As filed with the Securities and Exchange Commission on March 18, 2020

Registration No. 333-236340

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

AMENDMENT NO. 1

TO

FORM S-3 ON

FORM S-1

REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF 1933

VIVINT SMART HOME, INC.

(Exact Name of Registrant as Specified in Its Charter)

4931 North 300 West

Provo, Utah 84604

(404) 504-7474

(Address, Including Zip Code, and Telephone Number, Including Area Code, of Registrant’s Principal Executive Offices)

Shawn J. Lindquist

Chief Legal Officer

4931 North 300 West

Provo, Utah 84604

(404) 504-7474

(Name, Address, Including Zip Code, and Telephone Number, Including Area Code, of Agent for Service)

Copies to:

Igor Fert

Mark Brod

Simpson Thacher & Bartlett LLP

425 Lexington Avenue

New York, NY 10017

(212) 455-2000

Approximate date of commencement of proposed sale to the public:

From time to time after the effective date of this registration statement.

If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, please check the following box.  ☒

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  ☐

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  ☐

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 under the Securities Exchange Act of 1934:

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B) of the Securities Act.  ☐ 

The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment that specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act or until the registration statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.

CALCULATION OF REGISTRATION FEE

EXPLANATORY NOTE

The Company filed a Registration Statement on Form S-3 on February 7, 2020 (Registration No. 333-236340) (the “Registration Statement”). This Amendment No. 1 to Form S-3 is being filed to convert the Registration Statement into a Registration Statement on Form S-1.

The information in this preliminary prospectus is not complete and may be changed. Neither we nor the selling securityholders may sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This preliminary prospectus is not an offer to sell these securities and is not soliciting an offer to buy these securities in any jurisdiction where the offer or sale is not permitted.

SUBJECT TO COMPLETION—DATED MARCH 18, 2020

PRELIMINARY PROSPECTUS

VIVINT SMART HOME, INC.

168,494,733 Shares of Class A Common Stock

Up to 17,433,334 Shares of Class A Common Stock

Issuable Upon Exercise of Warrants

This prospectus relates to the offer and sale from time to time by the selling securityholders named in this prospectus (the “Selling Securityholders”) of up to 168,494,733 shares of our Class A common stock. We will not receive any proceeds from the sale of shares of Class A common stock by the Selling Securityholders pursuant to this prospectus.

Our registration of the securities covered by this prospectus does not mean that the Selling Securityholders will offer or sell any of the shares. The Selling Securityholders may sell the shares of Class A common stock covered by this prospectus in a number of different ways and at varying prices. We provide more information about how the Selling Securityholders may sell the shares in the section entitled “Plan of Distribution.”

In addition, this prospectus relates to the issuance by us of up to an aggregate of 17,433,334 shares of our Class A common stock which consists of (i) 5,933,334 shares of Class A common stock that are issuable upon the exercise of 5,933,334 warrants (the “Private Warrants”) originally issued in a private placement in connection with the initial public offering of Mosaic and (ii) 11,500,000 shares of Class A common stock that are issuable upon the exercise of 11,500,000 warrants (the “Public Warrants” and, together with the Private Warrants, the “Warrants”) originally issued in the initial public offering of Mosaic. We will receive the proceeds from any exercise of any Warrants for cash.

Our Class A common stock and our Public Warrants are listed on the New York Stock Exchange, or NYSE, under the symbols “VVNT” and “VVNT WS,” respectively. On March 17, 2020, the closing price of our Class A common stock was $11.69 and the closing price for our Public Warrants was $1.12.

See the section entitled “Risk Factors” beginning on page 6 of this prospectus to read about factors you should consider before buying our securities.

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

The date of this prospectus is                    , 2020.

TABLE OF CONTENTS

You should rely only on the information provided in this prospectus, as well as the information incorporated by reference into this prospectus and any applicable prospectus supplement. Neither we nor the Selling Securityholders have authorized anyone to provide you with different information. Neither we nor the Selling Securityholders are making an offer of these securities in any jurisdiction where the offer is not permitted. You should not assume that the information in this prospectus, any applicable prospectus supplement or any documents incorporated by reference is accurate as of any date other than the date of the applicable document. Since the respective dates of this prospectus and the documents incorporated by reference into this prospectus, our business, financial condition, results of operations and prospects may have changed.

Unless the context indicates otherwise, references in this prospectus to the “Company,” “we,” “us,” “our” and similar terms refer to Vivint Smart Home, Inc. (f/k/a Mosaic Acquisition Corp.) and its consolidated subsidiaries (including Legacy Vivint Smart Home). References to “Mosaic” refer to the Company prior to the consummation of the Merger.

i

ABOUT THIS PROSPECTUS

This prospectus is part of a registration statement on Form S-1 that we filed with the Securities and Exchange Commission (the “SEC”) using the “shelf” registration process. Under this shelf registration process, the Selling Securityholders may, from time to time, sell the securities offered by them described in this prospectus. We will not receive any proceeds from the sale by such Selling Securityholders of the securities offered by them described in this prospectus. This prospectus also relates to the issuance by us of the shares of Class A common stock issuable upon the exercise of any Warrants. We will receive proceeds from any exercise of the Warrants for cash.

Neither we nor the selling securityholders have authorized anyone to provide you with any information or to make any representations other than those contained in this prospectus or any applicable prospectus supplement or any free writing prospectuses prepared by or on behalf of us or to which we have referred you. Neither we nor the selling securityholders take responsibility for, and can provide no assurance as to the reliability of, any other information that others may give you. Neither we nor the selling securityholders will make an offer to sell these securities in any jurisdiction where the offer or sale is not permitted.

We may also provide a prospectus supplement or post-effective amendment to the registration statement to add information to, or update or change information contained in, this prospectus. You should read both this prospectus and any applicable prospectus supplement or post-effective amendment to the registration statement together with the additional information to which we refer you in the sections of this prospectus entitled “Where You Can Find More Information.”

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This prospectus, any accompanying prospectus supplement and the documents incorporated by reference herein and therein may contain forward-looking statements as defined by the Private Securities Litigation Reform Act of 1995. These statements are based on the beliefs and assumptions of management. Although the Company believes that its plans, intentions and expectations reflected in or suggested by these forward-looking statements are reasonable, the Company cannot assure you that it will achieve or realize these plans, intentions or expectations. Forward-looking statements are inherently subject to risks, uncertainties and assumptions. Generally, statements that are not historical facts, including statements concerning the Company’s possible or assumed future actions, business strategies, events or results of operations, are forward-looking statements. These statements may be preceded by, followed by or include the words “believes,” “estimates,” “expects,” “projects,” “forecasts,” “may,” “will,” “should,” “seeks,” “plans,” “scheduled,” “anticipates” or “intends” or similar expressions.

Forward-looking statements are not guarantees of performance. You should not put undue reliance on these statements which speak only as of the date hereof. You should understand that the following important factors, among others, could affect the Company’s future results and could cause those results or other outcomes to differ materially from those expressed or implied in the Company’s forward-looking statements:

1

In addition, the origination and retention of new subscribers will depend on various factors, including, but not limited to, market availability, subscriber interest, the availability of suitable components, the negotiation of acceptable contract terms with subscribers, local permitting, licensing and regulatory compliance, and the Company’s ability to manage anticipated expansion and to hire, train and retain personnel, the financial viability of subscribers and general economic conditions.

These and other factors that could cause actual results to differ from those implied by the forward-looking statements in this prospectus are more fully described in the “Risk Factors” section. The risks described in “Risk Factors” are not exhaustive. New risk factors emerge from time to time and it is not possible for us to predict all such risk factors, nor can the Company assess the impact of all such risk factors on its business or the extent to which any factor or combination of factors may cause actual results to differ materially from those contained in any forward-looking statements. All forward-looking statements attributable to the Company or persons acting on its behalf are expressly qualified in their entirety by the foregoing cautionary statements. The Company undertakes no obligations to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

2

3

4

5

RISK FACTORS

Investing in our securities involves risks. Before you make a decision to buy our securities, in addition to the risks and uncertainties discussed above under “Cautionary Note Regarding Forward-Looking Statements,” you should carefully consider the specific risks set forth herein. If any of these risks actually occur, it may materially harm our business, financial condition, liquidity and results of operations. As a result, the market price of our securities could decline, and you could lose all or part of your investment. Additionally, the risks and uncertainties described in this prospectus, any prospectus supplement or in any document incorporated by reference herein or therein are not the only risks and uncertainties that we face. Additional risks and uncertainties not presently known to us or that we currently believe to be immaterial may become material and adversely affect our business.

Risks Relating to the Company’s Business and Industry

The Company’s industry is highly competitive.

The Company operates in a highly competitive industry. The Company faces, and may in the future face, competition from other providers of information and communication products and services, including cable and telecommunications companies, Internet service providers, large technology companies, singular experience companies, industrial and smart hardware companies, and others that may have greater capital and resources than the Company does. The Company also faces competition from large residential security companies that have or may have greater capital and other resources than the Company. Competitors that are larger in scale and have greater resources may benefit from greater economies of scale and other lower costs that permit them to offer more favorable terms to consumers (including lower service costs) than the Company offers, causing such consumers to choose to enter into contracts with such competitors. For instance, cable and telecommunications companies are expanding into the smart home and security industries and are bundling their existing offerings with automation and monitored security services. In some instances, it appears that certain components of such bundled offerings are significantly underpriced and, in effect, subsidized by the rates charged for the other product or services offered by these companies. These bundled pricing alternatives may influence subscribers’ desire to subscribe to the Company’s services at rates and fees the Company considers appropriate. These competitors may also benefit from greater name recognition and superior advertising, marketing, promotional and other resources. To the extent that such competitors utilize any competitive advantages in markets where the Company’s business is more highly concentrated, the negative impact on the Company’s business may increase over time. In addition to potentially reducing the number of new subscribers the Company is able to originate, increased competition could also result in increased subscriber acquisition costs and higher attrition rates that would negatively impact the Company over time. The benefit offered to larger competitors from economies of scale and other lower costs may be magnified by an economic downturn in which subscribers put a greater emphasis on lower cost products or services. In addition, the Company faces competition from regional competitors that concentrate their capital and other resources in targeting local markets.

The Company also faces potential competition from do-it-yourself, or DIY, systems, which enable consumers to install their own systems and monitor and control their home over the Internet without the need for a subscription agreement with a service provider. Improvements in these systems may result in more subscribers choosing to take on the responsibility for installation, maintenance, and management of connected home systems themselves. In addition, consumers may prefer individual device solutions that provide more narrowly targeted functionality instead of a more comprehensive integrated smart home solution. Pricing pressure or improvements in technology and shifts in consumer preferences towards DIY and/or individual solutions could adversely impact the Company’s subscriber base or pricing structure and have a material and adverse effect on the Company’s business, financial condition, results of operations and cash flows.

Cable and telecommunications companies actively targeting the smart home market and expanding into the monitored security space, and large technology companies expanding into the smart home market could result in

6

pricing pressure, a shift in subscriber preferences towards the services of these companies and a reduction in the Company’s market share. Continued pricing pressure from these competitors or failure to achieve pricing based on the competitive advantages previously identified above could prevent the Company from maintaining competitive price points for the Company’s products and services, resulting in lost subscribers or in the Company’s inability to attract new subscribers, and have an adverse effect on the Company’s business, financial condition, results of operations and cash flows.

The Company relies on long-term retention of subscribers, and subscriber attrition can have a material adverse effect on the Company’s results.

The Company incurs significant upfront costs to originate new subscribers. Accordingly, the Company’s long-term performance is dependent on the Company’s subscribers remaining with the Company for several years after the initial term of their contracts. One reason for attrition occurs when subscribers move and do not reconnect. Subscriber moves are impacted by changes in the housing market. See “—The Company’s business is subject to macroeconomic, microeconomic and demographic factors that may negatively impact the Company’s results of operations”. Some other factors that can increase subscriber attrition include problems experienced with the quality of the Company’s products or services, unfavorable general economic conditions, adverse publicity and the preference for lower pricing of competitors’ products and services. In addition, the Company generally experiences an increased level of subscriber cancellations in the months surrounding the expiration of such subscribers’ initial contract term. If the Company fails to retain the Company’s subscribers for a sufficient period of time, the Company’s profitability, business, financial condition, results of operations and cash flows could be materially and adversely affected. The Company’s inability to retain subscribers for a long term could materially and adversely affect the Company’s business, financial condition, cash flows or results of operations.

Litigation, complaints or adverse publicity or unauthorized use of the Company’s brand name could negatively impact the Company’s business, financial condition and results of operations.

From time to time, the Company engages in the defense of, and may in the future be subject to, certain investigations, claims and lawsuits arising in the ordinary course of the Company’s business. For example, the Company has been named as a defendant in putative class actions alleging violations of wage and hour laws, the Telephone Consumer Protection Act, common law privacy and consumer protection laws. From time to time the Company’s subscribers have communicated and may in the future communicate complaints to organizations such as the Better Business Bureau, regulators, law enforcement or the media. Any resulting actions or negative subscriber sentiment or publicity could reduce the volume of the Company’s new subscriber originations or increase attrition of existing subscribers. Any of the foregoing may materially and adversely affect the Company’s business, financial condition, cash flows or results of operations.

Given the Company’s relationship with Vivint Solar, Inc. (“Vivint Solar”) and the fact that Vivint Solar uses the Company’s registered trademark, “Vivint”, in its name pursuant to a licensing agreement, the Company’s subscribers and potential subscribers may associate the Company with any problems experienced with Vivint Solar or adverse publicity related to Vivint Solar’s business. The Company may not be able to take remedial action to cure any issues Vivint Solar has with its subscribers, and the Company’s trademark, brand and reputation may be adversely affected.

Unauthorized use of the Company’s brand name by third parties may also adversely affect the Company’s business and reputation, including the perceived quality and reliability of the Company’s products and services. The Company relies on trademark law, internal policies and agreements with the Company’s employees, subscribers, business partners and others to protect the value of the Company’s brand name. Despite the Company’s precautions, the Company cannot provide assurance that those procedures are sufficiently effective to protect against unauthorized third-party use of the Company’s brand name. The Company may not be successful in investigating, preventing or prosecuting all unauthorized third-party use of the Company’s brand name. Future litigation with respect to such unauthorized use could also result in substantial costs and diversion of the

7

Company’s resources. These factors could adversely affect the Company’s reputation, business, financial condition, results of operations and cash flows.

The Company is highly dependent on the Company’s ability to attract, train and retain an effective sales force and other key personnel.

The Company’s business is highly dependent on the Company’s ability to attract, train and retain an effective sales force, especially for the Company’s peak April through August sales season. In addition, because sales representatives become more productive as they gain experience, retaining those individuals is very important for the Company’s success. If the Company is unable to attract, train and retain an effective sales force, the Company’s business, financial condition, cash flows or results of operations could be adversely affected. In addition, the Company’s business is dependent on the Company’s ability to attract and retain other key personnel in other critical areas of the Company’s business. If the Company is unable to attract and retain key personnel in the Company’s business, it could adversely affect the Company’s business, financial condition, cash flows and results of operations.

The Company’s operations depend upon third-party providers of telecommunication technologies and services.

The Company’s operations depend upon third-party cellular and other telecommunications providers to communicate signals to and from the Company’s subscribers in a timely, cost-efficient and consistent manner. The failure of one or more of these providers to transmit and communicate signals in a timely manner could affect the Company’s ability to provide services to the Company’s subscribers. There can be no assurance that third-party telecommunications providers and signal-processing centers will continue to transmit and communicate signals to or from the Company’s third-party providers and the monitoring stations without disruption. Any such disruption, particularly one of a prolonged duration, could have a material adverse effect on the Company’s business. In addition, failure to renew contracts with existing providers or to contract with other providers on commercially acceptable terms or at all may adversely impact the Company’s business.

Certain elements of the Company’s operating model have historically relied on the Company’s subscribers’ continued selection and use of traditional landline telecommunications to transmit signals to and from the Company’s subscribers. There is a growing trend for consumers to switch to the exclusive use of cellular, satellite or internet communication technology in their homes, and telecommunication providers may discontinue their landline services in the future. In addition, many of the Company’s subscribers who use cellular communication technology for their systems use products that rely on older 2G and 3G technologies, and certain telecommunication providers have discontinued 2G services in certain markets, and these and other telecommunication providers are expected to discontinue 2G and 3G services in other markets in the future. The discontinuation of landline, 2G, 3G and any other services by telecommunications providers in the future would require the Company’s subscriber’s system to be upgraded to alternative, and potentially more expensive, technologies. This could increase the Company’s subscriber attrition rates and slow the Company’s new subscriber originations. To maintain the Company’s subscriber base that uses components that are or could become obsolete, the Company may be required to upgrade or implement new technologies, including by offering to subsidize the replacement of subscribers’ outdated systems at the Company’s expense. Any such upgrades or implementations could require significant capital expenditures and also divert management’s attention and other important resources away from the Company’s customer service and new subscriber origination efforts.

The Company depends on third-party providers of internet access services that may impair, degrade or otherwise block the Company’s services that could lead to additional expenses or loss of users.

The Company’s interactive services are accessed through the internet and the Company’s security monitoring services are increasingly delivered using internet-based technologies. In addition, the Company’s

8

distributed cloud storage solution, including the Vivint Smart Drive, is dependent upon internet services for shared storage. Some providers of broadband access may take measures that affect their subscribers’ ability to use these products and services, such as degrading the quality of the data packets the Company transmits over their lines, giving those packets low priority, giving other packets higher priority than the Company’s, blocking the Company’s packets entirely or attempting to charge their subscribers more for using the Company’s services or terminating the subscriber’s contract.

The Federal Communications Commission (“FCC”) released an order that became effective on June 11, 2018, that repeals most of the rules that the agency previously had in place that prevented providers of broadband internet access services from impairing, degrading or blocking services provided by third parties to the Company. The prior rules prohibiting impairment, degradation and blocking are commonly referred to as “network neutrality” rules. Numerous parties have appealed the FCC order which is before the U.S. Court of Appeals for the District of Columbia. The Company cannot predict whether the FCC order will be upheld, reversed or remanded, nor the timing of the appellate court’s resolution of the appeal.

Following the adoption of the FCC’s order reversing the network neutrality rules, a number of states have passed network neutrality laws. The laws vary by state both in substance and in scope. There is legal uncertainty as to whether states have authority to pass laws that would conflict with the recent FCC order due to the interstate nature of internet communications and for other reasons. The Company cannot predict whether state laws that are interpreted to conflict with the FCC’s order will survive judicial scrutiny if challenged.

The largest providers of broadband internet access services have publicly stated that network neutrality rules are not required as they would not engage in some of the practices that the rules prohibit. While it is difficult to predict what would occur in the absence of such rules, it is possible that as a result of the lack of network neutrality rules, the Company could incur greater operating expenses which could harm the Company’s results of operations. While the Company thinks it is unlikely and that other laws may be implicated should broadband internet access providers affirmatively interfere with the delivery of the Company’s services that rely on broadband internet connections, interference with the Company’s services by broadband internet access service providers for using the Company’s products and services could cause the Company to lose existing subscribers, impair the Company’s ability to attract new subscribers and materially and adversely affect the Company’s business, financial condition, results of operations and cash flows.

Changes in laws or regulations that impact the Company’s underlying providers of telecommunications services could adversely impact the Company’s business.

Telecommunications service providers are subject to extensive regulation in the markets where the Company operates or may expand in the future. Changes in the applicable laws or regulations affecting telecommunication services could require the Company to change the way the Company operates, which could increase costs or otherwise disrupt the Company’s operations, which in turn could adversely affect the Company’s business, financial condition, cash flows or results of operations.

The Company must successfully upgrade and maintain the Company’s information technology systems.

The Company relies on various information technology systems to manage its operations. As necessary, the Company implements modifications and upgrades to these systems, and replaces certain of its legacy systems with successor systems with new functionality.

There are inherent costs and risks associated with modifying or changing these systems and implementing new systems, including potential disruption of the Company’s internal control structure, substantial capital expenditures, additional administration and operating expenses, retention of sufficiently skilled personnel to implement and operate the new systems, demands on management time and other risks and costs of delays or difficulties in transitioning to new systems or of integrating new systems into the Company’s current systems.

9

For example, Legacy Vivint Smart Home encountered issues associated with the implementation of the Company’s integrated customer resource management system (“CRM”) in 2014, which resulted in an immaterial error in the Company’s financial statements for the quarter ended June 30, 2014. This error was corrected during the quarter ended September 30, 2014. As a result of the issues encountered associated with the CRM implementation, Legacy Vivint Smart Home also issued a significant number of billing-related subscriber credits during the year ended December 31, 2014, which reduced the Company’s revenue. While management seeks to identify and remediate issues, the Company can provide no assurance that its identification and remediation efforts will be successful or that the Company will not encounter additional issues as it completes the implementation of these and other systems. In addition, the Company’s information technology system implementations may not result in productivity improvements at a level that outweighs the costs of implementation, or at all. The implementation of new information technology systems may also cause disruptions in the Company’s business operations and have an adverse effect on the Company’s business, cash flows and operations.

Privacy and data protection concerns, laws, and regulations relating to privacy and data protection and information security could have a material adverse effect on the Company’s business.

In the course of the Company’s operations, the Company gathers, processes, transmits and stores subscriber information, including personal, payment, credit and other confidential and private information. The Company may use this information for operational and marketing purposes in the course of operating the Company’s business.

The Company’s collection, retention, transfer and use of this information are governed by U.S. and foreign laws and regulations relating to privacy, data protection and information security, industry standards and protocols, or it may be asserted that such industry standards or protocols apply to the Company. The regulatory framework for privacy and information security issues worldwide is rapidly evolving and is likely to remain uncertain for the foreseeable future. In North America, federal and various state and provincial governmental bodies and agencies have adopted or are considering adopting laws and regulations limiting, or laws and regulations regarding the collection, distribution, use, disclosure, storage, and security of certain categories of information. Some of these requirements include obligations of companies to notify individuals of security breaches involving particular personal information, which could result from exploitation of a vulnerability in the Company’s systems or services or breaches experienced by the Company’s service providers and/or partners. For example, the State of California recently enacted the California Consumer Privacy ACT (“CCPA”), which became effective as of January 1, 2020. The CCPA expands the scope of what is considered “personal information” and creates new data access and opt-out rights for consumers, which may create new requirements for the Company and other companies that operate in California. The Company is also subject to state and federal laws and regulations regarding telemarketing and other telephonic communications and state and federal laws regarding unsolicited commercial emails, as well as regulations relating to automated telemarketing calls, texts or SMS messages.

