2013, respectively. Our effective tax rate differs from the statutory rate primarily due to our valuation allowance for the nine months ended September 30, 2014. Our effective tax rate differs from the statutory rate primarily due to benefits from disqualifying dispositions of incentive stock options and non-tax deductible transaction costs related to the acquisition of Endeka for the nine months ended September 30, 2013. At September 30, 2014, we have net deferred tax liabilities of $2,454, which include net operating loss carry-forwards. As of September 30, 2014 and December 31, 2013, we had $461 and $445, respectively, of uncertain tax positions, $106 of which is a reduction to deferred tax assets, which is presented net of uncertain tax positions, in the accompanying condensed consolidated balance sheets. We accrue interest and penalties related to unrecognized tax benefits as a component of income taxes. As of September 30, 2014 and December 31, 2013, we have accrued $69 and $53, respectively, for related interest, net of federal income tax benefits, and penalties. The amount of unrecognized tax benefits that, if recognized, would affect the effective tax rate as of September 30, 2014 was $286.

 

We are subject to taxation in the United States and in various states. Our tax years 201 1 and forward are subject to examination by the IRS and our tax years 2009 and forward are subject to examination by material state jurisdictions. However, due to prior year loss carryovers, the IRS and state tax authorities may examine any tax years for which the carryovers are used to offset future taxable income. We are currently subject to examination by the IRS for our 2011 tax year. Although the ultimate outcome is unknown, we believe that any adjustments that may result from the examination is not likely to have a material, adverse effect on our condensed consolidated results of operations, financial position or cash flows.

 

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9. Commitments and contingencies

 

Letters of credit

 

We have entered into Letter of Credit Authorization agreements (collectively, “Letters of Credit”) with Silicon Valley Bank. The Letters of Credit are irrevocable and serve as performance guarantees that will allow our customers to draw upon the available funds if we are in default. As of September 30, 2014, we have Letters of Credit totaling $3,307 that are scheduled to expire over the next thirteen-month period. There have been no drafts drawn under these Letters of Credit as of September 30, 2014. Subsequent to September 30, 2014, the Company increased the value of one Letter of Credit by $1,789.

 

Legal proceedings

 

From time to time, we may be subject to claims, suits, investigations and proceedings arising out of the normal course of business. We are not currently a party to any litigation that we believe could have a material adverse effect on our business, financial position, results of operations or cash flows.

 

10. Stock incentive plans

 

In March 2011, our board of directors approved the 2011 Equity Incentive Plan (“2011 Plan”).  The 2011 Plan provides for the grant of incentive and nonstatutory stock options, stock appreciation rights, restricted shares of our common stock, stock units, and performance cash awards.  As of January 1 of each year, the number of shares of common stock reserved for issuance under our stock incentive plan shall automatically be increased by a number equal to the lesser of (a) 4.5% of the total number of shares of common stock then outstanding, (b) 3,000,000 shares of common stock and (c) as determined by our board of directors.  As of September 30, 2014, 8,693,162 shares of common stock are reserved for issuance.

 

No further awards will be made under our Amended and Restated 2001 Stock Incentive Plan (“2001 Plan”), and it will be terminated.  Options outstanding under the 2001 Plan will continue to be governed by their existing terms.

 

Stock-based compensation expense is allocated as follows on the accompanying condensed consolidated statements of operations:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

Nine Months Ended

 

 

 

September 30,

 

September 30,

 

 

    

2014

    

2013

    

2014

    

2013

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Network operations

 

$

344 

 

$

241 

 

$

983 

 

$

638 

 

Development and technology

 

 

118 

 

 

143 

 

 

378 

 

 

242 

 

Selling and marketing

 

 

396 

 

 

301 

 

 

1,132 

 

 

759 

 

General and administrative

 

 

984 

 

 

667 

 

 

2,717