Attached files
file | filename |
---|---|
8-K/A - FORM 8-K/A - BLACKBOARD INC | w80214e8vkza.htm |
EX-99.4 - EX-99.4 - BLACKBOARD INC | w80214exv99w4.htm |
EX-23.1 - EX-23.1 - BLACKBOARD INC | w80214exv23w1.htm |
EX-23.2 - EX-23.2 - BLACKBOARD INC | w80214exv23w2.htm |
EX-99.3 - EX-99.3 - BLACKBOARD INC | w80214exv99w3.htm |
EXHIBIT 99.5
Unaudited Pro Forma Financial Information
On July 2, 2010, Blackboard Inc. (Blackboard or the Company) entered into an Arrangement
Agreement to acquire all outstanding shares in the capital of Elluminate, Inc., a Canadian
federal corporation (Elluminate). On July 2, 2010, the Company entered into an Agreement and
Plan of Acquisition to acquire Wimba, Inc., a Delaware corporation (Wimba), by merging a wholly
owned subsidiary of the Company with and into Wimba. On August 4, 2010 and August 5, 2010, the
Company closed its acquisitions of Elluminate and Wimba, respectively.
The following unaudited pro forma consolidated financial statements have been prepared to
give effect to the completed acquisitions of Elluminate and Wimba. The unaudited pro forma
condensed consolidated balance sheet as of June 30, 2010 gives effect to the acquisitions of
Elluminate and Wimba as if they had occurred on June 30, 2010. The unaudited pro forma condensed
consolidated balance sheet as of June 30, 2010 is derived from the unaudited historical financial
statements of Blackboard and Wimba as of June 30, 2010 and the unaudited internally prepared
financial statements of Elluminate as of June 30, 2010. The unaudited pro forma consolidated
statement of operations for the six months ended June 30, 2010 gives effect to the Elluminate and
Wimba acquisitions as if they had occurred on January 1, 2010 and also gives effect to
Blackboards acquisition of Saf-T-Net, Inc. (Saf-T-Net) on March 19, 2010, as if it had
occurred on January 1, 2010. The unaudited pro forma consolidated statement of operations is
derived from the unaudited historical financial statements of Blackboard and Wimba for the six
months ended June 30, 2010, the unaudited internally prepared financial statements of Elluminate
for the six months ended June 30, 2010 and the unaudited internally prepared historical financial
statements of Saf-T-Net for the period from January 1, 2010 to March 19, 2010. The unaudited pro
forma consolidated statement of operations for the year ended December 31, 2009 gives effect to
the Saf-T-Net, Elluminate and Wimba acquisitions as if they had occurred on January 1, 2009 and
also gives effect to Blackboards acquisition of ANGEL Learning, Inc. (ANGEL) on May 9, 2009 as
if it had occurred on January 1, 2009. The unaudited pro forma consolidated statement of
operations for the year ended December 31, 2009 is derived from the audited historical financial
statements of Blackboard, Wimba and Saf-T-Net for the year ended December 31, 2009, the unaudited
internally prepared historical financial statements of Elluminate for the year ended December 31,
2009 and the unaudited internally prepared historical financial statements of ANGEL for the
period from January 1, 2009 to May 8, 2009.
The Elluminate and Wimba acquisitions were accounted for under the acquisition method of
accounting. Under the acquisition method of accounting, the total estimated purchase price,
calculated as described in Notes 1 and 2 to the unaudited pro forma consolidated financial
statements, is allocated to the net tangible and intangible assets acquired and liabilities
assumed in connection with the Elluminate and Wimba acquisitions, based on their estimated fair
values as of the effective date of the Elluminate and Wimba acquisitions. The preliminary
allocation of the purchase price was based upon managements preliminary valuation of the fair
value of tangible and intangible assets acquired and liabilities assumed and such estimates and
assumptions are subject to change. The areas of the purchase price allocation that are not yet
finalized relate primarily to income and non-income based taxes.
