On July 5, 2023 (the “Paperspace Acquisition Date”), the Company consummated a business combination acquiring 100% of Paperspace Co. (“Paperspace”) for total cash consideration of $100,399. Included in the consideration paid was a contribution of $11,100 to an escrow account held by a third party on the Paperspace Acquisition Date to support certain post-closing indemnification obligations. During the three months ended September 30, 2024, the indemnification period expired and the remaining indemnity escrow fund was distributed to the participating Paperspace stockholders in accordance with the acquisition agreement.

This acquisition has been accounted for as a business combination and the results of Paperspace’s operations have been included in the accompanying condensed consolidated financial statements since the Paperspace Acquisition Date. The acquisition and integration of Paperspace’s advanced technology into the Company’s platform will extend the

Company’s offerings, enabling customers to more easily test, develop and deploy artificial intelligence and machine learning (“AI/ML”) applications, and augment and enhance existing AI/ML applications.

During the nine months ended September 30, 2024, goodwill increased $352 due to measurement period adjustments for the business combination. The following table sets forth the final allocation of the purchase price and summarizes the fair values of the assets acquired and liabilities assumed at the Paperspace Acquisition Date:


	Amount
Fair value of consideration transferred
Cash consideration	$	100,399

Recognized amounts of identifiable assets acquired and liabilities assumed
Tangible assets acquired:
Cash and cash equivalents	$	1,376
Accounts receivable	1,042
Prepaid expenses and other current assets	4
Property and equipment, net	4,515
Operating right-of-use asset, net	4,398
Finance lease right-of-use asset, net	11,958
Other assets	367
Intangible assets	37,690
Liabilities assumed:
Accounts payable and accrued expenses	(1,608)
Deferred revenue	(105)
Operating lease liabilities, current	(1,475)
Operating lease liabilities, non-current	(2,923)
Finance lease liabilities, current	(5,707)
Finance lease liabilities, non-current	(6,251)
Deferred tax liabilities	(1,074)
Total identifiable net assets acquired	42,207
Goodwill recorded in acquisition	58,192
Total purchase price allocation	$	100,399

The Company amortizes its intangible assets assuming no residual value over periods in which the economic benefit of these assets is consumed (the useful life). The fair values allocated to the identifiable intangible assets and their estimated useful lives are as follows:

Paperspace’s assets and liabilities were measured at estimated fair values on July 5, 2023. Estimates of fair value represent management’s best estimate and require a complex series of judgments about future events and uncertainties. Third-party valuation specialists were engaged to assist management in the valuation of these assets and liabilities.

The goodwill is attributable primarily to the integration of Paperspace’s advanced technology into the Company’s platform which will extend the Company’s offerings, resulting in incremental revenue from new and existing customers, and to a lesser extent intangible assets that do not qualify for separate recognition, including the existing workforce acquired through the acquisition. None of the goodwill is expected to be deductible for income tax purposes.

The unaudited pro forma information below summarizes the combined results of the Company and Paperspace as if the Company’s acquisition of Paperspace closed on January 1, 2022 but does not necessarily reflect the combined actual results of operations of the Company and Paperspace that would have been achieved, nor are they necessarily indicative of future results of operations. The unaudited pro forma information reflects certain adjustments that were directly attributable to the acquisition of Paperspace, including additional amortization of acquired assets and the timing of nonrecurring acquisition and integration related costs, and other adjustments the Company believes are reasonable for the pro forma presentation. If Paperspace had been acquired on January 1, 2022, it would not have had a material impact to revenue for the three and nine months ended September 30, 2023.


	Three Months Ended September 30, 2023		Nine Months Ended September 30, 2023
Net income (loss)	$	17,708	$	(7,500)

Contingent compensation represents compensation for post-combination services because the payments are contingent on continuing employment of the Paperspace founders, Cloudways seller, and Snapshooter Limited founder at each payment date. Contingent compensation costs related to payments due to certain Paperspace founders for $10,120, of which $5,060 was earned and paid on July 5, 2024, and $5,060 was earned during the three months ended September 30, 2024.

Contingent compensation costs related to payments due to a Cloudways seller for $38,830, of which $16,851 was earned and paid on September 1, 2023, $7,326 was earned and paid on March 1, 2024 and $7,326 was earned and paid on September 1, 2024. On October 30, 2024, the Cloudways seller resigned from the Company. In recognition of the Cloudways seller’s service, the Company has agreed to make the remaining payment of $7,326 following the resignation date.