Many jurisdictions have established their own data security and privacy legal and regulatory frameworks with which the Company or the Company’s vendors or partners must comply to the extent the Company’s operations expand into these geographies or the laws and regulations in these frameworks otherwise may be interpreted to apply to the Company. Laws and regulations in these jurisdictions apply broadly to the collection, use, storage, disclosure and security of data that identifies or may be used to identify or locate an individual, such as names, email addresses and, in some jurisdictions, internet protocol addresses. The Company is also bound by contractual requirements relating to privacy, data protection and information security, and may agree to additional contractual requirements addressing these matters from time to time.

The Company’s compliance with these various requirements increases the Company’s operating costs, and additional laws, regulations, standards or protocols (or new interpretations of existing laws, regulations, standards or protocols) in these areas may further increase the Company’s operating costs and adversely affect the Company’s ability to effectively market the Company’s products and services. In view of new or modified

10

legal obligations relating to privacy, data protection or information security, or any changes in their interpretation, the Company may find it necessary or desirable to fundamentally change the Company’s business activities and practices or to expend significant resources to modify the Company’s products and services and otherwise adapt to these changes. The Company may be unable to make such changes and modifications in a commercially reasonable manner or at all, and the Company’s ability to develop new services and features could be limited.

Further, the Company’s failure or perceived failure to comply with any of these laws, regulations, standards, protocols or other obligations could result in a loss of subscriber data, fines, sanctions and other liabilities and additional restrictions on the Company’s collection, transfer or use of subscriber data. In addition, the Company’s failure to comply with any of these laws, regulations, standards, protocols or other obligations could result in a material adverse effect on the Company’s reputation, subscriber attrition, new subscriber origination, financial condition, cash flows or results of operations.

If the Company’s security controls are breached or unauthorized or inadvertent access to subscriber information or other data are otherwise obtained, the Company’s services may be perceived as insecure, the Company may lose existing subscribers or fail to attract new subscribers, the Company’s business may be harmed, and the Company may incur significant liabilities.

Use of the Company’s solutions involves the storage, transmission and processing of personal, payment, credit and other confidential and private information of the Company’s subscribers, and may in certain cases permit access to the Company’s subscribers’ homes or property or help secure them. The Company also maintains and processes other confidential and proprietary information in the Company’s business, including the Company’s employees’ and contractors’ personal information and confidential business information. The Company relies on proprietary and commercially available systems, software, tools and monitoring to protect against unauthorized use or access of the information the Company processes and maintains. The Company’s services and the networks and information systems the Company utilizes in the Company’s business are at risk for breaches as a result of third-party action, employee, vendor or partner error, malfeasance, or other factors. For example, Legacy Vivint Smart Home has experienced instances of its employees, contractors and other third parties improperly accessing its and/or its subscribers’ systems and information in violation of Legacy Vivint Smart Home’s internal policies and procedures.

Criminals and other nefarious actors are using increasingly sophisticated methods, including cyberattacks, phishing, social engineering and other illicit acts to capture, access or alter various types of information, to engage in illegal activities such as fraud and identity theft, and to expose and exploit potential security and privacy vulnerabilities in corporate systems and websites. Unauthorized intrusion into the portions of the Company’s systems and networks and data storage devices that process and store subscriber confidential and private information, the loss of such information or the deployment of malware or other harmful code to the Company’s services or the Company’s networks or systems may result in negative consequences, including the actual or alleged malfunction of the Company’s products or services. In addition, third parties, including the Company’s partners and vendors, could also be sources of security risks to the Company in the event of a failure of their own security systems and infrastructure. The threats the Company and the Company’s partners and vendors face continue to evolve and are difficult to predict due to advances in computer capabilities, new discoveries in the field of cryptography and new and sophisticated methods used by criminals. There can be no assurances that the Company’s defensive measures will prevent cyber-attacks or that the Company will discover network or system intrusions or other breaches on a timely basis or at all. The Company cannot be certain that the Company will not suffer a compromise or breach of the technology protecting the systems or networks that house or access the Company’s products and services or on which the Company or the Company’s partners or vendors process or store personal information or other sensitive information or data, or that any such incident will not be believed or reported to have occurred. Any such actual or perceived compromises or breaches to systems, or unauthorized access to the Company’s subscribers’ data, products or systems, or acquisition or loss of, data, whether suffered by the Company, the Company’s partners or vendors or other third parties, whether as

11

a result of employee error or malfeasance or otherwise, could harm the Company’s business. They could, for example, cause interruptions in operations, loss of data, loss of confidence in the Company’s services and products and damage to the Company’s reputation, and could limit the adoption of the Company’s services and products. They could also subject the Company to costs, regulatory investigations and orders, litigation, contract damages, indemnity demands and other liabilities and materially and adversely affect the Company’s subscriber base, sales, revenues and profits. Any of these could, in turn, have a material adverse impact on the Company’s business, financial condition, cash flows or results of operations.

Further, if a high profile security breach occurs with respect to another provider of smart home solutions, the Company’s subscribers and potential subscribers may lose trust in the security of the Company’s services or in the smart home space generally, which could adversely impact the Company’s ability to retain existing subscribers or attract new ones. Even in the absence of any security breach, subscriber concerns about security, privacy or data protection may deter them from using the Company’s service. The Company’s insurance policies covering errors and omissions and certain security and privacy damages and claim expenses may not be sufficient to compensate for all potential liability. Although the Company maintains cyber liability insurance, the Company cannot be certain that the Company’s coverage will be adequate for liabilities actually incurred or that insurance will continue to be available to the Company on economically reasonable terms, or at all.

The Company’s Vivint Flex Pay plan is a new business model that may subject the Company to additional risks.

In 2017, Legacy Vivint Smart Home introduced a new program (“Vivint Flex Pay”) that allowed subscribers to finance the purchase of their products and related installation through Legacy Vivint Smart Home’s Vivint Flex Pay plan. Under Vivint Flex Pay, the Company offers to the Company’s qualified U.S. subscribers an opportunity to finance through a third party the purchase of products and related installation used in connection with the Company’s services. The Company offers certain of its subscribers who do not qualify for third-party financing and all Canadian subscribers the opportunity to finance their purchase of products and related installation under a retail installment contract program (an “RIC”), which is financed by the Company. Under Vivint Flex Pay, subscribers pay separately for the products and the Company’s services. As an alternative to the financing offered under these programs, subscribers are able to purchase the products by check, ACH, credit or debit card, and pay in full at the time of installation.

There can be no assurance that the Vivint Flex Pay plan will be successful. If this plan is not favorably received by subscribers or is otherwise not performing as intended by the Company, it could have an adverse effect on the Company’s business, subscriber growth rate, financial condition and results of operations. In addition, reductions in consumer lending and/or the availability of consumer credit under the Vivint Flex Pay plan could limit the number of subscribers with the financial means to purchase the products and thus limit the number of subscribers who are able to subscribe to the Company’s Smart Home Services. There is no assurance that the Company’s current providers of consumer financing, or any other companies that may in the future offer financing to the Company’s subscribers will continue to provide subscribers with access to credit or that credit limits under such arrangements will be sufficient. In addition, a severe disruption in the global financial markets could impact the providers of installment loans under the Vivint Flex Pay plan, and such instability could also affect the ability of subscribers to access financing under the Vivint Flex Pay plan or otherwise. Such restrictions or limitations on the availability of consumer credit or unfavorable reception of the Vivint Flex Pay plan by potential subscribers could have a material adverse impact on the Company’s business, results of operations, financial condition and cash flows.

In addition, the Vivint Flex Pay plan subjects the Company to additional regulatory requirements and compliance obligations. In particular, the Vivint Flex Pay plan may require that the Company be licensed as a lender in certain jurisdictions in which the Company operates. The Company faces the risk of increased consumer complaints, potential supervision, examinations or enforcement actions by federal and state licensing and regulatory agencies and/or penalties for violation of financial services, consumer protections and other

12

applicable laws and regulations. For example, in 2019, Legacy Vivint Smart Home received a subpoena in connection with an investigation by the U.S. Department of Justice (“DOJ”) concerning potential violations of the Financial Institutions Reform, Recovery and Enforcement Act (“FIRREA”). Legacy Vivint Smart Home also has received a civil investigative demand from the staff of the Federal Trade Commission (“FTC”) concerning potential violations of the Fair Credit Reporting Act (“FCRA”) and the “Red Flags Rule” thereunder, and the Federal Trade Commission Act (“FTC Act”). Legacy Vivint Smart Home has cooperated, and the Company intends to continue to cooperate, with any government requests or inquiries. The outcome of these proceedings cannot be predicted at this time. If any proceedings or investigations were to be determined adversely against us or resulted in legal actions, claims, regulatory proceedings, enforcement actions, or judgments, fines, or settlements involving a payment of material amounts, or if injunctive relief were issued against us, our business, financial condition and results of operations could be materially adversely affected.

The Company currently offers RICs in all of the jurisdictions in which the Company operates and therefore is subject to regulation by state and local authorities for the use of RICs. The Company provides intensive training to the Company’s employees regarding sales practices and the content of the Company’s RICs and strives to comply in all material respects with these laws; however, the Company cannot be certain that its employees will abide by the Company’s policies and applicable laws, which violations could have a material and adverse impact on the Company’s business. The Company also offers RICs to the Company’s Canadian subscribers, and as a result is subject to additional regulatory requirements in Canada. In the future, the Company may elect to offer installment loans and other financial services products similar to the Consumer Financing Program directly to qualified subscribers. If the Company elects to offer such financial services directly, this may further expand the Company’s regulatory and compliance obligations. In addition, as Vivint Flex Pay evolves, the Company may become subject to additional regulatory requirements and compliance obligations.

The Company is subject to payment-related risks.

The Company accepts payments using a variety of methods, including check, credit card, debit card, direct debit from a subscriber’s bank account and consumer invoicing. For existing and future payment options that the Company offers to the Company’s subscribers, the Company may become subject to additional regulations, compliance requirements and fraud. For certain payment methods, including credit and debit cards, the Company pays interchange and other fees, which may increase over time and raise the Company’s operating costs and lower profitability. The Company relies on third parties to provide payment-processing services, including the processing of credit cards, debit cards and electronic checks, and it could disrupt the Company’s business if these companies become unwilling or unable to provide these services to the Company. The Company is also subject to payment card association operating rules, including data security rules, certification requirements and rules governing electronic funds transfers, which could change or be reinterpreted to make it difficult or impossible for the Company to comply. If the Company fails to comply with these rules or requirements, or if the Company’s data security systems are breached or compromised, the Company may be liable for card-issuing banks’ costs, subject to fines and higher transaction fees, and lose the Company’s ability to accept credit and debit card payments from the Company’s subscribers, process electronic funds transfers, or facilitate other types of online payments, and the Company’s business and operating results could be adversely affected. See “—Privacy and data protection concerns, and laws and regulations relating to privacy, data protection and information security, could have a material adverse effect on the Company’s business” and “—If the Company’s security controls are breached or unauthorized or inadvertent access to subscriber information or other data is otherwise obtained, the Company’s services may be perceived as insecure, the Company may lose existing subscribers or fail to attract new subscribers, the Company’s business may be harmed, and the Company may incur significant liabilities”.

The Company may fail to obtain or maintain necessary licenses or otherwise fail to comply with applicable laws and regulations.

The Company’s business focuses on contracts and transactions with residential subscribers and therefore is subject to a variety of laws, regulations and licensing requirements that govern the Company’s interactions with

13

residential consumers, including those pertaining to privacy and data security, consumer financial and credit transactions, home improvements, warranties and door-to-door solicitation. The Company is a licensed service provider in each market where such licensure is required, and the Company is responsible for every subscriber installation. The Company’s business may become subject to additional such requirements in the future. In certain jurisdictions, the Company is also required to obtain licenses or permits to comply with standards governing marketing and sales efforts, installation of equipment or servicing of subscribers, monitoring station employee selection and training and to meet certain standards in the conduct of the Company’s business. These laws and regulations are dynamic and subject to potentially differing interpretations, and various legislative and regulatory bodies may expand current laws or regulations or enact new laws and regulations regarding these matters. The Company strives to comply with all applicable laws and regulations relating to the Company’s interactions with residential subscribers. It is possible, however, that these requirements may be interpreted and applied in a manner that is inconsistent from one jurisdiction to another and may conflict with other rules or the Company’s practices. The Company’s non-compliance with any such law or regulations could also expose the Company to claims, proceedings, litigation and investigations by private parties and regulatory authorities, as well as substantial fines and negative publicity, each of which may materially and adversely affect the Company’s business. Legacy Vivint Smart Home has incurred, and the Company will continue to incur, significant expenses to comply with such laws and regulations, and increased regulation of matters relating to the Company’s interactions with residential consumers could require the Company to modify the Company’s operations and incur significant additional expenses, which could have an adverse effect on the Company’s business, financial condition and results of operations. If the Company expands the scope of the Company’s products or services or the Company’s operations in new markets, the Company may be required to obtain additional licenses and otherwise maintain compliance with additional laws, regulations or licensing requirements.

Changes in these laws or regulations or their interpretation, as well as new laws, regulations or licensing requirements which may be enacted, could dramatically affect how the Company does business, acquire subscribers, and manage and use information the Company collects from and about current and prospective subscribers and the costs associated therewith. For example, certain U.S. municipalities have adopted, or are considering adopting, laws, regulations or policies aimed at reducing the number of false alarms, including: (1) subjecting companies to fines or penalties for transmitting false alarms, (2) imposing fines on subscribers for false alarms or (3) imposing limitations on law enforcement response. These measures could adversely affect the Company’s future operations and business by increasing the Company’s costs, reducing subscriber satisfaction or affecting the public perception of the effectiveness of the Company’s products and services. In addition, federal, state and local governmental authorities have considered, and may in the future consider, implementing consumer protection rules and regulations, which could impose significant constraints on the Company’s sales channels.

Regulations have been issued by the FTC, the Federal Communications Commission (the “FCC”) and the Canadian Radio-Television and Telecommunications Commission (the “CRTC”) that place restrictions on direct-to-home marketing, telemarketing, email marketing and general sales practices. These restrictions include, but are not limited to, limitations on methods of communication, requirements to maintain a “do not call” list, cancellation rights and required training for personnel to comply with these restrictions.

The FTC regulates both general sales practices and telemarketing specifically and has broad authority to prohibit a variety of advertising or marketing practices that may constitute “unfair or deceptive acts or practices”. The CRTC has enforcement authority under the Canadian Anti-Spam Law (“CASL”), which prohibits the sending of commercial emails without prior consent of the recipient or an existing business relationship and sets forth rules governing the sending of commercial emails. CASL allows for a private right of action for the recovery of damages or provides for enforcement by CRTC, permitting the recovery of significant civil penalties, costs and attorneys’ fees in the event that regulations are violated. Similarly, most of the statutes and regulations in the United States allow a private right of action for the recovery of damages or provide for enforcement by the FTC, state attorneys general or state agencies permitting the recovery of significant civil or criminal penalties,

14

costs and attorneys’ fees in the event that regulations are violated. Any new or changed laws, regulations or licensing requirements, or the interpretation of such laws, regulations or licensing requirements could have a material adverse effect on the Company’s business, financial condition, cash flows or results of operations. The Company strives to comply with all such applicable regulations but cannot assure you that the Company or third parties that the Company may rely on for telemarketing, email marketing and other lead generation activities will be in compliance with all applicable regulations at all times. Although the Company’s contractual arrangements with such third parties expressly require them to comply with all such regulations and to indemnify the Company for their failure to do so, the Company cannot assure you that the FTC, FCC, CRTC, private litigants or others will not attempt to hold the Company responsible for any unlawful acts conducted by such third parties or that the Company could successfully enforce or collect upon such indemnities. Additionally, certain FCC rulings and/or FTC enforcement actions may support the legal position that the Company may be held vicariously liable for the actions of third parties, including any telemarketing violations by the Company’s independent, third-party, authorized dealers that are performed without the Company’s authorization or that are otherwise prohibited by the Company’s policies. Both the FCC and the FTC have relied on certain actions to support the notion of vicarious liability, including but not limited to, the use of the company brand or trademark, the authorization or approval of telemarketing scripts or the sharing of consumer prospect lists. Changes in such regulations or the interpretation thereof that further restricts such activities could result in a material reduction in the number of leads for the Company’s business and could have a material adverse effect on the Company’s business, financial condition, results of operations and cash flows.

The Company may fail to comply with import and export, bribery and money laundering laws, regulations and controls.

The Company conducts its business in the U.S. and Canada and sources its products in Thailand, Vietnam, Mexico, Taiwan, China, Malaysia and the United States. The Company is subject to regulation by various federal, state, local and foreign governmental agencies, including, but not limited to, agencies and regulatory bodies or authorities responsible for monitoring and enforcing product safety and consumer protection laws, data privacy and security laws and regulations, employment and labor laws, workplace safety laws and regulations, environmental laws and regulations, antitrust laws, federal securities laws and tax laws and regulations.

The Company is subject to the U.S. domestic bribery statute contained in 18 U.S.C. § 201, the U.S. Foreign Corrupt Practices Act of 1977, as amended, the U.S. Travel Act, and possibly other anti-bribery laws, including those that comply with the Organization for Economic Cooperation and Development, Convention on Combating Bribery of Foreign Public Officials in International Business Transactions and other international conventions. Anti-corruption laws are interpreted broadly and prohibit the Company from authorizing, offering, or providing directly or indirectly improper payments or benefits to recipients in the public or private-sector. Certain laws could also prohibit the Company from soliciting or accepting bribes or kickbacks. The Company can be held liable for the corrupt activities of its employees, representatives, contractors, partners and agents, even if it did not explicitly authorize such activity. Although the Company has implemented policies and procedures designed to ensure compliance with anti-corruption laws, there can be no assurance that all of its employees, representatives, contractors, partners, and agents will comply with these laws and policies.

The Company’s operations require it to import from Thailand, Vietnam, Mexico, Taiwan, China and Malaysia and export to Canada, which geographically stretches its compliance obligations. The Company is also subject to anti-money laundering laws such as the USA PATRIOT Act and may be subject to similar laws in other jurisdictions. The Company’s products are subject to export control and import laws and regulations, including the U.S. Export Administration Regulations, U.S. Customs regulations, and various economic and trade sanctions regulations administered by the U.S. Treasury Department’s Office of Foreign Assets Controls. The Company may also be subject to import/export laws and regulations in other jurisdictions in which it conducts business or source our products. If the Company fails to comply with these laws and regulations, the Company and certain of its employees could be subject to substantial civil or criminal penalties, including the possible loss of export or import privileges; fines, which may be imposed on the Company and responsible employees or managers; and, in extreme cases, the incarceration of responsible employees or managers.

15

Changes in laws that apply to the Company could result in increased regulatory requirements and compliance costs which could harm our business, financial condition, cash flows and results of operations. In certain jurisdictions, regulatory requirements may be more stringent than in the United States. Noncompliance with applicable regulations or requirements could subject the Company to whistleblower complaints, investigations, sanctions, settlements, mandatory product recalls, enforcement actions, disgorgement of profits, fines, damages, civil and criminal penalties or injunctions, suspension or debarment from contracting with certain governments or other customers, the loss of export privileges, multi-jurisdictional liability, reputational harm, and other collateral consequences. If any governmental or other sanctions are imposed, or if the Company does not prevail in any possible civil or criminal litigation, its business, financial condition, cash flows and results of operations could be materially harmed. In addition, responding to any action will likely result in a materially significant diversion of management’s attention and resources and an increase in defense costs and other professional fees.

The policies of the U.S. government may adversely impact the Company’s business, financial condition and results of operations.

Certain changes in U.S. social, political, regulatory and economic conditions or in laws and policies governing foreign trade, manufacturing, development and investment could adversely affect the Company’s business. General trade tensions between the U.S. and China escalated in 2018, with three rounds of U.S. tariffs on Chinese goods taking effect in July, August and September 2018, each followed by a round of retaliatory Chinese tariffs on U.S. goods. If duties on existing tariffs are raised or if additional tariffs are announced, many of the Company’s inbound products to the United States would be subject to tariffs assessed in the cost of goods as imported. If these duties are imposed on such products, the Company may be required to raise the Company’s prices, which may result in the loss of subscribers and harm the Company’s operating performance. Alternatively, the Company may seek to shift production outside of China, resulting in additional costs and disruption to the Company’s operations. Additionally, the current administration continues to signal that it may alter trade agreements and terms between China and the United States, including limiting trade with China, and may impose additional tariffs on imports from China.

On December 22, 2017, the U.S. President signed into law the “Tax Cuts and Jobs Act” (the “Act”). Among other changes, the Act imposes limitations on the deductibility of interest. Moreover, the effects of the Act are not yet entirely clear and will depend on, among other things, additional regulatory and administrative guidance, as well as any statutory technical corrections that are subsequently enacted, which could have an adverse effect on the U.S. federal income taxation of the Company and the Company’s subsidiaries’ operations.

While there is currently a substantial lack of clarity and uncertainty around the likelihood, timing and details of any such policies and reforms, such policies and reforms may materially and adversely affect the Company’s business, financial condition and results of operations and the value of the Company’s securities.

Police departments could refuse to respond to calls from monitored security service companies.

Police departments in certain U.S. and Canadian jurisdictions do not respond to calls from monitored security service companies unless certain conditions are met, such as video or other verification or eyewitness accounts of suspicious activities, either as a matter of policy or by local ordinance. In most cases this is accomplished through contracts with private guard companies, which increases the overall cost of monitoring. If more police departments were to refuse to respond or be prohibited from responding to calls from monitored security service companies unless certain conditions are met, such as video or other verification or eyewitness accounts of suspicious activities, the Company’s ability to attract and retain customers could be negatively impacted and its business, financial condition, results of operations, and cash flows could be materially adversely affected.

16

Increased adoption of laws purporting to characterize certain charges in the Company’s subscriber contracts as unlawful, may adversely affect the Company’s operations.

