Equity Method Investments

The Company currently holds two investments, SUPERNAP International and Planet3, Inc. ("Planet3"). As of December 31, 2017 and 2016, the Company determined that it continued to have a variable interest in both SUPERNAP International and Planet3, as the entities do not have sufficient equity at risk. However, the Company concluded that it is not the primary beneficiary of SUPERNAP International or of Planet3 as it does not have deemed control of either entity. As a result, it does not consolidate either entity into its consolidated financial statements.

As of December 31, 2017 and 2016, the investment in SUPERNAP International was accounted for under the equity method of accounting. SUPERNAP International is an investment of which the Company holds a 50% ownership interest. As of December 31, 2017 and 2016, the Company had invested $1.3 million in SUPERNAP International. As of December 31, 2017, the Company's carrying value of its investment in SUPERNAP International was reduced to zero as a result of recording its share of the investee's losses. Accordingly, as the Company does not have any guaranteed obligations and is not otherwise committed to provide further financial support to SUPERNAP International, the Company discontinued the equity method of accounting for its investment in SUPERNAP International as of December 31, 2017 and will not provide for additional losses until its share of future net income or comprehensive income, if any, equals the share of net losses or comprehensive losses not recognized during the period the equity method was suspended. The Company's share of net loss recorded for the years ended December 31, 2017, and 2016, amounted to $1.0 million and $2.1 million, respectively. In 2015, SUPERNAP International recognized $10.0 million in revenue under a license agreement with a Thailand joint venture. As a result, the Company recognized equity in net earnings of SUPERNAP International of $2.8 million during the year ended December 31, 2015. As of December 31, 2017 and 2016, the Company had recorded amounts consisting of reimbursable expenses due from SUPERNAP International of $337,000 and $1.4 million, respectively, within accounts receivable on the consolidated balance sheets.

Planet3 is an investment of which the Company holds a 45% ownership interest. As of December 31, 2017 and 2016, the Company had invested $10.0 million in Planet3. The Company's share of net loss recorded for the years ended December 31, 2016 and 2015 amounted to $3.7 million and $2.0 million, respectively. As of December 31, 2016, as the Company does not have any guaranteed obligations and is not otherwise committed to provide further financial support to Planet3, the Company discontinued the equity method of accounting for its investment in Planet3 and will not provide for additional losses until its share of future net income, if any, equals the share of net losses not recognized during the period the equity method was suspended.

On May 13, 2016, Switch, Ltd. entered into an agreement with Planet3 (the "Note Purchase Agreement") pursuant to which Planet3 agreed to issue to Switch, Ltd. secured convertible promissory notes with an aggregate principal amount not to exceed $3.0 million. Interest accrues on the unpaid principal balance of the notes at 5% per annum. The notes, together with any then unpaid and accrued interest, matured on September 1, 2017. On the maturity date, the outstanding principal balance and accrued interest can be converted at the Company's option into ownership interests of Planet3, which remained unexercised by the Company as of December 31, 2017. On September 6, 2017, the Company delivered to Planet3 a Notice of Default. As of December 31, 2017 and 2016, the Company had purchased notes having an aggregate principal amount of $3.0 million. If a qualified financing, as defined in the notes, had occurred on or prior to the maturity date, then, upon the closing of the qualified financing, the outstanding principal amount of the notes and all accrued and unpaid interest would have automatically converted into shares of the preferred stock issued by Planet3 at a discount. The Company had identified and separately accounted for an embedded derivative related to the automatic conversion feature of the secured convertible promissory notes. The estimated fair value of the embedded derivative was based on Level 3 inputs, such as the value of the preferred stock upon conversion, using a present value of future cash flow valuation technique that relied on management assumptions of the probability of occurrence, term, and the risk-free discount rate. The embedded derivative was fully impaired as of December 31, 2016.

As of December 31, 2016, the Company determined an other than temporary loss in value of its investment in Planet3 had occurred due to Planet3's continued operating losses and the release of a beta product that did not generate the projected sales activity. The Company fully impaired the carrying values of its investment in Planet3 of $4.4 million, notes receivable of $2.4 million, net of a $629,000 discount, interest receivable of $55,000, and related embedded derivative of $896,000 for a total write-down of $7.7 million. The estimated fair value of the Company's investment in Planet3 was based on Level 3 inputs, using a present value of future cash flow valuation technique that relied on management assumptions to derive an enterprise value.

The summarized financial information of the Company's equity method investments is as follows:



	December 31,
	2017		2016
	(in thousands)
Current assets	$	2,169	$	5,683
Noncurrent assets	$	17,075	$	18,956
Current liabilities	$	2,583	$	2,558
Noncurrent liabilities	$	19,445	$	23,164



	Years Ended December 31,
	2017			2016			2015
	(in thousands)
Revenue	$	700		$	1,239		$	10,866
Gross (loss) profit	$	(3,467	)	$	(2,313	)	$	7,628
Net (loss) income	$	(5,834	)	$	(12,353	)	$	1,412