Business Combinations On April 3, 2017, the Company completed its acquisition of Jiff. Jiff provided an enterprise health benefits platform that served as a central hub for employee wellbeing and employee benefit programs and its acquisition by the Company formed the basis for Wellbeing Navigator. The acquisition enabled the Company to develop a product offering that provides the full spectrum of wellbeing, healthcare decision support and an engagement hub all in one complete package. The Company acquired Jiff for approximately 27,000,000 shares and options. At the closing on April 3, 2017, Venrock, a holder of more than 5% of the Companys capital stock, acquired a total of 3,965,979 shares of the Companys Class B common stock in exchange for its shares of Jiff capital stock. Venrock will also receive its pro rata share of any additional contingent consideration further described below. Bryan Roberts, the Chairman of the Companys Board of Directors, is a Partner at Venrock. Accordingly, this was a related party transaction. The Companys Board appointed a Special Committee (comprised solely of disinterested directors) to which it delegated the full and exclusive power, authority and discretion of the Castlight Board to evaluate, assess, and approve the Jiff transaction on its behalf, including retaining a financial advisor for an opinion on the fairness of the financial conditions of the transaction. The transaction was approved solely by the Special Committee which concluded that the transaction terms were fair to Castlight, and the transaction was in the best interests of Castlight and its stockholders. As part of the merger, certain stockholders and option holders were to receive an aggregate of 1,000,000 shares of the Companys Class B common stock or options if the Jiff business achieved at least $25 million in revenue in 2017 and an aggregate of 3,000,000 shares of Class B common stock or options if the Jiff business achieved at least $25 million in net new bookings during 2017 (the milestones). As of December 31, 2017, the Company evaluated and determined that both the milestones were not met. Additionally, all options for Jiff common stock held by Jiff employees who became employees of the combined company were converted into options to purchase the Companys Class B common stock. The following table summarizes the components of the purchase consideration transferred based on the closing price of the Companys stock as of the acquisition date (in thousands): Fair value Fair value of Company Class B common stock (25,054,049 shares at $3.65 per share) $ 91,447 Fair value of contingent consideration 671 Fair value of assumed Jiff options attributable to pre-combination services 9,574 Transaction costs paid on behalf of Jiff 4,498 Total purchase price consideration $ 106,190 For the Jiff options assumed as part of the acquisition, the Company applied the ratio of pre-combination service provided, on a grant-by-grant basis, to the total service period and applied this ratio to the acquisition date fair value of the Jiff awards. The Company determined that the contingent consideration shares associated with the milestones are one unit of account, and the Company classified the contingent consideration as a liability as the arrangement can be settled in a variable number of shares and is not considered fixed-for-fixed. Based on the probability of completing the milestones and changes in the fair value of the Companys common stock, the Company used a Monte Carlo simulation model to determine the fair value of the contingent consideration liability which was $0.7 million at the date of acquisition. As of December 31, 2017, the Company reversed the contingent consideration liability as the milestones were not met. As a result, $0.7 million of income was recorded in general and administrative expenses for the year ended December 31, 2017. The Company has accounted for this acquisition as a business combination. The method requires, among other things, that assets acquired and liabilities assumed in a business combination be recognized at their fair values as of the acquisition date. The final allocation of purchase consideration to assets acquired and liabilities assumed is reflected below. There were no changes to amounts previously recorded as assets or liabilities that resulted in a corresponding adjustment to goodwill. The fair values of the assets acquired and liabilities assumed by major class in the acquisition of Jiff were recognized as follows (in thousands): Cash $ 2,234 Current assets 5,159 Other assets 1,971 Acquired intangible assets 23,900 Goodwill 91,785 Total assets acquired 125,049 Deferred revenue (1,857) Other current liabilities (6,192) Debt (5,578) Non-current liabilities (5,232) Total net assets acquired $ 106,190 The fair values assigned to tangible assets acquired, liabilities assumed and identifiable intangible assets are based on managements estimates and assumptions. The excess of purchase consideration over the fair value of net tangible and identifiable intangible assets acquired was recorded as goodwill. The goodwill balance is primarily attributed to the cross-selling opportunities, cost synergies, and a knowledgeable and experienced workforce which play an important role in the integration of the acquired customers and technology. The goodwill balance is not deductible for U.S. income tax purposes. The following table sets forth the fair value components of identifiable acquired intangible assets (in thousands) and their estimated useful lives (in years): Fair Value Useful Life Customer relationships $ 10,900 10 Developed technology 10,600 5 Backlog 1,500 3 Other acquired intangible assets 900 1 - 3 Total identifiable intangible assets $ 23,900 Customer relationships represent the fair value of projected cash flows that will be derived from the sale of products to Jiff's existing customers based on existing, in-process, and future versions of the underlying technology. Developed technology represents Jiffs benefits platform. The Company used the relief from royalty method to value the developed technology. To determine the net cash flow that a market participant would expect to realize from licensing the Company's technology, the Company estimated a net royalty rate, which excludes any expenses that would be incurred to maintain the current functionality of the technology. The Company has included the financial results of Jiff in the consolidated statements of operations from the date of acquisition. For the year ended December 31, 2017, $10.0 million of revenue, adjusted for the adoption of ASC 606 in 2018, attributable to Jiff was included in the consolidated results of operations, and the associated operating income was immaterial. The Company incurred $3.1 million of acquisition-related costs for the year ended December 31, 2017 that were recognized in general and administrative expenses. The unaudited pro forma financial information in the table below summarizes the combined results of operations for the Company and Jiff as if the companies were combined as of the beginning of 2016. The historical consolidated financial statements have been adjusted in the pro forma combined financial statements to give effect to pro forma events that are directly attributable to the business combination and factually supportable. The unaudited pro forma financial information presented includes the business combination accounting effects resulting from the acquisition, including amortization charges from acquired intangible assets, stock-based compensation, and acquisition-related costs. In addition, the pro forma combined financial statements give effect to the adoption of ASC 606 in 2018. The unaudited pro forma financial information as presented below is for informational purposes only and is not necessarily indicative of the results of operations that would have been achieved if the acquisitions had taken place at the beginning of 2016 (in thousands): Year Ended December 31, 2017 Total revenue $ 135,588 Net loss $ (57,398) The pro forma revenue and net loss reflects material, nonrecurring adjustments, such as the tax benefit of $5.2 million recorded in 2017 that resulted from the acquisition, non-recurring acquisition-related compensation expense and non-recurring deferred revenue fair value adjustments.