If a subscriber cancels prior to the end of the initial term of the contract, other than in accordance with the contract, the Company may, under the terms of the subscriber contract, charge the subscriber the amount that would have been paid over the remaining term of the contract. Several states have adopted, or are considering adopting, laws restricting the charges that can be imposed upon contract cancellation prior to the end of the initial contract term. Such initiatives could negatively impact the Company’s business and have a material adverse effect on the Company’s business, financial condition, cash flows or results of operations. Adverse rulings regarding these matters could increase legal exposure to subscribers against whom such charges have been imposed and increase the risk that certain subscribers may seek to recover such charges from the Company through litigation or otherwise. In addition, the costs of defending such litigation and enforcement actions could have an adverse effect on the Company’s business, financial condition, cash flows or results of operations.

The Company’s new products and services may not be successful.

Legacy Vivint Smart Home launched its first smart home products and services beginning in 2010. Since that time Legacy Vivint Smart Home has launched a number of other offerings. The Company anticipates launching additional products and services in the future. These products and services and the new products and services the Company may launch in the future may not be well received by the Company’s subscribers, may not help the Company to generate new subscribers, may adversely affect the attrition rate of existing subscribers, may increase the Company’s subscriber acquisition costs and may increase the costs to service the Company’s subscribers. For example, during the year ended December 31, 2015 Legacy Vivint Smart Home recorded restructuring and asset impairment charges for its wireless internet business totaling $52.5 million, which resulted in $53.2 million of asset impairment charges related to write-downs of Legacy Vivint Smart Home’s network assets, subscriber acquisition costs, certain intellectual property and goodwill and $5.1 million in net restructuring charges related to employee severance and termination benefits, as well as write-offs of certain vendor contracts. Any profits the Company may generate from these or other new products or services may be lower than profits generated from the Company’s other products and services and may not be sufficient for the Company to recoup the Company’s development or subscriber acquisition costs incurred. New products and services may also have lower gross margins, particularly to the extent that they do not fully utilize the Company’s existing infrastructure. In addition, new products and services may require increased operational expenses or subscriber acquisition costs and present new and difficult technological and intellectual property challenges that may subject the Company to claims or complaints if subscribers experience service disruptions or failures or other quality issues. To the extent the Company’s new products and services are not successful, it could have a material adverse effect on the Company’s business, financial condition, cash flows or results of operations.

The Company’s new retail strategy may subject the Company to additional risks.

Historically, Legacy Vivint Smart Home has primarily originated subscribers through its direct-to-home and inside sales channels. However, in 2017 Legacy Vivint Smart Home developed a new strategy to enter into the retail channel in order to expand Legacy Vivint Smart Home’s reach to the broad consumer market. For example, on May 4, 2017, Legacy Vivint Smart Home announced an agreement with Best Buy, pursuant to which the parties had agreed to jointly market and sell smart home products and services. In July 2018, as part of certain cost reduction initiatives, the goal of which was to reduce certain of Legacy Vivint Smart Home’s general and administrative, subscriber service, and sales support fixed costs, Legacy Vivint Smart Home agreed in principle to end the co-branded Best Buy Smart Home by Legacy Vivint Smart Home arrangement and in December 2018 Legacy Vivint Smart Home formally terminated its relationship with Best Buy. The Company continues to explore other retail strategy opportunities and may devote significant management attention, substantial capital and other resources in connection with such efforts. However, despite these efforts and expenses, the Company may not be able to establish retail distribution channels for the Company’s products and services.

17

The technology the Company employs may become obsolete, which could require significant capital expenditures.

The Company’s industry is subject to continual technological innovation. The Company’s products and services interact with the hardware and software technology of systems and devices located at the Company’s subscribers’ property. The Company may be required to implement new technologies or adapt existing technologies in response to changing market conditions, subscriber preferences, industry standards or inability to secure necessary intellectual property licenses, which could require significant capital expenditures. It is also possible that one or more of the Company’s competitors could develop a significant technological advantage that allows them to provide additional or superior products or services, or to lower their price for similar products or services, that could put the Company at a competitive disadvantage. The Company’s inability to adapt to changing technologies, market conditions or subscriber preferences in a timely manner could have a material adverse effect on the Company’s business, financial condition, cash flows or results of operations.

The Company’s future operating and financial results are uncertain.

Prior growth rates in revenues and other operating and financial results of Legacy Vivint Smart Home should not be considered indicative of the Company’s future performance. The Company’s future performance and operating results depend on, among other things: (1) the Company’s ability to renew and/or upgrade contracts with existing subscribers and maintain subscriber satisfaction with existing subscribers; (2) the Company’s ability to generate new subscribers, including the Company’s ability to scale the number of new subscribers generated through inside sales and other channels; (3) the Company’s ability to increase the density of the Company’s subscriber base for existing service locations or continue to expand into new geographic markets; (4) the Company’s ability to successfully develop and market new and innovative products and services; (5) the level of product, service and price competition; (6) the degree of saturation in, and the Company’s ability to further penetrate, existing markets; (7) the Company’s ability to manage growth, revenues, origination or acquisition costs of new subscribers and attrition rates, the cost of servicing the Company’s existing subscribers and general and administrative costs; and (8) the Company’s ability to attract, train and retain qualified employees. If the Company’s future operating and financial results suffer as a result of any of the other reasons mentioned above, or any other reasons, there could be a material adverse effect on the Company’s business, financial condition, cash flows or results of operations.

There can be no assurance that the Company will be able to achieve or maintain profitability or positive cash flow from operations.

The Company’s ability to generate future positive operating results and cash flows depends, in part, on the Company’s ability to generate new subscribers in a cost-effective manner, while minimizing attrition of existing subscribers. New subscriber acquisitions play a particularly important role in the Company’s financial model as they not only increase the Company’s future operating cash flows, but also help to replace the cash flows lost as a result of subscriber attrition. If the Company is unable to cost-effectively generate new subscribers or retain the Company’s existing subscribers, the Company’s business, operating results and financial condition would be materially adversely affected. In addition, to drive the Company’s growth, Legacy Vivint Smart Home made significant upfront investments in subscriber acquisition costs, as well as technology and infrastructure to support the Company’s growing subscriber base. As a result of these investments, Legacy Vivint Smart Home has incurred losses and used significant amounts of cash to fund operations. As the Company’s business scales, the Company expects recurring revenue to increase due to growth in the Company’s total subscribers. If such increase occurs, a greater percentage of the Company’s net acquisition costs for new subscribers may be funded through revenues generated by the Company’s existing subscriber base. The Company also expects the number of new subscribers to decrease as a percentage of the Company’s total subscribers as the Company’s business scales, which the Company believes, along with the expected growth in recurring revenue, will improve operating results and operating cash flows over time. The Company’s ability to improve the Company’s operating results and cash flows, however, is subject to a number of risks and uncertainties and there can be no assurance that the Company will achieve such improvements. To the extent the number of new subscribers does

18

not decrease as a percentage of the Company’s total subscribers or the Company does not reduce the percentage of the Company’s revenue used to support new investments, the Company will continue to incur losses and require a significant amount of cash to fund the Company’s operations, which in turn could have a material adverse effect on the Company’s business, cash flows, operating results and financial condition.

The Company’s business is subject to economic and demographic factors that may negatively impact the Company’s results of operations.

The Company’s business is generally dependent on national, regional and local economic conditions. Historically, both the U.S. and worldwide economies have experienced cyclical economic downturns, some of which have been prolonged and severe. These economic downturns have generally coincided with, and contributed to, increased energy costs, concerns about inflation, slower economic activity, decreased consumer confidence and spending, reduced corporate profits and capital spending, adverse business conditions and liquidity concerns. These conditions and concerns result in a decline in business and consumer confidence and increased unemployment.

Where disposable income available for discretionary spending is reduced (due to, for example, higher housing, energy, interest or other costs or where the perceived wealth of subscribers has decreased) and disruptions in the financial markets adversely impact the availability and cost of credit, the Company’s business may experience increased attrition rates, a reduced ability to originate new subscribers and reduced consumer demand.

For instance, recoveries in the housing market increase the occurrence of relocations, which may lead to subscribers disconnecting service and not contracting with the Company in their new homes. The Company cannot predict the timing or duration of any economic slowdown or the timing or strength of a subsequent economic recovery, worldwide or in the specific markets where the Company’s subscribers are located.

Furthermore, any deterioration in new construction and sales of existing single-family homes could reduce opportunities to originate new subscribers and increase attrition among the Company’s existing subscribers. Such downturns in the economy in general, and the housing market in particular, may negatively affect the Company’s business.

In addition, unfavorable shifts in population and other demographic factors may cause the Company to lose subscribers as people migrate to markets where the Company has little or no presence, or if the general population shifts into a less desirable age, geographic or other demographic group from the Company’s business perspective.

The Company’s inside sales and retail channels depend on third parties and other sources that the Company does not control to generate leads that the Company then converts into subscribers. If the Company’s third-party partners and lead generators are not successful in generating leads for the Company’s inside sales and retail sales channels, if the quality of those leads deteriorates, or if the Company is unable to generate leads through other sources that are cost effective and can be successfully converted into subscribers, it could have a material adverse effect on the Company’s financial condition, cash flows or results of operations.

Also, the Company’s subscribers consist largely of homeowners, who are subject to economic, credit, financial and other risks, as applicable. These risks could materially and adversely affect a subscriber’s ability to make required payments to the Company on a timely basis. Any such decrease or delay in subscriber payments may have a material adverse effect on the Company. As a result of financial distress, subscribers may apply for relief under bankruptcy and other laws relating to creditors’ rights. In addition, subscribers may be subject to involuntary application of such bankruptcy and other laws relating to creditors’ rights. The bankruptcy of a subscriber could adversely affect the Company’s ability to collect payments, to protect the Company’s rights and otherwise realize the value of the Company’s contract with the subscriber. This may occur as a result of, among

19

other things, application of the automatic stay, delays and uncertainty in the bankruptcy process and potential rejection of such subscriber contracts. the Company’s subscribers’ inability to pay, whether as a result of economic or credit issues, bankruptcy or otherwise, could have a material adverse effect on the Company’s financial condition, cash flows or results of operations.

The Company depends on a limited number of suppliers to provide the Company’s products and services. The Company’s product suppliers, in turn, rely on a limited number of suppliers to provide significant components and materials used in the Company’s products. A change in the Company’s existing preferred supply arrangements or a material interruption in supply of products or third-party services could increase the Company’s costs or prevent or limit the Company’s ability to accept and fill orders for the Company’s products and services.

The Company obtains important components of the Company’s systems from several suppliers. Should such suppliers cease to manufacture the products the Company purchase from them or become unable to timely deliver these products in accordance with the Company’s requirements, or should such other suppliers choose not to do business with the Company, the Company may be required to locate alternative suppliers. The Company also relies on a number of sole or limited source suppliers for critical components of the Company’s solution. Replacing this sole source supplier or the Company’s limited source suppliers could require the expenditure of significant resources and time to redesign and resource these products. In addition, any financial or other difficulties the Company’s suppliers face may have negative effects on the Company’s business. The Company may be unable to locate alternate suppliers on a timely basis or to negotiate the purchase of control panels or other equipment on favorable terms, if at all. In addition, the Company’s equipment suppliers, in turn, depend upon a limited number of outside unaffiliated suppliers for key components and materials used in the Company’s control panels and other equipment. If any of these suppliers cease to or are unable to provide components and materials in sufficient quantity and of the requisite quality, especially during the Company’s summer selling season when a large percentage of the Company’s new subscriber originations occur, and if there are not adequate alternative sources of supply, the Company could experience significant delays in the supply of equipment. Any such delay in the supply of equipment of the requisite quality could adversely affect the Company’s ability to originate subscribers and cause the Company’s subscribers not to continue, renew or upgrade their contracts or to choose not to purchase such products or services from the Company. This would result in delays in or loss of future revenues and could have a material adverse effect on the Company’s business, financial condition, cash flows or results of operations. Also, if previously installed components and materials were found to be defective, the Company might not be able to recover the costs associated with the recall, repair or replacement of such products, across the Company’s installed subscriber base, and the diversion of personnel and other resources to address such issues could have a material adverse effect on the Company’s financial condition, cash flows or results of operations.

Currency fluctuations could materially and adversely affect the Company, and the Company has not hedged this risk.

Historically, a small portion of Legacy Vivint Smart Home’s revenue has been denominated in Canadian Dollars. For the year ended December 31, 2019, before intercompany eliminations, approximately $72.2 million of Legacy Vivint Smart Home’s revenues were denominated in Canadian Dollars. As of December 31, 2019, $290.5 million of Legacy Vivint Smart Home’s total assets and $259.9 million of Legacy Vivint Smart Home’s total liabilities were denominated in Canadian Dollars. In the future, the Company expects to continue generating revenue denominated in Canadian Dollars and other foreign currencies. Accordingly, the Company may be materially and adversely affected by currency fluctuations in the U.S. Dollar versus these currencies. Weaker foreign currencies relative to the U.S. Dollar may result in lower levels of reported revenues with respect to foreign currency-denominated subscriber contracts, net income, assets, liabilities and accumulated other comprehensive income on the Company’s U.S. Dollar-denominated financial statements. The Company has not historically hedged against this exposure. Foreign exchange rates are influenced by many factors outside of the Company’s control, including but not limited to: changing supply and demand for a particular currency,

20

monetary policies of governments (including exchange-control programs, restrictions on local exchanges or markets and limitations on foreign investment in a country or an investment by residents of a country in other countries), changes in balances of payments and trade, trade restrictions and currency devaluations and revaluations. Also, governments may from time to time intervene in the currency markets, directly and by regulation, to influence prices directly. As such, these events and actions are unpredictable. The resulting volatility in the exchange rates for the other currencies could have a material adverse effect on the Company’s financial condition and results of operations.

The Company relies on certain third-party providers of licensed software and services integral to the operations of the Company’s business.

Certain aspects of the operation of the Company’s business depend on third-party software and service providers. The Company relies on certain software technology that the Company licenses from third parties and uses in the Company’s products and services to perform key functions and provide critical functionality. For example, the Company’s subscribers with Go! Control panels utilize technology hosted by Alarm.com to access their systems remotely through a smart phone application or through a web interface. With regard to licensed software technology, the Company is, to a certain extent, dependent upon the ability of third parties to maintain, enhance or develop their software and services on a timely and cost-effective basis, to meet industry technological standards and innovations to deliver software and services that are free of defects or security vulnerabilities, and to ensure their software and services are free from disruptions or interruptions. Further, these third-party services and software licenses may not always be available to the Company on commercially reasonable terms or at all.

If the Company’s agreements with third-party software or services vendors are not renewed or the third-party software or services become obsolete, fail to function properly, are incompatible with future versions of the Company’s products or services, are defective or otherwise fail to address the Company’s needs, there is no assurance that the Company would be able to replace the functionality provided by the third-party software or services with software or services from alternative providers. Furthermore, even if the Company obtains licenses to alternative software or services that provide the functionality the Company needs, the Company may be required to replace hardware installed at the Company’s monitoring stations and at the Company’s subscribers’ homes, including security system control panels and peripherals, to affect the Company’s integration of or migration to alternative software products. Any of these factors could have a material adverse effect on the Company’s financial condition, cash flows or results of operations.

The Company is highly dependent on the proper and efficient functioning of the Company’s computer, data backup, information technology, telecom and processing systems, platform and the Company’s redundant monitoring stations.

The Company’s ability to keep the Company’s business operating is highly dependent on the proper and efficient operation of the Company’s computer systems, information technology systems, telecom systems, data-processing systems and subscriber software platform. Although the Company has redundant central monitoring facilities, backup computer and power systems and disaster recovery tests, if there is a catastrophic event, natural disaster, security breach, negligent or intentional act by an employee or other extraordinary event, the Company may be unable to provide the Company’s subscribers with uninterrupted services.

Furthermore, because computer and data backup and processing systems are susceptible to malfunctions and interruptions, the Company cannot guarantee that the Company will not experience service failures in the future. A significant or large-scale malfunction or interruption of any computer or data backup and processing system could adversely affect the Company’s ability to keep the Company’s operations running efficiently and respond to alarm system signals. The Company does not have a backup system for the Company’s subscriber software platform. If a malfunction results in a wider or sustained disruption, it could have a material adverse effect on the Company’s reputation, business, financial condition, cash flows or results of operations.

21

The Company is subject to unionization and labor and employment laws and regulations, which could increase the Company’s costs and restrict the Company’s operations in the future.

Currently, a very small minority of the Company’s employees are represented by a union. As the Company continues to grow and enter different regions, unions may make further attempts to organize all or part of the Company’s employee base. If more or all of the Company’s workforce were to become unionized, and the terms of the collective bargaining agreement were significantly different from the Company’s current compensation arrangements, it could increase the Company’s costs and adversely impact the Company’s profitability. Additionally, responding to such organization attempts distracts the Company’s management and results in increased legal and other professional fees; and, labor union contracts could put the Company at increased risk of labor strikes and disruption of the Company’s operations.

The Company’s business is subject to a variety of employment laws and regulations and may become subject to additional such requirements in the future. Although the Company believes the Company is in material compliance with applicable employment laws and regulations, in the event of a change in requirements, the Company may be required to modify the Company’s operations or to utilize resources to maintain compliance with such laws and regulations. Moreover, the Company may be subject to various employment-related claims, such as individual or class actions or government enforcement actions relating to alleged employment discrimination, employee classification and related withholding, wage-hour disputes, labor standards or healthcare and benefit issues. The Company’s failure to comply with applicable employment laws and regulations and related legal actions against the Company may affect the Company’s ability to compete or have a material adverse effect on the Company’s business, financial condition, cash flows or results of operations.

The loss of the Company’s senior management could disrupt the Company’s business.

The success of the Company’s business depends upon the skills, experience and efforts of its key executive personnel and employees. The Company’s Chief Executive Officer Todd Pedersen and other members of the Company’s senior management have been and will continue to be integral to the continuing evolution of the Company’s business. There is significant competition for executive personnel with experience in the smart home and security industry and the Company’s sales channels. As a result of this need and the competition for a limited pool of industry-based executive experience, the Company may not be able to retain the Company’s existing senior management. For example, in 2019, the Company’s then Chief Financial Officer left the Company to pursue another opportunity. In addition, the Company may not be able to fill new positions or vacancies created by expansion or turnover. The Company does not and does not currently expect to have in the future, “key person” insurance on the lives of any member of the Company’s senior management. The loss of any member of the Company’s senior management team without retaining a suitable replacement could have a material adverse effect on the Company’s business, financial condition, cash flows or results of operations.

If the Company is unable to acquire necessary intellectual property or adequately protect the Company’s intellectual property, the Company could be competitively disadvantaged.

The Company’s intellectual property, including the Company’s patents, trademarks, copyrights, trade secrets and other proprietary rights, constitutes a significant part of the Company’s value. The Company’s success depends, in part, on the Company’s ability to protect the Company’s proprietary technology, brands and other intellectual property against dilution, infringement, misappropriation and competitive pressure by defending the Company’s intellectual property rights. To protect the Company’s intellectual property rights, the Company relies on a combination of patent, trademark, copyright and trade secret laws of the United States, Canada and other countries and a combination of confidentiality procedures, contractual provisions and other methods, all of which offer only limited protection. In addition, the Company makes efforts to acquire rights to intellectual property necessary for the Company’s operations. However, there can be no assurance that these measures will be successful in any given case, particularly in those countries where the laws do not protect the Company’s proprietary rights as fully as in the United States.

22

The Company owns a portfolio of issued U.S. patents and pending U.S. and foreign patent applications that relate to a variety of smart home, security and wireless Internet technologies utilized in the Company’s business. The Company may file additional patent applications in the future in the United States and internationally. The process of obtaining patent protection is expensive and time-consuming, and the Company may not be able to prosecute all necessary or desirable patent applications at a reasonable cost or in a timely manner all the way through to the successful issuance of a patent. The Company may choose not to seek patent protection for certain innovations and may choose not to pursue patent protection in certain jurisdictions. In addition, issuance of a patent does not guarantee that the Company has an absolute right to practice the patented invention.

If the Company fails to acquire the necessary intellectual property rights or adequately protect or assert the Company’s intellectual property rights, competitors may dilute the Company’s brands or manufacture and market similar products and services or convert the Company’s subscribers, which could adversely affect the Company’s market share and results of operations. The Company may not receive patents or trademarks for all the Company’s pending patent and trademark applications, and existing or future patents or licenses may not provide competitive advantages for the Company’s products and services. Furthermore, it is possible that the Company’s patent applications may not issue as granted patents, that the scope of the Company’s issued patents will be insufficient or not have the coverage originally sought, or that the Company’s issued patents will not provide the Company with any competitive advantages. The Company’s competitors may challenge, invalidate or avoid the application of the Company’s existing or future intellectual property rights that the Company obtains or licenses. In addition, patent rights may not prevent the Company’s competitors from developing, using or selling products or services that are similar to or address the same market as the Company’s products and services. The loss of protection for the Company’s intellectual property rights could reduce the market value of the Company’s brands and the Company’s products and services, reduce new subscriber originations or upgrade sales to existing subscribers, lower the Company’s profits, and could have a material adverse effect on the Company’s business, financial condition, cash flows or results of operations.

The Company’s policy is to require the Company’s employees that were hired to develop material intellectual property included in the Company’s products to execute written agreements in which they assign to the Company their rights in potential inventions and other intellectual property created within the scope of their employment (or, with respect to consultants and service providers, their engagement to develop such intellectual property), but the Company cannot assure you that the Company has adequately protected the Company’s rights in every such agreement or that the Company has executed an agreement with every such party. Finally, in order to benefit from the protection of patents and other intellectual property rights, the Company must monitor and detect infringement, misappropriation or other violations of the Company’s intellectual property rights and pursue infringement, misappropriation or other claims in certain circumstances in relevant jurisdictions, all of which are costly and time-consuming. As a result, the Company may not be able to obtain adequate protection or to effectively enforce the Company’s issued patents or other intellectual property rights.

In addition to patents and registered trademarks, the Company relies on trade secret rights, copyrights and other rights to protect the Company’s unpatented proprietary intellectual property and technology. Despite the Company’s efforts to protect the Company’s proprietary technologies and the Company’s intellectual property rights, unauthorized parties, including the Company’s employees, consultants, service providers or subscribers, may attempt to copy aspects of the Company’s products or obtain and use the Company’s trade secrets or other confidential information. The Company generally enters into confidentiality agreements with the Company’s employees and third parties that have access to the Company’s material confidential information, and generally limits access to and distribution of the Company’s proprietary information and proprietary technology through certain procedural safeguards. These agreements may not effectively prevent unauthorized use or disclosure of the Company’s intellectual property or technology, could be breached or otherwise may not provide meaningful protection for the Company’s trade secrets and know-how related to the design, manufacture or operation of the Company’s products and may not provide an adequate remedy in the event of unauthorized use or disclosure. The Company cannot assure you that the steps taken by the Company will prevent misappropriation of the Company’s intellectual property or technology or infringement of the Company’s intellectual property rights.

23

Competitors may independently develop technologies or products that are substantially equivalent or superior to the Company’s solutions or that inappropriately incorporate the Company’s proprietary technology into their products or they may hire the Company’s former employees who may misappropriate the Company’s proprietary technology or misuse the Company’s confidential information. In addition, if the Company expands the geography of the Company’s service offerings, the laws of some foreign countries where the Company may do business in the future do not protect intellectual property rights and technology to the same extent as the laws of the United States, and these countries may not enforce these laws as diligently as government agencies and private parties in the United States.

From time to time, legal action by the Company may be necessary to enforce the Company’s patents and other intellectual property rights, to protect the Company’s trade secrets, to determine the validity and scope of the intellectual property rights of others or to defend against claims of infringement, misappropriation or invalidity. Such litigation could result in substantial costs and diversion of resources and could negatively affect the Company’s business, operating results and financial condition. If the Company is unable to protect the Company’s intellectual property and technology, the Company may find itself at a competitive disadvantage to others who need not incur the additional expense, time and effort required to create the innovative products that have enabled the Company to be successful to date.

From time to time, the Company is subject to claims for infringing, misappropriating or otherwise violating the intellectual property rights of others, and will be subject to such claims in the future, which could have an adverse effect on the Company’s business and operations.

The Company cannot be certain that the Company’s products and services or those of third parties that the Company incorporates into the Company’s offerings do not and will not infringe the intellectual property rights of others. Many of the Company’s competitors and others may now and in the future have significantly larger and more mature patent portfolios than the Company has. From time to time, the Company is subject to claims based on allegations of infringement, misappropriation or other violations of the intellectual property rights of others, including litigation brought by special purpose or so-called “non-practicing” entities that focus solely on extracting royalties and settlements by enforcing intellectual property rights and against whom the Company’s patents may therefore provide little or no deterrence or protection. Regardless of their merits, intellectual property claims divert the attention of the Company’s personnel and are often time-consuming and expensive. In addition, to the extent claims against the Company are successful, the Company may have to pay substantial monetary damages (including, for example, treble damages if the Company is found to have willfully infringed patents and increased statutory damages if the Company is found to have willfully infringed copyrights) or discontinue or modify certain products or services that are found to infringe another party’s rights or enter into licensing agreements with costly royalty payments. Defending against claims of infringement, misappropriation or other violations or being deemed to be infringing, misappropriating or otherwise violating the intellectual property rights of others could impair the Company’s ability to innovate, develop, distribute and sell the Company’s current and planned products and services. The Company has in the past and will continue in the future to seek one or more licenses to continue offering certain products or services, which could have a material adverse effect on the Company’s business, financial condition, cash flows or results of operations. For example, the Company is one of several respondents in a patent matter pending before the U.S. International Trade Commission seeking an injunction against the continued importation of certain of our hardware. Legacy Vivint Smart Home has also been named as a defendant in related U.S. District Court cases alleging patent infringement and in which the plaintiff seeks unspecified money damages. The Company believes that the allegations in each of these matters are without merit and intend to vigorously defend against the claims; however, there can be no assurance regarding the ultimate outcome of these matters.

In some cases, the Company indemnifies the Company’s channel partners against claims that the Company’s products infringe, misappropriate or otherwise violate the intellectual property rights of third parties. Such claims could arise out of the Company’s indemnification obligation with the Company’s channel partners and end-subscribers, whom the Company typically indemnifies against such claims. Furthermore, because of the

24

substantial amount of discovery required in connection with intellectual property litigation, there is a risk that some of the Company’s confidential information could be compromised by the discovery process. Although claims of this kind have not materially affected the Company’s business to date, there can be no assurance material claims will not arise in the future.

Although third parties may offer a license to their technology or other intellectual property, the terms of any offered license may not be acceptable, and the failure to obtain a license or the costs associated with any license could cause the Company’s business, financial condition and results of operations to be materially and adversely affected. In addition, some licenses may be non-exclusive, and therefore the Company’s competitors may have access to the same technology licensed to the Company. If a third party does not offer the Company a license to its technology or other intellectual property on reasonable terms, or at all, the Company could be enjoined from continued use of such intellectual property. As a result, the Company may be required to develop alternative, non-infringing technology, which could require significant time (during which the Company could be unable to continue to offer the Company’s affected products, subscriptions or services), effort, and expense and may ultimately not be successful. Furthermore, a successful claimant could secure a judgment or the Company may agree to a settlement that prevents the Company from distributing certain products, providing certain subscriptions or performing certain services or that requires the Company to pay substantial damages, royalties or other fees. Any of these events could harm the Company’s business, financial condition and results of operations.

The Company’s solutions contain third-party open-source software components, and failure to comply with the terms of the underlying open-source software licenses could restrict the Company’s ability to sell the Company’s products and subscriptions.

Certain of the Company’s solutions contain software modules licensed to the Company by third-party authors under “open-source” licenses. The use and distribution of open-source software may entail greater risks than the use of third-party commercial software, as open-source licensors generally do not provide warranties or other contractual protections regarding infringement claims or the quality of the code.

Some open-source licenses contain requirements that the Company make available the source code for modifications or derivative works the Company creates based upon the type of open-source software the Company uses. If the Company combines the Company’s proprietary software with open-source software in a certain manner, the Company could, under certain open-source licenses, be required to release the source code of the Company’s proprietary software to the public. This would allow the Company’s competitors to create similar products with lower development effort and time and ultimately could result in a loss of sales for the Company.

Although the Company monitors the Company’s use of open-source software and tries to ensure that none is used in a manner that would require the Company to disclose the Company’s proprietary source code or that would otherwise breach the terms of an open-source agreement, the terms of many open-source licenses have not been interpreted by U.S. courts, and there is a risk that these licenses could be construed in ways that could impose unanticipated conditions or restrictions on the Company’s ability to commercialize solutions incorporating such software. Moreover, the Company cannot assure you that the Company’s processes for controlling the Company’s use of open-source software in the Company’s solutions will be effective. From time to time, the Company may face claims from third parties asserting ownership of, or demanding release of, the open-source software or derivative works that the Company developed using such software (which could include the Company’s proprietary source code), or otherwise seeking to enforce the terms of the applicable open-source license. These claims could result in litigation. If the Company is held to have breached the terms of an open-source software license, the Company could be required to seek licenses from third parties to continue offering the Company’s products on terms that are not economically feasible, to re-engineer the Company’s products, to discontinue the sale of the Company’s products if re-engineering could not be accomplished on a timely or cost-effective basis, or to make generally available, in source-code form, the Company’s proprietary code, any of which could adversely affect the Company’s business, results of operations and financial condition.

25

If the Company fails to maintain effective internal control over financial reporting at a reasonable assurance level, the Company may not be able to accurately report the Company’s financial results, which could have a material adverse effect on the Company’s operations, investor confidence in the Company’s business and the trading prices of the Company’s securities.

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of a company’s annual or interim financial statements will not be prevented or detected on a timely basis. If material weaknesses in the Company’s internal controls are discovered, they may adversely affect the Company’s ability to record, process, summarize and accurately report timely financial information and, as a result, the Company’s financial statements may contain material misstatements or omissions.

In addition, it is possible that control deficiencies could be identified by the Company’s management or by the Company’s independent registered public accounting firm in the future or may occur without being identified. Such a failure could result in regulatory scrutiny and cause investors to lose confidence in the Company’s reported financial condition, lead to a default under the Company’s indebtedness and otherwise have a material adverse effect on the Company’s business, financial condition, cash flow or results of operations.

Product or service defects or shortfalls in subscriber service could have an adverse effect on the Company.

The Company’s inability to provide products or services in a timely manner or defects in the Company’s products or services, including products and services of third parties that the Company incorporates into the Company’s offerings, could adversely affect the Company’s reputation and subject the Company to claims or litigation. In addition, the Company’s inability to meet subscribers’ expectations with respect to the Company’s products or services could increase attrition rates or affect the Company’s ability to generate new subscribers and thereby have a material adverse effect on the Company’s business, financial condition, cash flow or results of operations.

The Company is exposed to greater risk of liability for employee acts or omissions or system failure than may be inherent in other businesses.

The nature of the products and services the Company provides potentially exposes the Company to greater risks of liability for employee acts or omissions or system failures than may be inherent in other businesses. If subscribers believe that they incurred losses as a result of the Company’s action or inaction, the subscribers (or their insurers) have and could in the future bring claims against the Company. Although the Company’s service contracts contain provisions limiting the Company’s liability for such claims, no assurance can be given that these limitations will be enforced, and the costs of such litigation or the related settlements or judgments could have a material adverse effect on the Company’s financial condition. In addition, there can be no assurance that the Company is adequately insured for these risks. Certain of the Company’s insurance policies and the laws of some states may limit or prohibit insurance coverage for punitive or certain other types of damages or liability arising from gross negligence. If significant uninsured damages are assessed against the Company, the resulting liability could have a material adverse effect on the Company’s business, financial condition, cash flows or results of operations.

Future transactions could pose risks.

The Company frequently evaluates strategic opportunities both within and outside the Company’s existing lines of business. The Company expects from time to time to pursue additional business opportunities and may decide to eliminate or acquire certain businesses, products or services or expand into new channels or industries. Such acquisitions or dispositions could be material. For example, in August 2014, Legacy Vivint Smart Home acquired Space Monkey, a distributed cloud storage technology solution company, in 2019 Legacy Vivint Smart Home completed a spin-off of its wireless internet business and in 2020 the Company consummated the Merger. There are various risks and uncertainties associated with potential acquisitions and divestitures, including: (1) availability of financing; (2) difficulties related to integrating previously separate businesses into a single

26

unit, including product and service offerings, distribution and operational capabilities and business cultures; (3) general business disruption; (4) managing the integration process; (5) diversion of management’s attention from day-to-day operations, (6) assumption of costs and liabilities of an acquired business, including unforeseen or contingent liabilities or liabilities in excess of the amounts estimated; (7) failure to realize anticipated benefits and synergies, such as cost savings and revenue enhancements; (8) potentially substantial costs and expenses associated with acquisitions and dispositions; (9) potential increases in compliance costs; (10) failure to retain and motivate key employees; and (11) difficulties in applying the Company’s internal control over financial reporting and disclosure controls and procedures to an acquired business. Any or all of these risks and uncertainties, individually or collectively, could have a material adverse effect on the Company’s business, financial condition, cash flow or results of operations. The Company can offer no assurance that any such strategic opportunities will prove to be successful. Among other negative effects, the Company’s pursuit of such opportunities could cause the Company’s cost of investment in new subscribers to grow at a faster rate than the Company’s recurring revenue and fees collected at the time of installation. Additionally, any new product or service offerings could require developmental investments or have higher cost structures than the Company’s current arrangements, which could reduce operating margins and require more working capital. Moreover, expansion into any new industry or channel could result in higher compliance costs as the Company may become subject to laws and regulations to which it is not currently subject.

Goodwill and other identifiable intangible assets represent a significant portion of the Company’s total assets, and the Company may never realize the full value of the Company’s intangible assets.

As of December 31, Legacy Vivint Smart Home had approximately $1.0 billion of goodwill and identifiable intangible assets. Goodwill and other identifiable intangible assets are recorded at fair value on the date of acquisition. In addition, as of December 31, 2019, Legacy Vivint Smart Home had $1.2 billion of capitalized contract costs, net. The Company reviews such assets for impairment at least annually. Impairment may result from, among other things, deterioration in performance, adverse market conditions, adverse changes in applicable laws or regulations, including changes that restrict the activities of or affect the products and services the Company offers, challenges to the validity of certain intellectual property, reduced sales of certain products or services incorporating intellectual property, increased attrition and a variety of other factors. The amount of any quantified impairment must be expensed immediately as a charge to results of operations. Depending on future circumstances, it is possible that the Company may never realize the full value of the Company’s intangible assets. Any future determination of impairment of goodwill or other identifiable intangible assets could have a material adverse effect on the Company’s financial position and results of operations.

Insurance policies may not cover all of the Company’s operating risks and a casualty loss beyond the limits of the Company’s coverage could negatively impact the Company’s business.

The Company is subject to all of the operating hazards and risks normally incidental to the provision of the Company’s products and services and business operations. In addition to contractual provisions limiting the Company’s liability to subscribers and third parties, the Company maintains insurance policies in such amounts and with such coverage and deductibles as required by law and that the Company believe are reasonable and prudent. See “—the Company is exposed to greater risk of liability for employee acts or omissions or system failure than may be inherent in other businesses”. Nevertheless, such insurance may not be adequate to protect the Company from all the liabilities and expenses that may arise from claims for personal injury, death or property damage arising in the ordinary course of the Company’s business and current levels of insurance may not be able to be maintained or be available at economical prices. If a significant liability claim is brought against the Company that is not covered by insurance, then the Company may have to pay the claim with the Company’s own funds, which could have a material adverse effect on the Company’s business, financial condition, cash flows or results of operations.

27

The Company’s business is concentrated in certain markets.

The Company’s business is concentrated in certain markets. As of December 31, 2019, Legacy Vivint Smart Home’s subscribers in Texas and California represented approximately 19% and 9%, respectively, of its total subscriber base. Accordingly, the Company’s business and results of operations are particularly susceptible to adverse economic, weather and other conditions in such markets and in other markets that may become similarly concentrated.

Catastrophic events may disrupt the Company’s business.

Unforeseen events, or the prospect of such events, including war, terrorism and other international conflicts, public health issues including health epidemics or pandemics, such as the recent emergence of a novel coronavirus (COVID-19), and natural disasters such as fire, hurricanes, earthquakes, tornados or other adverse weather and climate conditions, whether occurring in the United States, Canada or elsewhere, could disrupt the Company’s operations, disrupt the operations of suppliers or subscribers or result in political or economic instability. These events could reduce demand for the Company’s products and services, make it difficult or impossible to receive equipment from suppliers or impair the Company’s ability to market its products and services and/or deliver products and services to subscribers on a timely basis. Any such disruption could also damage the Company’s reputation and cause subscriber attrition. The Company could be subject to claims or litigation with respect to losses caused by such disruptions. The Company’s property and business interruption insurance may not cover a particular event at all or be sufficient to fully cover the Company’s losses. With respect to COVID-19, the Company cannot presently estimate the overall operational and financial impact to its business that may result from the recent global outbreak of COVID-19, which could be material to its 2020 results, and which is highly dependent on the breadth and duration of the outbreak and could be affected by other factors it is not currently able to predict, including new information which may emerge concerning the severity of COVID-19, the success of actions taken to contain or treat COVID-19, and reactions by consumers, companies, governmental entities and capital markets. Any widespread growth in infections, or travel restrictions, quarantines or site closures imposed as a result of COVID-19, could, among other things, require the Company to implement mandatory work-from-home protocols resulting in additional expenses and strain on the business as well as adversely impact the ability of its employees to staff call centers, or enter homes to sell or install new systems or repair existing systems.

If the insurance industry changes its practice of providing incentives to homeowners for the use of residential electronic security services, the Company may experience a reduction in new subscriber growth or an increase in the Company’s subscriber attrition rate.

Some insurers provide a reduction in premium rates for insurance policies written on homes that have monitored electronic security systems. There can be no assurance that insurance companies will continue to offer these rate reductions. If these incentives were reduced or eliminated, homeowners who otherwise may not feel the need for the Company’s products or services would be removed from the Company’s potential subscriber pool, which could hinder the growth of the Company’s business, and existing subscribers may choose to cancel or not renew their contracts, which could increase the Company’s attrition rates. In either case, the Company’s results of operations and growth prospects could be adversely affected.

The Company has recorded net losses in the past and the Company may experience net losses in the future.

Legacy Vivint Smart Home recorded consolidated net losses of $395.9 million, $472.6 million and $410.2 million in the years ended December 31, 2019, 2018 and 2017, respectively. The Company may likely continue to record net losses in future periods.

The nature of the Company’s business requires the application of complex revenue and expense recognition rules, and the current legislative and regulatory environment affecting generally accepted accounting principles is uncertain. Significant changes in current principles could affect the Company’s financial statements going forward and changes in financial accounting standards or practices may cause adverse, unexpected financial reporting fluctuations and harm the Company’s operating results.

28

The accounting rules and regulations that the Company must comply with are complex and subject to interpretation by the Financial Accounting Standards Board (“FASB”), the SEC and various bodies formed to promulgate and interpret appropriate accounting principles. Recent actions and public comments from the FASB and the SEC have focused on the integrity of financial reporting and internal controls. In addition, many companies’ accounting policies are being subject to heightened scrutiny by regulators and the public. Further, the accounting rules and regulations are continually changing in ways that could materially impact Legacy Vivint Smart Home’s financial statements. For example, in May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606), as amended, which superseded nearly all existing revenue recognition guidance. Legacy Vivint Smart Home adopted the new standard effective January 1, 2018, utilizing a modified retrospective approach with the cumulative effect of initially applying the new standard recognized at the date of initial application and providing certain additional disclosures.

Risks Relating to the Company’s Indebtedness

Legacy Vivint Smart Home’s substantial indebtedness could adversely affect the Company’s financial condition.

Legacy Vivint Smart Home has substantial indebtedness. Net cash interest paid by Legacy Vivint Smart Home for the years ended December 31, 2019 and 2018 related to Legacy Vivint Smart Home’s indebtedness (excluding finance leases) totaled $250.4 million and $236.7 million, respectively. Legacy Vivint Smart Home’s net cash from operating activities for the years ended December 31, 2019 and 2018, before these interest payments, was an outflow of $28.8 million and an inflow of $16.2 million, respectively. Accordingly, Legacy Vivint Smart Home’s net cash from operating activities for the years ended December 31, 2019 and 2018 and was insufficient to cover these interest payments.

As of December 31, 2019, Legacy Vivint Smart Home had approximately $3.3 billion in aggregate principal amount of total debt outstanding, all of which was issued or borrowed by APX Group, Inc. (“APX”), a wholly owned subsidiary of the Company and guaranteed by APX’s parent company, APX Group Holdings, Inc. (“APX Group Holdings”) and by substantially all of APX’s domestic subsidiaries, $2.4 billion of which was secured debt, which requires significant interest and principal payments. Subject to the limits contained in the agreements governing the Company’s existing indebtedness, the Company may be able to incur substantial additional debt from time to time to finance working capital, capital expenditures, investments or acquisitions, or for other purposes. If the Company does so, the risks related to the Company’s high level of debt could increase. Specifically, the Company’s high level of debt could have important consequences, including the following:

29

The Company may be able to incur significant additional indebtedness in the future.

Despite the Company’s current level of indebtedness, the Company may be able to incur substantially more debt and enter into other transactions, which could further exacerbate the risks to the Company’s financial condition described above. As of December 31, 2019, Legacy Vivint Smart Home had $32.1 million of availability under the revolving credit facility (after giving effect to $11.1 million of letters of credit outstanding and $245.0 million of borrowings). The Company is still permitted to add, in addition to the revolving credit facility, incremental facilities of up to $225 million, subject to certain conditions being satisfied. Under both the Term Loan Agreement and revolving credit facility, up to $60 million may be incurred on the same “superpriority” basis as the revolving credit facility. Moreover, although the debt agreements governing the Company’s existing indebtedness contain restrictions on the incurrence of additional indebtedness and entering into certain types of other transactions, these restrictions are subject to a number of qualifications and exceptions. Additional indebtedness incurred in compliance with these restrictions could be substantial. These restrictions also do not prevent the Company from incurring obligations, such as trade payables, that do not constitute indebtedness as defined under the Company’s debt instruments. To the extent new debt is added to the Company’s current debt levels, the substantial leverage risks described in the previous risk factor would increase. In addition, the exceptions to the restrictive covenants permit the Company to enter into certain other transactions.

Accordingly, subject to market conditions, the Company opportunistically seeks to access the credit and capital markets from time to time, whether to refinance or retire the Company’s existing indebtedness, for the investment in and operation of the Company’s business, or for other general corporate purposes. Such transactions may take the form of new or amended senior secured credit facilities, including term or revolving loans, secured or unsecured notes and/or other instruments or indebtedness. These transactions may result in an increase in the Company’s total indebtedness, secured indebtedness and/or debt service costs.

The Company’s variable rate indebtedness subjects the Company to interest rate risk, which could cause the Company’s indebtedness service obligations to increase significantly.

Borrowings under the Company’s revolving credit facility are at variable rates of interest and expose the Company to interest rate risk. If interest rates increase, the Company’s debt service obligations on the variable rate indebtedness would increase even though the amount borrowed remained the same, and the Company’s net income and cash flows, including cash available for servicing the Company’s indebtedness, would correspondingly decrease.

The Company may be unable to service the Company’s indebtedness.

The Company’s ability to make scheduled payments on and to refinance the Company’s indebtedness depends on and is subject to the Company’s financial and operating performance, which, in turn, is affected by general and regional economic, financial, competitive, business and other factors beyond the Company’s control, including the availability of financing in the international banking and capital markets. the Company cannot assure you that the Company’s business will generate sufficient cash flow from operations or that future borrowings will be available to the Company in an amount sufficient to enable the Company to service the Company’s debt, to refinance the Company’s debt or to fund the Company’s other liquidity needs (including funding subscriber acquisition costs).

If the Company is unable to meet the Company’s debt service obligations or to fund the Company’s other liquidity needs, the Company will need to restructure or refinance all or a portion of the Company’s debt, which could cause the Company to default on the Company’s debt obligations and impair the Company’s liquidity. Any refinancing of the Company’s indebtedness could be at higher interest rates and may require the Company to comply with more onerous covenants that could further restrict the Company’s business operations.

Moreover, in the event of a default, the holders of the Company’s indebtedness could elect to declare all the funds borrowed to be due and payable, together with accrued and unpaid interest. The lenders under the

30

Company’s revolving credit facility could also elect to terminate their commitments thereunder, cease making further loans, and institute foreclosure proceedings against their collateral, and the Company could be forced into bankruptcy or liquidation. If the Company breach the Company’s covenants under the Company’s revolving credit facility, the Company would be in default under the Company’s revolving credit facility. The lenders could exercise their rights, as described above, and the Company could be forced into bankruptcy or liquidation.

The debt agreements governing the Company’s existing indebtedness impose significant operating and financial restrictions on the Company and the Company’s subsidiaries, which may prevent the Company from capitalizing on business opportunities.

The debt agreements governing the Company’s existing indebtedness impose significant operating and financial restrictions on the subsidiaries of the Company party thereto. The Company expects to guarantee the obligations under the credit agreement governing the revolving credit facility, the credit agreement governing the 2024 Term Loan and the debt agreements governing the notes. These restrictions limit the Company’s ability to, among other things:

In addition, the Company’s revolving credit facility requires that the Company maintain a consolidated first lien net leverage ratio of not more than 5.95 to 1.0 on the last day of each applicable test period.

As a result of these restrictions, the Company is limited as to how the Company conducts the Company’s business and the Company may be unable to raise additional debt or equity financing to compete effectively or to take advantage of new business opportunities. The terms of any future indebtedness the Company may incur could include more restrictive covenants. the Company cannot assure you that the Company will be able to maintain compliance with these covenants in the future and, if the Company fails to do so, that the Company will be able to obtain waivers from the lenders and/or amend the covenants.

The Company’s failure to comply with the restrictive covenants described above as well as other terms of the Company’s existing indebtedness and/or the terms of any future indebtedness from time to time could result in an event of default, which, if not cured or waived, could result in the Company’s being required to repay these borrowings before their due date. If the Company is forced to refinance these borrowings on less favorable terms or cannot refinance these borrowings, the Company’s results of operations and financial condition could be adversely affected.

31

The Company’s failure to comply with the agreements relating to the Company’s outstanding indebtedness, including as a result of events beyond the Company’s control, could result in an event of default that could materially and adversely affect the Company’s results of operations and the Company’s financial condition.

If there were an event of default under any of the agreements relating to the Company’s outstanding indebtedness, the holders of the defaulted debt could cause all amounts outstanding with respect to that debt to be due and payable immediately. the Company cannot assure you that the Company’s assets or cash flows would be sufficient to fully repay borrowings under the Company’s outstanding debt instruments if accelerated upon an event of default. Further, if the Company is unable to repay, refinance or restructure the Company’s indebtedness under the Company’s secured debt, the holders of such debt could proceed against the collateral securing that indebtedness. In addition, any event of default or declaration of acceleration under one debt instrument could also result in an event of default under one or more of the Company’s other debt instruments.

Risks Relating to Ownership of the Company’s Class A Common Stock

If the Merger’s benefits do not meet the expectations of financial analysts, the market price of the Company’s Class A common stock may decline.

The market price of the Class A common stock may decline as a result of the Merger if the Company does not achieve the perceived benefits of the Merger as rapidly, or to the extent anticipated by, financial analysts or the effect of the Merger on the Company’s financial results is not consistent with the expectations of financial analysts. Accordingly, holders of Class A common stock may experience a loss as a result of a decline in the market price of the Class A common stock. In addition, a decline in the market price of the Class A common stock could adversely affect the Company’s ability to issue additional securities and to obtain additional financing in the future.

The Company’s results of operations may differ significantly from the unaudited pro forma condensed combined financial information included in this prospectus.

Mosaic and Legacy Vivint Smart Home have had no prior history as a combined entity, and Mosaic’s and Legacy Vivint Smart Home’s operations have not previously been managed on a combined basis. The unaudited pro forma financial information included in this prospectus was presented for illustrative purposes only and is not necessarily indicative of what the actual financial position or results of operations would have been had the Merger been completed on the date(s) indicated, nor is it indicative of the future operating results or financial position of the Company. The unaudited pro forma adjustments represent management’s estimates based on information available as of the date of these unaudited pro forma condensed combined financial statements and are subject to change as additional information becomes available and analyses are performed.

The Company’s stock price may change significantly and you could lose all or part of your investment as a result.

The trading price of the Company’s Class A common stock is likely to be volatile. The stock market recently has experienced extreme volatility. This volatility often has been unrelated or disproportionate to the operating performance of particular companies. You may not be able to resell your shares at an attractive price due to a number of factors such as those listed in “—Risks Relating to the Company’s Business and Industry” and the following:

32

These broad market and industry fluctuations may adversely affect the market price of the Company’s Class A common stock, regardless of the Company’s actual operating performance. In addition, price volatility may be greater if the public float and trading volume of the Company’s Class A common stock is low.

In the past, following periods of market volatility, stockholders have instituted securities class action litigation. If the Company was involved in securities litigation, it could have a substantial cost and divert resources and the attention of executive management from the Company’s business regardless of the outcome of such litigation.

Because there are no current plans to pay cash dividends on the Company’s Class A common stock for the foreseeable future, you may not receive any return on investment unless you sell your common stock for a price greater than that which you paid for it.

The Company intends to retain future earnings, if any, for future operations, expansion and debt repayment and there are no current plans to pay any cash dividends for the foreseeable future. The declaration, amount and payment of any future dividends on shares of the Company’s Class A common stock will be at the sole discretion of the Company’s board of directors. the Company’s board of directors may take into account general and economic conditions, the Company’s financial condition and results of operations, the Company’s available cash and current and anticipated cash needs, capital requirements, contractual, legal, tax, and regulatory restrictions, implications on the payment of dividends by the Company to its stockholders or by the Company’s subsidiaries to it and such other factors as the Company’s board of directors may deem relevant. In addition, the Company’s ability to pay dividends is limited by covenants of the Company’s existing and outstanding indebtedness and may

33

be limited by covenants of any future indebtedness the Company incurs. As a result, you may not receive any return on an investment in the Company’s Class A common stock unless you sell the Company’s Class A common stock for a price greater than that which you paid for it.

If securities analysts do not publish research or reports about the Company’s business, or if they downgrade the Company’s stock or the Company’s sector, stock price and trading volume could decline.

The trading market for the Company’s Class A common stock depends in part on the research and reports that industry or financial analysts publish about the Company or the Company’s business. The Company does not control these analysts. In addition, some financial analysts may have limited expertise with the Company’s model and operations. Furthermore, if one or more of the analysts who does cover the Company downgrades the Company’s stock or industry, or the stock of any of its competitors, or publishes inaccurate or unfavorable research about the Company’s business, the price of the Company’s stock could decline. If one or more of these analysts ceases coverage of the Company or fails to publish reports on the Company regularly, the Company could lose visibility in the market, which in turn could cause the Company’s stock price or trading volume to decline.

Future sales, or the perception of future sales, by the Company or the Company’s stockholders in the public market following the Merger could cause the market price for the Company’s Class A common stock to decline.

The sale of shares of the Company’s Class A common stock in the public market, or the perception that such sales could occur, could harm the prevailing market price of shares of the Company’s Class A common stock. These sales, or the possibility that these sales may occur, also might make it more difficult for the Company to sell equity securities in the future at a time and at a price that it deems appropriate.

All shares issued in the Merger are freely tradable without registration under the Securities Act of 1933, as amended (the “Securities Act”), and without restriction by persons other than the Company’s “affiliates” (as defined under Rule 144 of the Securities Act, “Rule 144”), including the Company’s directors, executive officers and other affiliates (including affiliates of Blackstone).

Holders of substantially all of the Company’s Class A common stock and Mosaic Sponsor, LLC and Fortress Mosaic Sponsor LLC (collectively, the “SPAC sponsors”) have each agreed, subject to certain exceptions, not to dispose of or hedge any of their common stock or securities convertible into or exchangeable for shares of the Company’s Class A common stock during the period from the date of the Closing of the Merger (the “Closing Date”) continuing through the date (i) in the case of 313 Acquisition, six months after the Closing Date, (ii) in the case of the Pedersen Holders, Dunn Holders, Summit Holders and Black Horse Holders (each as defined in the Stockholders Agreement (defined herein)), two years after the Closing Date and (iii) for all other Stockholder Parties (as defined in the Stockholders Agreement), one year after the Closing Date.

Upon the expiration or waiver of the lock-ups, shares held by 313 Acquisition LLC (“313 Acquisition”), certain stockholders of 313 Acquisition, Legacy Vivint Smart Home and the SPAC sponsors (collectively, the “Investors”) will be eligible for resale, subject to volume, manner of sale and other limitations under Rule 144. In addition, pursuant to a registration rights agreement, the Investors and certain other stockholders named therein have the right, subject to certain conditions, to require the Company to register the sale of their shares of the Company’s Class A common stock under the Securities Act. By exercising their registration rights and selling a large number of shares, these stockholders could cause the prevailing market price of the Company’s Class A common stock to decline. The shares covered by registration rights represent a substantial majority of the Company’s outstanding Class A common stock.

As restrictions on resale end or if these stockholders exercise their registration rights, the market price of shares of the Company’s Class A common stock could drop significantly if the holders of these shares sell them

34

or are perceived by the market as intending to sell them. These factors could also make it more difficult for the Company to raise additional funds through future offerings of the Company’s shares of Class A common stock or other securities.

The Company also intends to register all shares of Class A common stock that the Company may issue under the Company’s 2020 Omnibus Incentive Plan, as well as any shares of Class A common stock underlying restricted shares of Class A common stock, stock appreciation rights and restricted stock units that have been granted to directors, executive officers and other employees of the Company as “substitute awards” pursuant to such 2020 Omnibus Incentive Plan, all of which are subject to time-based vesting conditions. In addition, the Company intends to register all shares of Class A common stock underlying the hypothetical stock appreciation rights subject to each of the Company’s (i) Second Amended and Restated 2013 Long-Term Incentive Pool Plan for Lead Technicians, (ii) Amended and Restated 2013 Long-Term Incentive Pool Plan for Regional Technicians, (iii) Second Amended and Restated 2013 Long-Term Incentive Pool Plan for Sales Managers and (iv) Second Amended and Restated 2013 Long-Term Incentive Pool Plan for Regional Managers. Following registration of such shares and subject to the expiration of applicable lock-up and vesting restrictions, they can be freely sold in the public market upon issuance, subject to volume limitations applicable to affiliates.

In the future, the Company may also issue its securities in connection with investments or acquisitions. The amount of shares of the Company’s Class A common stock issued in connection with an investment or acquisition could constitute a material portion of the Company’s then-outstanding shares of Class A common stock. Any issuance of additional securities in connection with investments or acquisitions may result in additional dilution to the Company’s stockholders.

Anti-takeover provisions in the Company’s organizational documents could delay or prevent a change of control.

Certain provisions of the Company’s amended and restated certificate of incorporation and amended and restated bylaws (“Bylaws”) may have an anti-takeover effect and may delay, defer or prevent a merger, acquisition, tender offer, takeover attempt or other change of control transaction that a stockholder might consider in the Company’s best interest, including those attempts that might result in a premium over the market price for the shares held by the Company’s stockholders.

These provisions provide for, among other things:

These anti-takeover provisions could make it more difficult for a third party to acquire us, even if the third-party’s offer may be considered beneficial by many of the Company’s stockholders. As a result, the Company’s

35

stockholders may be limited in their ability to obtain a premium for their shares. These provisions could also discourage proxy contests and make it more difficult for you and other stockholders to elect directors of your choosing and to cause us to take other corporate actions you desire.

The Certificate of Incorporation designates the Court of Chancery of the State of Delaware as the sole and exclusive forum for certain types of actions and proceedings that may be initiated by the Company’s stockholders, which could limit the stockholders’ ability to obtain a favorable judicial forum for disputes with the Company or the Company’s directors, officers, employees or stockholders.

The Certificate of Incorporation provides that, subject to limited exceptions, any (i) derivative action or proceeding brought on behalf of the Company, (ii) action asserting a claim of breach of a fiduciary duty owed by any director, officer, stockholder or employee to the Company or the Company’s stockholders, (iii) action asserting a claim arising pursuant to any provision of the DGCL or the Certificate of Incorporation or the Bylaws or (iv) action asserting a claim governed by the internal affairs doctrine shall, to the fullest extent permitted by law, be exclusively brought in the Court of Chancery of the State of Delaware or, if such court does not have subject matter jurisdiction thereof, another state or federal court located within the State of Delaware. Any person or entity purchasing or otherwise acquiring any interest in shares of the Company’s capital stock shall be deemed to have notice of and to have consented to the provisions of the Certificate of Incorporation. This choice of forum provision may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with the Company or the Company’s directors, officers or other employees, which may discourage such lawsuits against the Company and the Company’s directors, officers and employees. Alternatively, if a court were to find these provisions of the Certificate of Incorporation inapplicable to, or unenforceable in respect of, one or more of the specified types of actions or proceedings, the Company may incur additional costs associated with resolving such matters in other jurisdictions, which could adversely affect the Company’s business and financial condition.

Certain significant Company stockholders whose interests may differ from those of Company public stockholders will have the ability to significantly influence the Company’s business and management.

Pursuant to the stockholders agreement (the “Stockholders Agreement”) that the Company entered into with the SPAC sponsors, certain investment funds managed by the affiliates of The Blackstone Group Inc. (such investment funds, collectively, “Blackstone”) and certain other parties thereto (collectively, the “Stockholder Parties”) that became effective at the Closing, Blackstone has the right to designate nominees for election to the Company’s Board at any meeting of its stockholders. The number of Blackstone Designees (as defined in the Stockholders Agreement) will be equal to (i) a majority of the total number of directors in the event that 313 Acquisition, Blackstone and their respective affiliates (collectively, the “313 Acquisition Entities”) beneficially own in the aggregate 50% or more of the outstanding shares of Class A common stock, (ii) 40% of the total number of directors in the event that the 313 Acquisition Entities beneficially own in the aggregate more than 40%, but not 50% or more, of the outstanding shares of Class A common stock, (iii) 30% of the total number of directors in the event that the 313 Acquisition Entities beneficially own in the aggregate more than 30%, but not more than 40%, of the outstanding shares of Class A common stock, (iv) 20% of the total number of directors in the event that the 313 Acquisition Entities beneficially own in the aggregate more than 20%, but not more than 30%, of the outstanding shares of Class A common stock and (v) 10% of the total number of directors in the event that the 313 Acquisition Entities beneficially own in the aggregate more than 5%, but not more than 20% of the outstanding shares of Class A common stock.

Under the Stockholders Agreement, the Company agreed to nominate one director designated by Fortress Mosaic Investor LLC to the Company’s Board (the “Fortress Designee”) so long as the Fortress Holders (as defined in the Stockholders Agreement) beneficially own at least 50% of the shares of the Company’s Class A common stock the Fortress Holders own immediately following the consummation of the Merger; provided that the Fortress Designee must be an employee or principal of The SoftBank Vision Fund unless otherwise agreed in writing by the Blackstone Designator (as defined in the Stockholders Agreement) and the Company.

36

Under the Stockholders Agreement, the Company agreed to nominate one director designated by the Summit Designator (as defined in the Stockholders Agreement) to the Company’s Board so long as the Summit Holders (as defined in the Stockholders Agreement) beneficially own at least 50% of the shares of the Company’s Class A Common Stock they own immediately following the consummation of the Merger.

Accordingly, the persons party to the Stockholders Agreement will be able to significantly influence the approval of actions requiring Board approval through their voting power. Such stockholders will retain significant influence with respect to the Company’s management, business plans and policies, including the appointment and removal of its officers. In particular, the persons party to the Stockholder Agreement could influence whether acquisitions, dispositions and other change of control transactions are approved.

Affiliates of Blackstone control the Company, and their interests may conflict with the Company’s or yours in the future.

Affiliates of Blackstone beneficially own approximately 60.6% of the Company’s Class A common stock. For so long as Blackstone continues to own a significant percentage of the Company’s Class A common stock, Blackstone will still be able to significantly influence the composition of the Company’s board of directors and the approval of actions requiring stockholder approval. Accordingly, for such period of time, Blackstone will have significant influence with respect to the Company’s management, business plans and policies, including the appointment and removal of the Company’s officers. In particular, for so long as affiliates of Blackstone continues to own a significant percentage of the Company’s Class A common stock, Blackstone will be able to cause or prevent a change of control of the Company or a change in the composition of the Company’s board of directors and could preclude any unsolicited acquisition of the Company. The concentration of ownership could deprive you of an opportunity to receive a premium for your shares of common stock as part of a sale of the Company and ultimately might affect the market price of the Company’s Class A common stock. In addition, Blackstone may have an interest in pursuing acquisitions, divestitures and other transactions that, in its judgment, could enhance its investment, even though such transactions might involve risks to you. For example, Blackstone could cause the Company to make acquisitions that increase the Company’s indebtedness or cause the Company to sell revenue-generating assets. In certain circumstances, acquisitions of debt at a discount by purchasers that are related to a debtor can give rise to cancellation of indebtedness income to such debtor for U.S. federal income tax purposes. So long as affiliates of Blackstone continues to own a significant amount of the Company’s combined voting power, even if such amount is less than 50%, Blackstone will continue to be able to strongly influence or effectively control the Company’s decisions.

Notwithstanding Blackstone’s control of or substantial influence over the Company, the Company may from time to time enter into transactions with Blackstone and its affiliates, or enter into transactions in which Blackstone or its affiliates otherwise have a direct or indirect material interest. In connection with the Merger, the Company adopted a formal written policy for the review and approval of transactions with related persons.

Certain of the Company’s stockholders, including Blackstone, the SPAC sponsors and affiliates of Summit Partners, L.P., may engage in business activities which compete with the Company or otherwise conflict with the Company’s interests.

Blackstone, the SPAC sponsors, affiliates of Summit Partners, L.P. and certain other Stockholder Parties and their respective affiliates are in the business of making investments in companies and may from time to time acquire and hold interests in businesses that compete directly or indirectly with the Company. The Company’s amended and restated certificate of incorporation provides that none of the Stockholder Parties, any of their respective affiliates or any director who is not employed by the Company (including any non-employee director who serves as one of the Company’s officers in both his director and officer capacities) or his or her affiliates has any duty to refrain from engaging, directly or indirectly, in the same business activities or similar business activities or lines of business in which the Company operates. The Stockholder Parties also may pursue acquisition opportunities that may be complementary to the Company’s business and, as a result, those acquisition opportunities may not be available to the Company.

37

The Company is a “controlled company” within the meaning of the rules of the NYSE and the rules of the SEC. As a result, the Company qualifies for, and intends to rely on, exemptions from certain corporate governance requirements that would otherwise provide protection to stockholders of other companies.

Blackstone controls a majority of the voting power of the Company’s outstanding Class A common stock. As a result, the Company is a “controlled company” within the meaning of the corporate governance standards of the NYSE. Under these rules, a company of which more than 50% of the voting power is held by an individual, group or another company is a “controlled company” and may elect not to comply with certain corporate governance requirements, including:

The Company intends to utilize some or all of these exemptions. As a result, the Company’s nominating and corporate governance committee and compensation committee may not consist entirely of independent directors and such committees will not be subject to annual performance evaluations. Accordingly, you may not have the same protections afforded to stockholders of companies that are subject to all of the corporate governance requirements of the NYSE.

In addition, on June 20, 2012, the SEC passed final rules implementing provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 pertaining to compensation committee independence and the role and disclosure of compensation consultants and other advisers to the compensation committee. The SEC’s rules direct each of the national securities exchanges (including the NYSE on which the Company lists its common stock) to develop listing standards requiring, among other things, that:

As a “controlled company,” the Company is not subject to these compensation committee independence requirements.

Transformation of the Company into a listed public company will increase its costs and may disrupt the regular operations of its business.

Prior to the Merger, Legacy Vivint Smart Home operated as a privately owned company and expects to incur additional legal, regulatory, finance, accounting, investor relations and other administrative expenses as a result of having publicly traded common stock. In addition, while the Company is currently in compliance with portions of the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”), the Company is required under the Sarbanes-Oxley Act, as well as rules adopted by the SEC and the NYSE, to implement specified corporate governance practices that did not apply to Legacy Vivint Smart Home as a private company.

38

The Company is required to ensure that it has the ability to prepare financial statements on a timely basis that fully comply with all SEC reporting requirements and maintain effective internal controls over financial reporting.

The additional demands associated with being a public company may disrupt regular operations of the Company’s business by diverting the attention of some of its senior management team away from revenue producing activities to management and administrative oversight, adversely affecting the Company’s ability to attract and complete business opportunities and increasing the difficulty in both retaining professionals and managing and growing the Company’s businesses. In addition, failure to comply with any laws or regulations applicable to the Company as a public company may result in legal proceedings and/or regulatory investigations, and may cause reputational damage. Any of these effects could harm the Company’s business, financial condition and results of operations.

39

USE OF PROCEEDS

All of the Class A common stock offered by the Selling Securityholders pursuant to this prospectus will be sold by the Selling Securityholders for their respective accounts. The Company will not receive any of the proceeds from these sales.

The Company will receive up to an aggregate of approximately $200.5 million from the exercise of the Warrants, assuming the exercise in full of all of the Warrants for cash. The Company expects to use the net proceeds from the exercise of the Warrants for general corporate purposes, which may include temporary or permanent repayment of our outstanding indebtedness. The Company will have broad discretion over the use of proceeds from the exercise of the Warrants. There is no assurance that the holders of the Warrants will elect to exercise any or all of such Warrants.

The Selling Securityholders will pay any underwriting fees, discounts and selling commissions incurred by such Selling Securityholders in disposing of their Class A common stock. Pursuant to a registration rights agreement entered into by the Company, the Investors and certain other stockholders of the Company, the Company will bear all other costs, fees and expenses incurred in effecting the registration of the Class A common stock covered by this prospectus, including, without limitation, all registration and filing fees, NYSE listing fees and fees and expenses of counsel and independent registered public accountants.

40

DETERMINATION OF OFFERING PRICE

The offering price of the shares of Class A common stock underlying the Warrants offered hereby is determined by reference to the exercise price of the Warrants of $11.50 per share. The Warrants are listed on the NYSE under the symbol “VVNT WS.”

We cannot currently determine the price or prices at which shares of our Class A common stock may be sold by the Selling Securityholders under this prospectus.

41

MARKET INFORMATION FOR CLASS A COMMON STOCK AND DIVIDEND POLICY

Market Information

Our Class A common stock and warrants are currently listed on the NYSE under the symbols “VVNT” and “VVNT WS”, respectively. Prior to the consummation of the Merger, our Class A common stock and warrants were listed on the NYSE under the symbols “MOSC.U”, “MOSC” and “MOSC.WS”, respectively. As of March 16, 2020, there were 483 holders of record of our Class A common stock and 4 holders of record of our Warrants.

Dividend Policy

We have not paid any cash dividends on our common stock or the Warrants to date. Our Board may from time to time consider whether or not to institute a dividend policy. It is our present intention to retain any earnings for use in our business operations and, accordingly, we do not anticipate the Board declaring any dividends in the foreseeable future. The payment of cash dividends in the future will be dependent upon our revenues and earnings, if any, capital requirements and general financial condition. The payment of any cash dividends will be within the discretion of our Board. Further, our ability to declare dividends will also be limited by restrictive covenants contained in our debt agreements.

Securities Authorized for Issuance Under Equity Compensation Plans

As of December 31, 2019, we did not have any securities authorized for issuance under equity compensation plans. In connection with the Merger, our shareholders approved the Vivint Smart Home, Inc. 2020 Omnibus Incentive Plan.

42

SELECTED FINANCIAL INFORMATION

The following selected historical consolidated financial information and other data set forth below should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and Legacy Vivint Smart Home’s historical consolidated financial statements and the related notes thereto contained elsewhere in this prospectus.

Legacy Vivint Smart Home is considered the Company’s accounting predecessor.

The selected historical consolidated financial information and other data presented below for the years ended December 31, 2019, 2018 and 2017 and the selected consolidated balance sheet data as of December 31, 2019 and 2018 have been derived from Legacy Vivint Smart Home’s audited consolidated financial statements included in this prospectus. The selected historical consolidated financial information and other data presented below for the years ended December 31, 2016 and 2015 and the selected consolidated balance sheet data as of December 31, 2017, 2016 and 2015 have been derived from Legacy Vivint Smart Home’s audited consolidated financial statements which are not included in this prospectus.

43

UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION

The following unaudited pro forma condensed combined financial statements of Vivint Smart Home present the combination of the financial information of Vivint Smart Home and Legacy Vivint Smart Home adjusted to give effect to the Merger, the other transactions contemplated by the Merger Agreement and the Refinancing Transactions (defined below). The following unaudited pro forma condensed combined financial information has been prepared in accordance with Article 11 of Regulation S-X.

The unaudited pro forma condensed combined balance sheet as of December 31, 2019 combines the historical balance sheet of Vivint Smart Home and the historical balance sheet of Legacy Vivint Smart Home on a pro forma basis as if the Merger, the other transactions contemplated by the Merger Agreement, and the Refinancing Transactions summarized below, had been consummated on December 31, 2019. The unaudited pro forma condensed combined statement of operations for the year ended December 31, 2019 combines the historical statements of operations of Vivint Smart Home and Legacy Vivint Smart Home for such period on a pro forma basis as if the Merger, the other transactions contemplated by the Merger Agreement, and the Refinancing Transactions summarized below, had been consummated on January 1, 2019, the beginning of the earliest period presented:

Pursuant to the Sponsor Agreement, 50% of the unvested Founder Shares vested at the closing of the Merger; 25% of the unvested Founder Shares vested when a $12.50 Stock Price Level was achieved and the remaining 25% of unvested Founder Shares vested when a $15.00 Stock Price Level was achieved. Pursuant to the Sponsor Agreement, 50% of the unvested private placement warrants vested when a $12.50 Stock Price Level was achieved and the remaining 50% of unvested private placement warrants vested when a $15.00 Stock Price Level was achieved.

44

After the consummation of the Merger, holders of Legacy Vivint Smart Home common stock immediately prior to the Merger and holders of outstanding Rollover Restricted Stock immediately following the Merger received the contingent right to receive earnout shares and holders of Rollover Equity Awards (other than Rollover Restricted Stock) immediately following the Merger are entitled to either receive earnout shares or an increase in the value of their awards if, from the consummation of the Merger until the fifth anniversary thereof, the volume-weighted average price of Common Stock exceeds certain target thresholds. Upon the achievement of such targets, such holders will receive, in aggregate, 12,500,000 Common Stock on the achievement of each target (or in the case of holders of Rollover Equity Awards, an equivalent increase in value of such awards) based on their proportional holding of such stock or awards immediately prior to the Merger. The first issuance of earnout shares occurs when the volume-weighted average price of Common Stock exceeds $12.50 for any 20 trading days within any 30 trading day period (the “First Earnout”). The second issuance of earnout shares occurs when the volume-weighted average price of Common Stock exceeds $15.00 for any 20 trading days within any 30 trading day period (the “Second Earnout”). The third issuance of earnout shares occurs when the volume weighted average price of Common Stock exceeds $17.50 for any 20 trading days within any 30 trading day period (the “Third Earnout”).

Subsequent to the closing of the Merger, the issuance of 12,500,000 earnout shares occurred in February 2020 after attainment of the First Earnout and the issuance of 12,500,000 earnout shares occurred in March 2020 after attainment of the Second Earnout. Earnout shares from the Third Earnout are not reflected in the pro forma financial information as the Third Earnout has not been achieved. Legacy Vivint Smart Home has concluded that the earnout shares are equity classified awards, and are presented as so in the unaudited pro forma condensed combined balance sheet. The impact of the earnout shares is not expected to be material on the future results of operations of Vivint Smart Home.

The historical financial statements have been adjusted in the unaudited pro forma condensed combined financial statements to give pro forma effect to events that are: (i) directly attributable; (ii) factually supportable; and (iii) with respect to the statement of operations, expected to have a continuing impact on Vivint Smart Home’s results following the completion of the Merger, the other transactions contemplated by the Merger Agreement, and the Refinancing Transactions.

The unaudited pro forma condensed combined financial statements have been developed from and should be read in conjunction with:

Pursuant to Vivint Smart Home’s amended and restated certificate of incorporation, public stockholders were offered the opportunity to redeem, upon the closing of the Merger, shares of Vivint Smart Home Class A common stock then held by them for cash equal to their pro rata share of the aggregate amount on deposit (as of two business days prior to the closing of the Merger) in the Trust Account. The unaudited condensed combined pro forma financial statements reflect actual redemption of 31,074,592 shares of Vivint Smart Home Class A common stock at a per price share of approximately $10.29. Prior to the close of the Merger, Legacy Vivint Smart Home, Inc. agreed, in accordance with the Merger Agreement, to waive the Maximum Redemption Condition.

Notwithstanding the legal form of the Merger pursuant to the Merger Agreement, the Merger is accounted for as a reverse recapitalization in accordance with GAAP. Under this method of accounting, Vivint Smart Home

45

is treated as the acquired company and Legacy Vivint Smart Home is treated as the acquirer for financial statement reporting purposes. Legacy Vivint Smart Home has been determined to be the accounting acquirer based on evaluation of the following facts and circumstances:

On July 31, 2019, in an effort to deliver additional cost savings and cash-flow improvements, Legacy Vivint Smart Home completed a spin-off of its wireless internet business. In connection with the spin-off, the equity interests of Vivint Wireless, Inc. were distributed to the shareholders of Legacy Vivint Smart Home, Inc. pro rata based on their respective holdings. The spin-off is not believed to be a strategic shift that had a major effect on Legacy Vivint Smart Home’s operations and financial results, and therefore does not qualify as discontinued operations. In addition, the spin-off is not directly attributable to the Merger. However, since the wireless internet business will not be present in the financial position or results of operations of the combined company following the Merger, the Company has presented in its unaudited pro forma condensed combined financial statements the effect of the Vivint Wireless, Inc. spin-off, as this information could be useful to investors and readers of this prospectus.

On February 14, 2020, APX Group, Inc. (“APX”) an indirect, wholly owned subsidiary of Vivint Smart Home, completed its offering of $600.0 million aggregate principal amount of 6.75% senior secured notes due 2027 (the “2027 Notes”) in a private placement. Concurrently with the 2027 Notes offering, APX amended and restated the credit agreements governing the existing revolving credit facility and existing term loan credit facility (the “Concurrent Refinancing Transactions”). In connection therewith, APX, among other things, (i) extended the maturity date with respect to certain commitments under the revolving credit facility and increased the aggregate commitments in respect of the revolving credit facility to $350.0 million and (ii) extended the maturity date with respect to the loans outstanding under the term loan facility and increased the aggregate principal amount of term loans term loans outstanding under the term loan credit facility to $950.0 million.

APX used the net proceeds from the 2027 Notes offering and Concurrent Refinancing Transactions, together with the proceeds from the Merger, to (i) redeem all of APX’s outstanding 8.750% Senior Notes due 2020 (the “2020 Notes Redemption”), (ii) redeem all of APX’s outstanding 8.875% Senior Secured Notes due 2022 (the “2022 Private Placement Notes Redemption”), (iii) refinance in full the existing borrowings under APX’s existing term loan facility and revolving credit facility, (iv) redeem $223.0 million aggregate principal amount of APX’s outstanding 7.875% Senior Secured Notes due 2022 (the “Partial 7.875% Notes Redemption” and, together with the 2020 Notes Redemption and the 2022 Private Placement Notes Redemption, the “Redemptions”) and (v) pay the related accrued interest, fees and expenses related thereto (together with the 2027 Notes offering, Concurrent Refinancing Transactions, and Redemptions, the “Refinancing Transactions”). APX irrevocably deposited funds with the applicable trustee and/or paying agent to effect the Redemptions and to satisfy and discharge all of APX’s remaining obligations under the indenture governing APX’s 8.750% Senior Notes due 2020 and the note purchase agreement governing APX’s 8.875% Senior Secured Notes due 2022. The Company has presented in its unaudited pro forma condensed combined financial statements the effect of the Concurrent Refinancing Transactions, as this information could be useful to investors and readers of this prospectus.

46

Assumptions and estimates underlying the unaudited pro forma adjustments set forth in the unaudited pro forma condensed combined financial statements are described in the accompanying notes. The unaudited pro forma condensed combined financial statements have been presented for illustrative purposes only and are not necessarily indicative of the operating results and financial position that would have been achieved had the Merger occurred on the dates indicated. The unaudited pro forma condensed combined financial statements do not purport to project the future operating results or financial position of Vivint Smart Home following the completion of the Merger. The unaudited pro forma adjustments represent management’s estimates based on information available as of the date of these unaudited pro forma condensed combined financial statements and are subject to change as additional information becomes available and analyses are performed.

47

UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET

AS OF DECEMBER 31, 2019

(in thousands)

48

49

UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS

FOR THE YEAR ENDED DECEMBER 31, 2019

(in thousands, except share and per share data)

50

Notes to Unaudited Pro Forma Condensed Combined Financial Statements

1. Basis of Presentation

The Merger is accounted for as a reverse recapitalization, with no goodwill or other intangible assets recorded, in accordance with GAAP. Under this method of accounting, Vivint Smart Home is treated as the “acquired” company for financial reporting purposes. Accordingly, for accounting purposes, the Merger is treated as the equivalent of Legacy Vivint Smart Home issuing stock for the net assets of Vivint Smart Home, accompanied by a recapitalization.

The net assets of Vivint Smart Home are stated at historical cost, with no goodwill or other intangible assets recorded.

The unaudited pro forma condensed combined balance sheet as of December 31, 2019 gives pro forma effect to the Merger and the other transactions contemplated by the Merger Agreement as if they had been consummated on December 31, 2019. The unaudited pro forma condensed combined statement of operations for the year ended December 31, 2019 gives pro forma effect to the Merger and the other transactions contemplated by the Merger agreement as if they had been consummated on January 1, 2019.

The unaudited pro forma condensed combined balance sheet as of December 31, 2019 has been prepared using, and should be read in conjunction with, the following:

The unaudited pro forma condensed combined statement of operations for the year ended December 31, 2019 has been prepared using, and should be read in conjunction with, the following:

The unaudited condensed pro forma adjustments reflecting the consummation of the Merger, the other transactions contemplated by the Merger Agreement, and the Refinancing Transactions are based on certain estimates and assumptions. These estimates and assumptions are based on information available as of the date of these unaudited pro forma condensed combined financial statements and may be revised as additional information becomes available. Therefore, it is likely that the actual adjustments will differ from the pro forma adjustments and it is possible the difference may be material.

The unaudited pro forma condensed combined financial information does not give effect to any anticipated synergies, operating efficiencies, tax savings or cost savings that may be associated with the Merger, the other transactions contemplated by the Merger Agreement, and the Refinancing Transactions.

The pro forma adjustments reflecting the consummation of the Merger and other transactions contemplated by the Merger Agreement are based on certain currently available information and certain assumptions and methodologies that management believes are reasonable under the circumstances. The unaudited condensed pro forma adjustments, which are described in the accompanying notes, may be revised as additional information becomes available and is evaluated. Therefore, it is likely that the actual adjustments will differ from the pro forma adjustments and it is possible the difference may be material. The Company believes that its assumptions and methodologies provide a reasonable basis for presenting all of the significant effects of the Merger based on

51

information available to management at the time and that the pro forma adjustments give appropriate effect to those assumptions and are properly applied in the unaudited pro forma condensed combined financial information.

The unaudited pro forma condensed combined financial information is not necessarily indicative of what the actual results of operations and financial position would have been had the business combination taken place on the dates indicated, nor are they indicative of the future consolidated results of operations or financial position of the post-combination company. They should be read in conjunction with the historical financial statements and notes thereto of Vivint Smart Home and Legacy Vivint Smart Home.

2. Accounting Policies and Reclassifications

As part of preparing these unaudited pro forma condensed combined financial statements, certain reclassifications were made to align Vivint Smart Home and Legacy Vivint Smart Home’s financial statement presentation. Upon consummation of the Merger, management performed a comprehensive review of the two entities’ accounting policies. Based on its analysis, management did not identify any differences between the accounting policies of the two entities that would have a material impact on the unaudited pro forma condensed combined financial information. As a result, the unaudited pro forma condensed combined financial information does not assume any differences in accounting policies.

3. Vivint Wireless, Inc. Spin-off

The Company has presented in its unaudited pro forma condensed combined statements of operations the effect of the Vivint Wireless, Inc. spin-off, as the wireless internet business will not be present in the results of operations of the combined company following the Merger.

4. Refinancing Transactions

The Company has presented in its unaudited pro forma condensed combined financial information the effect of the Refinancing Transactions. Amounts adjusted in the unaudited pro forma condensed combined balance sheet reflect the effects of the change in total indebtedness as a result of the 2020 Notes Redemption, the 2022 Private Placement Notes Redemption, the Partial 7.875% 2022 Notes Redemption and the payment on the revolving credit facility, which is offset by the increase related to the 2027 Notes offering and incremental borrowings on the term loan credit facility related to the Concurrent Refinancing Transactions. Adjusted amounts also reflect the payment of the related accrued and unpaid interest of $6.8 million, the payment of other fees and expenses of

$11.0 million, including prepayment penalties, and the settlement of $1.6 million in unamortized discounts (premiums) and deferred financing costs in connection with the Redemptions.

Amounts adjusted in the unaudited pro forma condensed combined statements of operations reflect the effects on interest and other expense as a result of the Refinancing Transactions.

5. Adjustments to Unaudited Pro Forma Condensed Combined Financial Information

The unaudited pro forma condensed combined financial information has been prepared to illustrate the effect of the Merger and the other transactions contemplated by the Merger Agreement and has been prepared for informational purposes only. The historical financial statements have been adjusted in the unaudited pro forma condensed combined financial information to give pro forma effect to events that are (1) directly attributable to the Merger, (2) factually supportable, and (3) with respect to the statements of operations, expected to have a continuing impact on Vivint Smart Home’s results following the completion of the Merger, the other transactions contemplated by the Merger Agreement, and the Refinancing Transactions. Vivint Smart Home and Legacy Vivint Smart Home have not had any historical relationship prior to the Merger. Accordingly, no pro forma adjustments were required to eliminate activities between the companies.

52

Adjustments to Unaudited Pro Forma Condensed Combined Balance Sheet

The adjustments included in the unaudited pro forma condensed combined balance sheet as of December 31, 2019 are as follows:

53

54

Adjustments to Unaudited Pro Forma Condensed Combined Statements of Operations

The pro forma adjustments included in the unaudited pro forma condensed combined statements of operations for the year ended December 31, 2019 are as follows:

55

6. Loss per Share

Represents the net loss per share calculated using the historical weighted average shares outstanding, and the issuance of additional shares in connection with the Merger, assuming the shares were outstanding since January 1, 2019. As the Merger and the other transactions contemplated by the Merger Agreement are being reflected as if they had occurred at the beginning of the periods presented, the calculation of weighted average shares outstanding for basic and diluted net loss per share assumes that the shares issuable relating to the Merger have been outstanding for the entire periods presented.

The unaudited pro forma condensed combined financial information for the year ended December 31, 2019 are as follows:

56

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis provides information which management believes is relevant to an assessment and understanding of our consolidated results of operations and financial condition. The discussion should be read in conjunction with the “Selected Historical Consolidated Financial Information” and the consolidated financial statements and notes thereto contained in this prospectus. This discussion contains forward-looking statements and involves numerous risks and uncertainties, including, but not limited to, those described in the “Risk Factors” section of this prospectus. Actual results may differ materially from those contained in any forward-looking statements. Unless the context otherwise requires, references in this “Management’s Discussion and Analysis of Financial Condition and Results of Operations” to “we”, “us”, “our”, and “the Company” are intended to mean the business and operations of Vivint Smart Home, Inc. and its consolidated subsidiaries.

Overview

Until January 17, 2019, we were a blank check company, originally incorporated as a Cayman Islands exempted company on July 26, 2017 and formed for the purpose of effecting a merger, share exchange, asset acquisition, share purchase, reorganization or similar business combination with one or more businesses. Effective December 21, 2018, we changed our jurisdiction of incorporation from Cayman Islands to the State of Delaware.

On January 17, 2020 (the “Closing Date”), we consummated the previously announced merger pursuant to that certain Agreement and Plan of Merger, dated September 15, 2019, by and among the Company, Maiden Merger Sub, Inc., a subsidiary of the Company (“Merger Sub”), and Legacy Vivint Smart Home, Inc. (f/k/a Vivint Smart Home, Inc.) (“Legacy Vivint Smart Home”), as amended by Amendment No. 1 to the Agreement and Plan of Merger (the “Amendment” and as amended, the “Merger Agreement”), dated as of December 18, 2019, by and among the Company, Merger Sub and Legacy Vivint Smart Home.

Pursuant to the terms of the Merger Agreement, a business combination between the Company and Legacy Vivint Smart Home was effected through the merger of Merger Sub with and into Legacy Vivint Smart Home, with Legacy Vivint Smart Home surviving as the surviving company (the “Merger”). At the effective time of the Merger (the “Effective Time”), each stockholder of Legacy Vivint Smart Home received 84.5320916792 shares of the Company’s Class A common stock, par value $0.0001 per share (the “Common Stock”), for each share of Legacy Vivint Smart Home common stock, par value $0.01 per share (the “Legacy Vivint Smart Home common stock”), that such stockholder owned. Pursuant in each case to a Subscription Agreement entered into in connection with the Merger Agreement, certain investment funds managed by affiliates of Fortress Investment Group LLC (“Fortress”) and certain investment funds affiliated with The Blackstone Group Inc. (such investment funds, collectively, “Blackstone”) purchased, respectively, 12,500,000 and 10,000,000 newly-issued shares of Common Stock (such purchases, the “Fortress PIPE” and the “Blackstone PIPE,” respectively, and together, the “PIPE”) concurrently with the completion of the Merger (the “Closing”) on the Closing Date for an aggregate purchase price of $125,000,000 and $100,000,000, respectively.

In connection with the execution of the Amendment, the Company entered into a Subscription and Backstop Agreement (the “Fortress Subscription and Backstop Agreement”) with Fortress, pursuant to which Fortress committed to (i) purchase $50,000,000 in aggregate purchase price of shares of Mosiac’s Common Stock in the open market, subject to applicable law, (ii) backstop redemptions by subscribing for a number of shares of newly-issued shares of Mosaic’s Common Stock at a purchase price per share equal to the per-share value of the Company’s trust account at the time of any such redemptions and (iii) subscribe for up to $50,000,000 (less the aggregate purchase price of the shares purchased by it in the open market and to backstop redemptions) in aggregate purchase price of newly-issued shares of Mosaic’s Common Stock at a purchase price of $10.00 per share to be issued at the election of the Company at the Closing. On the Closing Date, pursuant to the Fortress Subscription and Backstop Agreement, Fortress purchased 2,698,753 shares of Common Stock for an aggregate of approximately $27.8 million.

57

In addition, the Company entered into an additional subscription agreement (the “Additional Forward Purchaser Subscription Agreement”) with one of the forward purchasers (the “Forward Purchaser”). Pursuant to the Additional Forward Purchaser Subscription Agreement, immediately prior to the Effective Time, the Forward Purchaser purchased from the Company 5,000,000 shares of Common Stock at a purchase price of $10.00 per share. As consideration for the additional investment, 25% of Mosaic Sponsor LLC’s shares of the Company’s Class F Common Stock, par value $0.0001 per share (the “Founder Shares”) and private placement warrants (the “Private Placement Warrants”) were forfeited to the Company and the Company issued to the Forward Purchaser an equal number of shares of Common Stock and Warrants concurrently with the Closing.

In connection with the Closing, the registrant changed its name from Mosaic Acquisition Corp. to Vivint Smart Home, Inc. The audited financial statements included herein are those of Legacy Vivint Smart Home, the Company’s accounting predecessor, and the Company prior to the Merger. Prior to the Merger, the Company neither engaged in any operations nor generated any revenue. Until the Merger, based on the Company’s business activities, it was a “shell company” as defined under the Securities Exchange Act of 1934, as amended (the “Exchange Act”).

Following the Merger, we are a smart home technology company. Our purpose-built platform has all the components required to deliver on the promise of a true smart home experience. Our smart home platform is comprised of the following five pillars: (1) our Smart Home Operating System, (2) our AI-driven smart home automation and assistance software, Vivint Assist, (3) our portfolio of proprietary, internally developed smart devices, (4) our curated yet extensible partner-neutral ecosystem, and (5) our people delivering tech-enabled premium services, including consultative selling, professional installation, and support.

Legacy Vivint Smart Home was founded by our CEO Todd Pedersen in 1999 and has grown to become one of the largest smart home solutions providers in North America with over 1.5 million subscribers as of December 31, 2019, managing over 20 million devices and processing over 1.5 billion home-related events on a daily basis. Our nationwide sales and service footprint covers 98% of U.S. zip codes.

Our culture and our history are characterized by a spirit of continuous innovation, resulting in the development of cutting-edge proprietary smart home devices and tech-enabled services for the smart home. Consistent with our Vivint brand name, which represents ‘to live intelligently’, our solution allows subscribers to live intelligently and to enjoy the benefits of a smart home. Our approach has focused on putting the subscriber experience first, which we do by presenting our subscribers with the right combination of technology and support, delivered by people who care.

Our go-to-market strategy is based on directly educating consumers about the value and benefits of a smart home experience. We reach consumers through a variety of efficient customer acquisition channels, including our direct-to-home, national inside sales, and retail partnership programs. We continue to scale these efforts through our proprietary operations technology, by launching new and innovative Products and Services, and by building out our consultative sales channels. We continue to strengthen our relationships with existing subscribers by offering them the ability to use Vivint Flex Pay to finance an upgrade of their existing system and to add new devices and features to their smart homes as our portfolio of offerings expands.

As of December 31, 2019 and 2018, Mosaic Acquisition Corp. had net income of $4.2 million and $5.3 million, respectively.

As of December 31, 2019 and 2018, Legacy Vivint Smart Home had over 1.5 million and 1.4 million subscribers, respectively, representing year-over-year growth of 7%. In 2019 and 2018, Legacy Vivint Smart Home generated revenue of $1.2 billion and $1.1 billion, respectively along with a net loss of $395.9 million and $472.6 million, respectively. As of December 31, 2019 and 2018, Legacy Vivint Smart Home had approximately $3.3 billion and $3.1 billion of total debt outstanding, respectively.

58

Recent Developments

Refinancing Transactions

On February 14, 2020, APX completed its offering of $600.0 million aggregate principal amount of 6.75% senior secured notes due 2027 (the “2027 Notes”) in a private placement.

Concurrently with the 2027 Notes offering, APX amended and restated the credit agreements governing our existing revolving credit facility and existing term loan credit facility (the “Concurrent Refinancing Transactions”). In connection therewith, APX, among other things, (i) extended the maturity date with respect to certain commitments under the revolving credit facility and increased the aggregate commitments in respect of the revolving credit facility to $350.0 million and (ii) extended the maturity date with respect to the loans outstanding under the term loan facility and increased the aggregate principal amount of term loans outstanding under the term loan credit facility to $950.0 million.

APX used the net proceeds from the 2027 Notes offering and Concurrent Refinancing Transactions, together with the proceeds from the Merger, to (i) redeem all of APX’s outstanding 8.750% Senior Notes due 2020 (the “2020 Notes Redemption”), (ii) redeem all of APX’s outstanding 8.875% Senior Secured Notes due 2022 (the “2022 Private Placement Notes Redemption”), (iii) refinance in full the existing borrowings under APX’s existing term loan facility and existing revolving credit facility, (iv) redeem $223.0 million aggregate principal amount of APX’s outstanding 7.875% Senior Secured Notes due 2022 (the “Existing 7.875% Notes Redemption” and, together with the 2020 Notes Redemption and the 2022 Private Placement Notes Redemption, the “Redemptions”) and (v) pay the related accrued interest, fees and expenses related thereto. APX irrevocably deposited funds with the applicable trustee and/or paying agent to effect the Redemptions and to satisfy and discharge all of APX’s remaining obligations under the indenture governing APX’s 8.750% Senior Notes due 2020 and the note purchase agreement governing APX’s 8.875% Senior Secured Notes due 2022. Vivint intends to use any remaining net proceeds for general corporate purposes, which may include repayment of additional indebtedness.

Earnout

Following the closing of the Merger, holders of Vivint common stock and holders of Rollover Restricted Stock (as defined in the Merger Agreement) and outstanding Rollover Equity Awards (as defined in the Merger Agreement) will have the contingent right to receive, in the aggregate, up to 37,500,000 shares of Common Stock if, from the closing of the Merger until the fifth anniversary thereof, the dollar volume-weighted average price of Common Stock exceeds certain thresholds. The first issuance of up to 12,500,000 earnout shares will occur if the volume-weighted average price of Common Stock exceeds $12.50 for any 20 trading days within any 30 trading day period (the “First Earnout”). The second issuance of up to 12,500,000 earnout shares will occur if the volume weighted average price of Common Stock exceeds $15.00 for any 20 trading days within any 30 trading day period (the “Second Earnout”). The third issuance of up to 12,500,000 earnout shares will occur if the volume weighted average price of Common Stock exceeds $17.50 for any 20 trading days within any 30 trading day period (the “Third Earnout”) (as further described in the Merger Agreement).

Subsequent to the closing of the Merger, the issuance of 12,500,000 earnout shares occurred in February 2020 after attainment of the First Earnout and the issuance of 12,500,000 earnout shares occurred in March 2020 after attainment of the Second Earnout.

Wireless Internet Business

On July 31, 2019, in an effort to deliver additional cost savings and cash-flow improvements, Legacy Vivint Smart Home completed a spin-off of its wireless internet business. In connection with the spin-off, the equity interests of Vivint Wireless, Inc. were distributed to the stockholders of Legacy Vivint Smart Home pro rata based on their respective holdings.

59

Our Business Model After the Merger

Our business is driven by the acquisition of new subscribers and by servicing and growing sales from our existing subscriber base. The acquisition of new subscribers requires significant upfront investment, which in turn generates high-margin recurring revenue from our cloud-enabled smart home solutions. We generate this revenue from selling our solution and accompanying smart home devices to our subscribers. Therefore, we focus our investment decisions on acquiring new subscribers in the most cost-effective manner, while striving to maximize existing subscriber retention and lifetime value.

Legacy Vivint Smart Home has experienced significant historical subscriber growth. For example, its Total Subscribers increased by 95% from December 31, 2013 to December 31, 2019. To drive this growth, Legacy Vivint Smart Home has made significant upfront investments in its various sales channels, as well as technology and infrastructure to support its growing subscriber base. As a result of these investments, Legacy Vivint Smart Home has incurred losses and used significant amounts of cash to fund operations.

As we scale our business a greater percentage of our net acquisition costs for New Subscribers may be funded through revenues generated by our existing subscriber base. Although we anticipate the absolute number of new subscribers to grow over time, we expect the number of new subscribers to decrease as a percentage of our Total Subscribers. We believe this decrease in new subscribers as a percentage of the total, along with the expected growth in revenue, will improve our operating results and operating cash flows over time. Our ability to improve our operating results and cash flows, however, is subject to a number of risks and uncertainties as described in greater detail elsewhere in this filing and there can be no assurance that we will achieve such improvements. To the extent that we do not scale our business efficiently, we will continue to incur losses and require a significant amount of cash to fund our operations, which in turn could have a material adverse effect on our business, cash flows, operating results and financial condition.

We seek to increase our average monthly revenue per user, or AMRU, by continually innovating and offering new smart home solutions that further leverage the investments made to date in our existing platform and sales channels. Since 2010, Legacy Vivint Smart Home has successfully expanded its smart home platform, which has allowed it to charge higher recurring subscription fees and generate higher smart home device revenue from new subscribers for these additional offerings. For example, the introduction of Legacy Vivint Smart Home’s proprietary Vivint Smart Hub, Vivint SkyControl Panel, Vivint Glance Display, Vivint Smart Drive, Vivint Doorbell Camera, Vivint Ping Camera, Vivint Outdoor Camera, Vivint Element Thermostat, Vivint Smart Sensor and Vivint Motion Sensor has expanded its smart home platform. Due to the high rate of adoption of additional smart home devices and tech-enabled services, Legacy Vivint Smart Home’s AMRU has increased from $56.14 in 2013 to $64.44 for the year ended December 31, 2019, an increase of 15%.

Our SHaaS business model generates subscription-based, high-margin recurring revenue from subscribers who contract for our Smart Home Services. We continue to focus on technology, service, and business model innovation to provide superior subscriber experience, from the time of first contact to the day-to-day experience.

In 2017, Legacy Vivint Smart Home made a strategic decision to offer Vivint Flex Pay to the market as a part of its business model innovation, providing benefits to both its subscribers and the company. Vivint Flex Pay provides greater subscriber accessibility and affordability by enabling qualified subscribers to purchase our Products and related installation through unsecured financing provided either by a third party financing partner or by us, in most cases at zero-percent APR. Under the Consumer Financing Program (the “CFP”), qualified subscribers are eligible for installment loans of up to $4,000 for either 42 or 60 months. These installment loans are between the subscriber and Citizens Bank, N.A., or Citizens, as the exclusive third party provider of the installment loans under Vivint Flex Pay. Customers not eligible for the CFP, but who qualify under the Company’s underwriting criteria, may enter into a RIC directly with Vivint. Because we directly fund Product purchases financed through RICs, the mix of financing methods between CFP and RICs affects the amount of cash we receive at the time of subscriber origination to offset this upfront investment.

60

Pursuant to the agreement between Citizens (the “CFP Agreement”) and Legacy Vivint Smart Home, we pay a monthly fee to Citizens based on the average daily outstanding balance of the loans provided by Citizens to our subscribers, and we share with Citizens the liability for credit losses, with our company being responsible for between 5% to 100% of lost principal balances, depending on factors specified in the CFP Agreement. Additionally, we are responsible for reimbursing Citizens for the credit card transaction fees associated with these loans. The present value of the estimated total fees owed by us to Citizens, based on current loans outstanding, are recorded as a derivative liability on our consolidated balance sheet. The initial term of the CFP Agreement is five years, subject to automatic, one-year renewals unless terminated by either party in accordance with its terms. Because the Vivint Flex Pay plan separates payments for our smart home devices from payments for our Smart Home Services, under the plan agreements, following the expiration of the term of subscribers’ initial contract term, annual revenues will primarily be limited to fees from our Services. Thus, our revenues and margins are expected to be lower over the life of the subscriber than under our historical service contracts.

The launch of Vivint Flex Pay enables us to accelerate the acquisition of new subscribers and expand our market opportunity by reducing upfront cash requirements associated with new subscriber acquisitions. Vivint Flex Pay also improves our unit economics, increases contract length, reduces our balance sheet risk, and increases the capital efficiency of our business. Today, Vivint Flex Pay is the significant driver of our subscriber retention strategy. Our retention improves as our subscribers enter into longer term contracts. Vivint Flex Pay has also improved Legacy Vivint Smart Home’s subscriber economics with an Average Subscriber Lifetime of 92 months (approximately 8 years) as of December 31, 2019. If our expected long-term annualized attrition rate increases by 1% to 14%, Average Subscriber Lifetime would decrease to approximately 86 months. Conversely, if our expected attrition decreases by 1% to 12%, our Average Subscriber Lifetime would increase to approximately 100 months. Although there are costs to acquiring new subscribers, because we operate on a recurring revenue-based model, acquiring subscribers results in cumulative value generation that compounds and accrues over time.

We expect to continue investing in innovative technologies that will make our platform more valuable and engaging for subscribers, and we expect to continue investing in our subscriber acquisition channels to further improve the economics of our business model.

Recurring services for our subscriber contracts are billed directly to the subscriber in advance, generally monthly, pursuant to the terms of subscriber contracts and recognized ratably over the service period. Because we view the sale of our subscription and the accompanying devices as a single, combined performance obligation, we recognize these revenues together, ratably, generally over the course of the contract. We operate in a single, reportable segment.

Key Factors Affecting Operating Results After the Merger

Our future operating results and cash flows are dependent upon a number of opportunities, challenges and other factors, including our ability to efficiently grow our subscriber base, expand our Product and Service offerings to generate increased revenue per user, provide high quality products and subscriber service to maximize subscriber lifetime value and improve the leverage of our business model.

Market factors and disruptions in global markets may also affect our future operating results and cash flows. For example, we cannot presently estimate the overall operational and financial impact of the coronavirus disease (COVID-19), which could be material to our 2020 results, and which is highly dependent on the breadth and duration of the outbreak and could be affected by other factors we are not currently able to predict.

Key factors affecting our operating results include the following:

Subscriber Lifetime

Our ability to retain subscribers has a significant impact on our financial results, including revenues, operating income, and operating cash flows. Because we operate a business built on recurring revenues,

61

subscriber lifetime is a key determinant of our operating success. Legacy Vivint Smart Home’s Average Subscriber Lifetime was 92 months (approximately 8 years) as of December 31, 2019. If our expected long-term annualized attrition rate increases by 1% to 14%, Average Subscriber Lifetime would decrease to approximately 86 months. Conversely, if our expected attrition decreases by 1% to 12%, our Average Subscriber Lifetime would increase to approximately 100 months. A portion of the subscriber base can be expected to cancel its service every year. Subscribers may choose not to renew or may terminate their contracts for a variety of reasons, including, but not limited to, relocation, cost, switching to a competitor’s service or service issues. We analyze our retention by tracking the number of subscribers who remain as a percentage of the monthly average number of subscribers at the end of each 12 month period. We caution investors that not all companies, investors and analysts in our industry define retention in this manner.

The table below presents Legacy Vivint Smart Home’s subscriber data for the years ended December 31, 2019, 2018 and 2017:

Historically, Legacy Vivint Smart Home has experienced an increased level of subscriber cancellations in the months surrounding the expiration of such subscribers’ initial contract term. Attrition in any twelve month period may be impacted by the number of subscriber contracts reaching the end of their initial term in such period. Attrition in the twelve months ended December 31, 2019, reflects the effect of the 2014 60-month, 2015 42-month and 2016 42-month contracts reaching the end of their initial contract term. Attrition in the twelve months ended December 31, 2018 reflects the effect of the 2013 60-month, 2014 60-month and 2015 42-month contracts reaching the end of their initial contract term. We believe this trend in cancellations at the end of the initial contract term is comparable to other companies within our industry.

Our subscribers are the foundation of our recurring revenue-based model. Our operating results are affected by the level of our net acquisition costs to generate those subscribers and the value of products and services purchased by them. A reduction in net subscriber acquisition costs or an increase in the total value of products or services purchased by a new subscriber increases the life-time value of that subscriber, which in turn, improves our operating results and cash flows over time.

The net upfront cost of adding incremental subscribers is a key factor impacting our ability to scale. Vivint Flex Pay has made it more affordable to accelerate the growth in new subscribers. Prior to Vivint Flex Pay, Legacy Vivint Smart Home recovered the cost of equipment installed in subscribers’ homes over time through their monthly service billings. From the introduction of Vivint Flex Pay in early 2017 through December 31, 2019, 14% of Legacy Vivint Smart Home subscribers have financed their equipment purchases through RICs, which we fund through Legacy Vivint Smart Home’s balance sheet. We expect the percentage of subscriber contracts financed through RICs to continue decreasing over time. In addition, since the introduction of Vivint Flex Pay in 2017, 100% of new Legacy Vivint Smart Home subscribers have either opted to use this program to finance their equipment costs or paid for their equipment themselves at the time of contract origination. This has greatly reduced the net cost per acquisition, as well as the balance sheet impact of acquiring subscribers. Moving forward, we will continue to explore ways to grow our subscriber base in a cost-effective manner through our existing sales and marketing channels, through the growth of our financing programs, as well as through strategic partnerships and new channels, as these opportunities arise.

62

We believe the Vivint Flex Pay program will result in higher retention, more revenue per user, and thus greater subscriber lifetime values. Existing subscribers are also able to use Vivint Flex Pay to upgrade their systems or to add new products and services, which we believe further increases subscriber lifetime value. This positively impacts our operating performance, and we anticipate that adding additional financing partners to the Vivint Flex Pay program, both in the United States and Canada, will generate additional revenue growth and a subsequent increase in subscriber lifetime value. For additional information about Vivint Flex Pay, see “Critical Accounting Policies and Estimates—Consumer Financing Program” below.

Sales and Marketing Efficiency

Our continued ability to attract and sign new subscribers in a cost-effective manner across the United States and Canada will be a key determinant of our future operating performance. Because our direct-to-home and national inside sales channels are currently our primary means of subscriber acquisition, we have invested heavily in scaling these teams. There is a lag in the productivity of new hires, which we anticipate will improve over the course of their tenure, impacting our subscriber acquisition rates and overall operating success. These Smart Home Pros are instrumental to subscriber growth in the regions we cover, and their continued productivity is vital to our future success.

Generating subscriber growth through these investments in our sales teams depends, in part, on our ability to launch cost-effective marketing campaigns, both online and offline. This is particularly true for our National Inside Sales (“NIS”) channel, because NIS fields inbound requests from subscribers who find us using online search and submitting our on-site contact form. Our marketing campaigns attract potential subscribers and successfully build awareness of our brand across all our sales channels. We also believe that building brand awareness is important to countering the competition we face from other companies in the geographies we serve, particularly in those markets where our direct-to-home sales representatives are present. We expect to scale our retail channel through several pilot programs. Similar to the delay between the hiring of a Smart Home Pro and the resulting revenue generation, we anticipate that our retail efforts will take time to reach capacity. Once they do, we hope to accelerate subscriber acquisition and revenue growth by scaling this channel, while maintaining our unit economics.

Expansion of Platform Monetization

As smart home technology develops, we will continue expanding the breadth and depth of our offerings to reflect the growing needs of our subscriber base and focus on expanding our platform through the addition of new smart home experiences and use cases. As a result of Legacy Vivint Smart Home’s investments to date, our smart home platform is active in over 1.5 million households. We will continue to develop our Smart Home Operating System to include new complex automation capabilities, use case scenarios, and comprehensive device integrations. The Legacy Vivint Smart Home platform supports over 20 million connected devices, as of December 31, 2019.

With each new Product, Service, or feature we add to our platform, we create an opportunity to generate revenue, either through sales to our existing subscribers or through the acquisition of new subscribers. As a result, we anticipate that offering a broader range of smart home experiences will allow us to grow revenue, because it improves our ability to offer tailored service packages to subscribers with different needs. This is the rationale behind our addition of Carguard, a service that expands our smart home experience beyond the four walls of the home. We believe this expansion of our Product and Service offerings will allow us to build our subscriber base, while maintaining or improving margins.

Whether we upsell existing subscribers or acquire new ones, expansion of our platform and corresponding monetization strategies directly impacts our revenue growth and our average revenue per user, and therefore, our operating results.

63

Subscribers who contract for a smart home are signing up for our combined proprietary smart home devices and tech-enabled service offerings. At the time of signing, subscribers choose the subscription-based service that matches their smart home needs. Because our revenue and operating margins are determined by which package a subscriber signs up for, ensuring that new subscribers choose the appropriate service offering is a major determinant of our operating success. Additionally, because we cover 98% of US zip codes, our service costs greatly impact our operating margins. Over time, as our organization grows, we achieve economies of scale on our service costs. While we anticipate that our service costs per subscriber will decline over time, an unanticipated increase in service costs could negatively impact our profitability moving forward.

Investment in Future Projects

Legacy Vivint Smart Home has made significant investments in the development of our organization, and we expect to leverage these investments to continue expanding our Product and Service offerings over time, including integration with third party products to drive future revenue. Our ability to expand our smart home platform and to monetize the platform as it develops will significantly impact our operating performance and profitability in the future.

We believe that the smart home of the future will be an ecosystem in which businesses will seek to deliver products and services to subscribers in a way that addresses the individual subscriber’s lifestyle and needs. As the smart home becomes the setting for the delivery of a wide range of these products and services, including healthcare, entertainment, home maintenance, elder care, beauty, and consumer goods, we hope to become the hub of this ecosystem and the strategic partner of choice for the businesses delivering these products and services.

Our success in connecting with business partners who integrate with our Smart Home Operating System in order to reach and interact with our subscriber base will be a key determinant of our continued operating success. We expect that additional partnerships will generate incremental revenue, because we will share in the revenue generated by each partner-provided product or service sale that occurs as a result of integration with our smart home platform. If we are able to continue expanding our curated set of partnerships with influential companies, as we already have with Google, Amazon, and Philips, we believe that this will help us to increase our revenue and resulting profitability.

Our ability to introduce a full suite of high-quality innovative new offerings that further expands our existing smart home platform will affect our ability to retain, grow and further monetize our subscriber base. Furthermore, we believe that by vertically integrating the development and design of our Products and Services with our existing sales and subscriber service activities allows us to more quickly respond to market needs, and better understand our subscribers’ interactions and engagement with our Products and Services. This provides critical data that we expect to enable us to continue improving the power, usability and intelligence of these Products and Services. We expect to continue investing in technologies that will make our platform more valuable and engaging for subscribers.

Key Performance Measures After the Merger

In evaluating our results, we review several key performance measures discussed below. We believe that the presentation of such metrics is useful to our investors and lenders because they are used to measure the value of companies such as ours with recurring revenue streams. After the Merger, our management uses these metrics to analyze its continuing operations and to monitor, assess, and identify meaningful trends in the operating and financial performance of the company.

Total Subscribers

Total subscribers is the aggregate number of active smart home and security subscribers at the end of a given period.

64

Total Monthly Revenue

Total monthly revenue, or Total MR, is the average monthly total revenue recognized during the period.

Average Monthly Revenue per User

Average monthly revenue per user, or AMRU, is Total MR divided by average monthly Total Subscribers during a given period.

Total Monthly Service Revenue

Total monthly service revenue, or MSR, is the contracted recurring monthly service billings to our smart home and security subscribers, based on the Total Subscribers number as of the end of a given period.

Average Monthly Service Revenue per User

Average monthly service revenue per user, or AMSRU, is Total MSR divided by Total Subscribers at the end of a given period.

Attrition Rate

Attrition rate is the aggregate number of canceled smart home and security subscribers during the prior 12 month period divided by the monthly weighted average number of Total Subscribers based on the Total Subscribers at the beginning and end of each month of a given period. Subscribers are considered canceled when they terminate in accordance with the terms of their contract, are terminated by us or if payment from such subscribers is deemed uncollectible (when at least four monthly billings become past due). If a sale of a service contract to third parties occurs, or a subscriber relocates but continues their service, we do not consider this as a cancellation. If a subscriber transfers their service contract to a new subscriber, we do not consider this as a cancellation.

Average Subscriber Lifetime

Average subscriber lifetime, in number of months, is 100% divided by our expected long-term annualized attrition rate (which is currently estimated at 13%) multiplied by 12 months.

Net Service Cost per Subscriber

Net service cost per subscriber is the average monthly service costs incurred during the period (both period and capitalized service costs), including monitoring, customer service, field service and other service support costs, less total non-recurring Smart Home Services billings for the period divided by average monthly Total Subscribers for the same period.

Net Service Margin

Net service margin is the monthly average MSR for the period, less total average net service costs for the period divided by the monthly average MSR for the period.

New Subscribers

New subscribers is the aggregate number of net new smart home and security subscribers originated during a given period. This metric excludes new subscribers acquired by the transfer of a service contract from one subscriber to another.

65

Net Subscriber Acquisition Costs per New Subscriber

Net subscriber acquisition costs per New Subscriber is the net cash cost to create new smart home and security subscribers during a given 12 month period divided by New Subscribers for that period. These costs include commissions, Products, installation, marketing, sales support and other allocations (general and administrative and overhead); less upfront payment received from the sale of Products associated with the initial installation, and installation fees. These costs exclude capitalized contract costs and upfront proceeds associated with contract modifications.

Total Monthly Service Revenue for New Subscribers

Total Monthly Service Revenue for New Subscribers is the contracted recurring monthly service billings to our New Subscribers during the prior 12 month period.

Total Bookings

Total bookings is Total Monthly Service Revenue for New Subscribers multiplied by Average Subscriber Lifetime, plus total Product revenue to be recognized over the contract term from New Subscribers during the prior 12 month period.

Total Backlog

Total backlog is total unrecognized Product revenue plus total Service revenue expected to be recognized over the remaining subscriber lifetime for Total Subscribers.

Components of Results of Operations

Total Revenues

Recurring and Other Revenue

Our revenues are generated through the sale and installation of our Smart Home Services contracted for by our subscribers. Recurring Smart Home Services for our subscriber contracts are billed directly to the subscriber in advance, generally monthly, pursuant to the terms of subscriber contracts and recognized ratably over the service period. Revenues from products are deferred and generally recognized on a straight-line basis over the customer contract term, the amount of which is dependent on the total sales price of products sold. Imputed interest associated with RIC receivables is recognized over the initial term of the RIC. The amount of revenue from services is dependent upon which of our service offerings is included in the subscriber contracts. Our smart home and video offerings generally provide higher service revenue than our base smart home service offering. Historically, Legacy Vivint Smart Home has generally offered contracts to subscribers that range in length from 36 to 60 months that are subject to automatic monthly renewal after the expiration of the initial term. In addition, to a lesser extent, it has contracts that are offered as month-to-month at the time of origination. At the end of each monthly period, the portion of recurring fees related to services not yet provided are deferred and recognized as these services are provided.

Total Costs and Expenses

Operating Expenses

Operating expenses primarily consists of labor associated with monitoring and servicing subscribers and labor and expenses associated with Products used in service repairs. We also incur equipment costs associated with excess and obsolete inventory and rework costs related to Products removed from subscribers’ homes. In addition, a portion of general and administrative expenses, comprised of certain human resources, facilities and information technology costs are allocated to operating expenses. This allocation is primarily based on employee

66

headcount and facility square footage occupied. Because our full-time smart home professionals (“Smart Home Pros”) perform most subscriber installations related to customer moves, customer upgrades or those generated through our national inside sales channels, the costs incurred within field service associated with these installations are allocated to capitalized contract costs. We generally expect our operating expenses to increase in absolute dollars as the total number of subscribers we service continues to grow, but to remain relatively constant in the near to intermediate term as a percentage of our revenue.

Selling Expenses

Selling expenses are primarily comprised of costs associated with housing for our direct-to-home sales representatives, advertising and lead generation, marketing and recruiting, certain portions of sales commissions (residuals), overhead (including allocation of certain general and administrative expenses) and other costs not directly tied to a specific subscriber origination. These costs are expensed as incurred. We generally expect our selling expenses to increase in absolute dollars as the total number of subscriber originations continues to grow, but to remain relatively constant in the near to intermediate term as a percentage of our revenue.

General and Administrative Expenses

General and administrative expenses consist largely of finance, legal, research and development, or R&D, human resources, information technology and executive management expenses, including stock-based compensation expense. Stock-based compensation expense is recorded within various components of our costs and expenses. General and administrative expenses also include the provision for doubtful accounts. We allocate approximately one-third of our gross general and administrative expenses, excluding the provision for doubtful accounts, into operating and selling expenses in order to reflect the overall costs of those components of the business. We generally expect our general and administrative expenses to increase in absolute dollars to support the overall growth in our business, but to decrease in the near to intermediate term as a percentage of our revenue.

Depreciation and Amortization

Depreciation and amortization consists of depreciation from property, plant and equipment, amortization of equipment leased under finance leases, capitalized contract costs and intangible assets. We generally expect our depreciation and amortization expenses to increase in absolute dollars as we grow our business and increase the number of new subscribers originated on an annual basis, but to remain relatively constant in the near to intermediate term as a percentage of our revenue.

Restructuring Expenses

Restructuring expenses are comprised of costs incurred in relation to activities to exit or dispose of portions of our business that do not qualify as discontinued operations. Expenses for related termination benefits are recognized at the date we notify the employee, unless the employee must provide future service, in which case the benefits are expensed ratably over the future service period. Liabilities related to termination of a contract are measured and recognized at fair value when the contract does not have any future economic benefit to the entity and the fair value of the liability is determined based on the present value of the remaining obligation.

Critical Accounting Policies and Estimates

In preparing our consolidated financial statements, we make assumptions, judgments and estimates that can have a significant impact on our revenue, loss from operations and net loss, as well as on the value of certain assets and liabilities on our consolidated balance sheets. We base our assumptions, judgments and estimates on historical experience and various other factors that we believe to be reasonable under the circumstances. Actual results could differ materially from these estimates under different assumptions or conditions. At least quarterly,

67

we evaluate our assumptions, judgments and estimates and make changes accordingly. Historically, our assumptions, judgments and estimates relative to our critical accounting estimates have not differed materially from actual results. We believe that the assumptions, judgments and estimates involved in the accounting for revenue recognition, deferred revenue, capitalized contract costs, derivatives, retail installment contract receivables, allowance for doubtful accounts, loss contingencies, valuation of intangible assets, impairment of long-lived assets, fair value and income taxes have the greatest potential impact on our consolidated financial statements; therefore, we consider these to be our critical accounting estimates. For information on our significant accounting policies, see Note 2 to the accompanying audited consolidated financial statements.

Revenue Recognition

We offer our customers smart home services combining Products, including a proprietary control panel, door and window sensors, door locks, security cameras and smoke alarms; installation; and a proprietary back-end cloud platform software and Services. These together create an integrated system that allows our customers to monitor, control and protect their home. Our customers are buying this integrated system that provides them with these Smart Home Services. The number and type of Products purchased by a customer depends on their desired functionality. Because the Products and Services included in the customer’s contract are integrated and highly interdependent, and because they must work together to deliver the Smart Home Services, we have concluded that installed Products, related installation and Services contracted for by the customer are generally not distinct within the context of the contract and, therefore, constitute a single, combined performance obligation. Revenues for this single, combined performance obligation are recognized on a straight-line basis over the customer’s contract term, which is the period in which the parties to the contract have enforceable rights and obligations. We have determined that certain contracts that do not require a long-term commitment for monitoring services by the customer contain a material right to renew the contract, because the customer does not have to purchase Products upon renewal. Proceeds allocated to the material right are recognized over the period of benefit, which is generally three years.

The majority of our subscription contracts are between three and five years in length and are non-cancelable. These contracts with customers generally convert into month-to-month agreements at the end of the initial term, and some customer contracts are month-to-month from inception. Payment for recurring monitoring and other Smart Home Services is generally due in advance on a monthly basis.

Sales of Products and other one-time fees such as service fees or installation fees are invoiced to the customer at the time of sale. Revenues for wireless internet service that were provided by Vivint Wireless Inc. and any products or services that are considered separate performance obligations are recognized when those products or services are delivered. Taxes collected from customers and remitted to governmental authorities are not included in revenue. Payments received or amounts billed in advance of revenue recognition are reported as deferred revenue.

We consider Products, related installation, and our proprietary back-end cloud platform software and services an integrated system that allows our customers to monitor, control and protect their homes. These Smart Home Services are accounted for as a single performance obligation that is recognized over the customer’s contract term, which is generally three to five years.

Deferred Revenue

Our deferred revenues primarily consist of amounts for sales (including upfront proceeds) of Smart Home Services. Deferred revenues are recognized over the term of the related performance obligation, which is generally three to five years.

Capitalized Contract Costs

Capitalized contract costs represent the costs directly related and incremental to the origination of new contracts, modification of existing contracts or to the fulfillment of the related subscriber contracts. These

68

include commissions, other compensation and related costs incurred directly for the origination and installation of new or upgraded customer contracts, as well as the cost of Products installed in the subscriber’s home at the commencement or modification of the contract. We calculate amortization by accumulating all deferred contract costs into separate portfolios based on the initial month of service and amortize those deferred contract costs on a straight-line basis over the expected period of benefit that we have determined to be five years, consistent with the pattern in which we provide services to our customers. We believe this pattern of amortization appropriately reduces the carrying value of the capitalized contract costs over time to reflect the decline in the value of the assets as the remaining period of benefit for each monthly portfolio of contracts decreases. The period of benefit of five years is longer than a typical contract term because of anticipated contract renewals. We apply this period of benefit to our entire portfolio of contracts. We update our estimate of the period of benefit periodically and whenever events or circumstances indicate that the period of benefit could change significantly. Such changes, if any, are accounted for prospectively as a change in estimate. Amortization of capitalized contract costs is included in “Depreciation and Amortization” on the consolidated statements of operations.

The carrying amount of the capitalized contract costs is periodically reviewed for impairment. In performing this review, we consider whether the carrying amount of the capitalized contract costs will be recovered. In estimating the amount of consideration we expect to receive in the future related to capitalized contract costs, we consider factors such as attrition rates, economic factors, and industry developments, among other factors. If we determine that capitalized contract costs are impaired, we recognize an impairment loss for the amount by which the carrying amount of the capitalized contract costs and the anticipated costs that relate directly to providing the future services exceed the consideration that we have received and that we expect to receive in the future.

Contract costs not directly related and incremental to the origination of new contracts, modification of existing contracts or to the fulfillment of the related subscriber contracts are expensed as incurred. These costs include those associated with housing, marketing and recruiting, non-direct lead generation costs, certain portions of sales commissions and residuals, overhead and other costs considered not directly and specifically tied to the origination of a particular subscriber.

On the accompanying consolidated statement of cash flows, capitalized contract costs are classified as operating activities and reported as “Capitalized contract costs – deferred contract costs” as these assets represent deferred costs associated with subscriber contracts.

Consumer Financing Program

Vivint Flex Pay became Legacy Vivint Smart Home’s primary sales model beginning in March 2017. Under Vivint Flex Pay, customers pay separately for Products and Services. The customer has the following three ways to pay for the Products: (1) qualified customers in the United States may finance the purchase of Products through a third-party financing provider (“Consumer Financing Program”), (2) we offer to some customers not eligible for the Consumer Financing Program, but who qualify under our underwriting criteria, the option to enter into a retail installment contract (“RIC”) directly with us, or (3) customers may purchase the Products at the outset of the service contract by check, automatic clearing house payments (“ACH”), credit or debit card.

Under the Consumer Financing Program, qualified customers are eligible for loans provided by third-party financing providers up to $4,000. The annual percentage rates on these loans range between 0% and 9.99%, based on the customer’s credit quality, and are either installment loans or revolving loans with a 42 or 60 month term. For certain third-party provider loans, we pay a monthly fee based on either the average daily outstanding balance of the loans or the number of outstanding loans, depending on the third-party financing provider and we share liability for credit losses, with the Company being responsible for between 5% and 100% of lost principal balances. Additionally, we are responsible for reimbursing certain third-party financing providers for the credit card transaction fees associated with the loans. Because of the nature of these provisions, we record a derivative liability at its fair value when the third-party financing provider originates loans to customers, which reduces the amount of estimated revenue recognized on the provision of the services. The derivative liability represents the

69

estimated remaining amounts to be paid to the third-party provider by us related to outstanding loans, including the monthly fees based on either the outstanding loan balances or the number of outstanding loans, shared liabilities for credit losses and customer payment processing fees. The derivative liability is reduced as payments are made by us to the third-party financing provider. Subsequent changes to the fair value of the derivative liability are realized through other expenses (income), net in the Consolidated Statement of Operations.

For other third-party loans, we receive net proceeds (net of fees and expected losses) for which we have no further obligation to the third-party. We record these net proceeds to deferred revenue.

Retail Installment Contract Receivables

For subscribers that enter into a RIC to finance the purchase of Products and related installation, we record a receivable for the amount financed. Gross RIC receivables are reduced for (i) expected write-offs of uncollectible balances over the term of the RIC and (ii) a present value discount of the expected cash flows using a risk adjusted market interest rate (together, the “RIC Discount”). Therefore, the RIC receivables equal the present value of the expected cash flows to be received by us over the term of the RIC. At the time of installation, we record a long-term note receivable within long-term notes receivables and other assets, net on the consolidated balance sheets for the present value of the receivables that are expected to be collected beyond 12 months of the reporting date. The unbilled receivable amounts that are expected to be collected within 12 months of the reporting date are included as a short-term notes receivable within accounts and notes receivable, net on the consolidated balance sheets. The billed amounts of notes receivable are included in accounts receivable within accounts and notes receivable, net on the consolidated balance sheets.

We impute the interest on the RIC receivable using a risk adjusted market interest rate and record it as an adjustment to deferred revenue and as an adjustment to the face amount of the related receivable. The risk adjusted interest rate considers a number of factors, including credit quality of the subscriber base and other qualitative considerations such as macro-economic factors. The imputed interest income is recognized over the term of the RIC contract as recurring and other revenue on the consolidated statements of operations.

When we determine that there are RIC receivables that have become uncollectible, we record an adjustment to the RIC Discount and reduce the related note receivable balance. On a regular basis, we also assess the level of the RIC Discount balance based on historical RIC write-off trends and adjust the balance, if necessary. Account balances are written-off if collection efforts are unsuccessful and future collection is unlikely based on the length of time from the day accounts become past due.

Accounts Receivable

Accounts receivable consists primarily of amounts due from subscribers for recurring monthly monitoring Services and the billed portion of RIC receivables. The accounts receivable are recorded at invoiced amounts and are non-interest bearing and are included within accounts and notes receivable, net on the consolidated balance sheets. We estimate this allowance based on historical collection experience and subscriber attrition rates. When we determine that there are accounts receivable that are uncollectible, they are charged off against the allowance for doubtful accounts. The provision for doubtful accounts is included in general and administrative expenses in the accompanying consolidated statements of operations.

Loss Contingencies

We record accruals for various contingencies including legal proceedings and other claims that arise in the normal course of business. The accruals are based on judgment, the probability of losses and, where applicable, the consideration of opinions of legal counsel. We record an accrual when a loss is deemed probable to occur and is reasonably estimable. Factors that we consider in the determination of the likelihood of a loss and the estimate of the range of that loss in respect of legal matters include the merits of a particular matter, the nature of the

70

litigation, the length of time the matter has been pending, the procedural posture of the matter, whether we intend to defend the matter, the likelihood of settling for an insignificant amount and the likelihood of the plaintiff accepting an amount in this range. However, the outcome of such legal matters is inherently unpredictable and subject to significant uncertainties.

Goodwill and Intangible Assets

Purchase accounting requires that all assets and liabilities acquired in a transaction be recorded at fair value on the acquisition date, including identifiable intangible assets separate from goodwill. For significant acquisitions, we obtain independent appraisals and valuations of the intangible (and certain tangible) assets acquired and certain assumed obligations as well as equity. Identifiable intangible assets include customer relationships and other purchased and internally developed technology. Goodwill represents the excess of cost over the fair value of net assets acquired.

The estimated fair values and useful lives of identified intangible assets are based on many factors, including estimates and assumptions of future operating performance and cash flows of the acquired business, estimates of cost avoidance, the nature of the business acquired, the specific characteristics of the identified intangible assets and our historical experience and that of the acquired business. The estimates and assumptions used to determine the fair values and useful lives of identified intangible assets could change due to numerous factors, including product demand, market conditions, regulations affecting the business model of our operations, technological developments, economic conditions and competition.

We conduct a goodwill impairment analysis annually in the fourth fiscal quarter, as of October 1, and as necessary if changes in facts and circumstances indicate that the fair value of our reporting units may be less than their carrying amounts. When indicators of impairment do not exist and certain accounting criteria are met, we are able to evaluate goodwill impairment using a qualitative approach. When necessary, our quantitative goodwill impairment test consists of two steps. The first step requires that we compare the estimated fair value of our reporting units to the carrying value of the reporting unit’s net assets, including goodwill. If the fair value of the reporting unit is greater than the carrying value of its net assets, goodwill is not considered to be impaired and no further testing is required. If the fair value of the reporting unit is less than the carrying value of its net assets, we would be required to complete the second step of the test by analyzing the fair value of its goodwill. If the carrying value of the goodwill exceeds its fair value, an impairment charge is recorded. Our reporting units are determined based on our current reporting structure, which as of December 31, 2019 consisted of one reporting unit. As of December 31, 2019, there were no changes in facts and circumstances since the most recent annual impairment analysis to indicate impairment existed.

Property, Plant and Equipment and Long-lived Assets

Property, plant and equipment are stated at cost and depreciated on the straight-line method over the estimated useful lives of the assets or the lease term for assets under finance leases, whichever is shorter. Intangible assets with definite lives are amortized over the remaining estimated economic life of the underlying technology or relationships, which ranges from two to ten years. Definite-lived intangible assets are amortized on the straight-line method over the estimated useful life of the asset or in a pattern in which the economic benefits of the intangible asset are consumed. Amortization expense associated with leased assets is included with depreciation expense. Routine repairs and maintenance are charged to expense as incurred.

We review long-lived assets, including property, plant and equipment, capitalized contract costs, and definite-lived intangibles for impairment when events or changes in circumstances indicate that the carrying amount may not be recoverable. We consider whether or not indicators of impairment exist on a regular basis and as part of each quarterly and annual financial statement close process. Factors we consider in determining whether or not indicators of impairment exist include market factors and patterns of customer attrition. If indicators of impairment are identified, we estimate the fair value of the assets. An impairment loss is recognized if the carrying amount of a long-lived asset is not recoverable and exceeds its fair value.

71

We conduct an indefinite-lived intangible impairment analysis annually as of October 1, and as necessary if changes in facts and circumstances indicate that the fair value of our indefinite-lived intangibles may be less than the carrying amount. When indicators of impairment do not exist and certain accounting criteria are met, we are able to evaluate indefinite-lived intangible impairment using a qualitative approach. When necessary, our quantitative impairment test consists of two steps. The first step requires that we compare the estimated fair value of our indefinite-lived intangibles to the carrying value. If the fair value is greater than the carrying value, the intangibles are not considered to be impaired and no further testing is required. If the fair value is less than the carrying value, an impairment loss in an amount equal to the difference is recorded.

Income Taxes

We account for income taxes based on the asset and liability method. Under the asset and liability method, deferred tax assets and deferred tax liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Valuation allowances are established when necessary to reduce deferred tax assets when it is determined that it is more likely than not that some portion, or all, of the deferred tax asset will not be realized.

We recognize the effect of an uncertain income tax position on the income tax return at the largest amount that is more likely than not to be sustained upon audit by the relevant taxing authority. An uncertain income tax position will not be recognized if it has less than a 50% likelihood of being sustained. Our policy for recording interest and penalties is to record such items as a component of the provision for income taxes.

Changes in tax laws and rates could also affect recorded deferred tax assets and liabilities in the future. We record the effect of a tax rate or law change on our deferred tax assets and liabilities in the period of enactment. Future tax rate or law changes could have a material effect on our results of operations, financial condition, or cash flows.

Recent Accounting Pronouncements

See Note 2 to Legacy Vivint Smart Home’s accompanying audited Consolidated Financial Statements.

Basis of Presentation

We conduct business through one operating segment, Vivint, and primarily operate in two geographic regions: the United States and Canada. See Note 16 in the accompanying consolidated financial statements for more information about Legacy Vivint Smart Home’s geographic segments.

Results of Operations for Mosaic Acquisition Corp.

Our entire activity from inception up to December 31, 2019 related to our formation, commencement of our initial public offering and entering into forward purchase agreements. After the initial public offering, our activity was limited to the search for a prospective initial business combination, which we completed on January 17, 2020 with the consummation of the Merger. For the year ended December 31, 2019, we incurred expenses as a result of being a public company (for legal, financial reporting, accounting and auditing compliance), as well as for due diligence expenses.

For the year ended December 31, 2019, we had a net income of approximately $4.2 million, which consisted of approximately $1.3 million in general and administrative expenses, approximately $195,000 in franchise tax expense, approximately $1.5 million in income tax expense, offset by approximately $7.2 million in interest income.

72

For the year ended December 31, 2018, we had a net income of approximately $5.3 million, which consisted of approximately $871,000 in general and administrative expenses, approximately $5,500 in franchise tax expense, approximately $44,000 in income tax expense, offset by approximately $6.2 million in interest income

Results of Operations for Legacy Vivint Smart Home, Inc.

Key Performance Measures