The unaudited pro forma consolidated financial statements do not include any adjustments
regarding liabilities incurred or cost savings achieved resulting from the integration of the
companies, as management is in the process of assessing what, if any, future actions are
necessary. However, additional liabilities ultimately may
be recorded for severance and/or other costs associated with removing redundant operations
that could affect amounts in the unaudited pro forma consolidated financial statements, and their
effects may be material and would be reflected in the statement of operations.
The unaudited pro forma consolidated financial statements should be read in conjunction with
the historical audited consolidated financial statements and related notes of Blackboard, the
section entitled Managements Discussion and Analysis of Financial Condition and Results of
Operations contained in Blackboards Annual Report on Form 10-K for the year ended
December 31, 2009, filed on February 17, 2010 and the Quarterly Report on Form 10-Q for the Six
Months ended June 30, 2010, filed on August 9, 2010, as well as the audited historical financial
statements and related notes of Elluminate as of October 31, 2009 and for the year then ended and
the unaudited historical financial statements and related notes of Elluminate as of July 31, 2010
and for the nine months ended July 31, 2010 and 2009, which are attached as Exhibit 99.3 to this
Form 8K/A, and the audited historical financial statements and related notes of Wimba as of
December 31, 2009 and for the year then ended and the unaudited historical financial statements
and related notes of Wimba as of June 30, 2010 and for the six months ended June 30, 2010 and
2009, which are attached as Exhibit 99.4 to this Form 8-K/A. The unaudited pro forma consolidated
financial statements are not intended to represent or be indicative of the consolidated results
of operations or financial condition of Blackboard that would have been reported had the
acquisitions of Elluminate and Wimba been completed as of the dates presented, and should not be
construed as representative of the future consolidated results of operations or financial
condition of the combined entity.
1
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
BLACKBOARD INC.
AS OF JUNE 30, 2010
BLACKBOARD INC.
AS OF JUNE 30, 2010
Consolidated | ||||||||||||||||||||
Pro Forma | Consolidated | |||||||||||||||||||
Blackboard | Wimba | Elluminate | Adjustments | Total | ||||||||||||||||
(In thousands) | ||||||||||||||||||||
Current Assets: |
||||||||||||||||||||
Cash and cash equivalents |
$ | 137,284 | $ | 2,077 | $ | 1,767 | $ | (119,052 | )(a) | $ | 22,076 | |||||||||
Accounts receivable, net |
85,003 | 6,550 | 6,741 | | 98,294 | |||||||||||||||
Inventories |
228 | | | | 228 | |||||||||||||||
Prepaid expenses and other current assets |
17,828 | 526 | 271 | | 18,625 | |||||||||||||||
Deferred tax asset, current portion |
66 | | | 1,210 | (b) | 1,276 | ||||||||||||||
Deferred cost of revenues |
5,509 | | | | 5,509 | |||||||||||||||
Total current assets |
245,918 | 9,153 | 8,779 | (117,842 | ) | 146,008 | ||||||||||||||
Deferred tax asset, noncurrent portion |
17,136 | | | 6,966 | (b) | 24,102 | ||||||||||||||
Investment in common stock warrant |
3,124 | | | | 3,124 | |||||||||||||||
Restricted cash, noncurrent portion |
3,863 | 753 | | | 4,616 | |||||||||||||||
Property and equipment, net |
37,796 | 1,895 | 1,304 | | 40,995 | |||||||||||||||
Goodwill |
355,329 | 1,445 | | 63,814 | (c) | 420,588 | ||||||||||||||
Intangible assets, net |
74,107 | 89 | 355 | 39,176 | (d) | 113,727 | ||||||||||||||
Scientific research and development |
| | 427 | (427 | )(e) | | ||||||||||||||
Other assets |
967 | 8 | | | 975 | |||||||||||||||
Total assets |
$ | 738,240 | $ | 13,343 | $ | 10,865 | $ | (8,313 | ) | $ | 754,135 | |||||||||
Current liabilities: |
||||||||||||||||||||
Accounts payable |
$ | 3,990 | $ | | $ | | $ | 1,437 | (f) | $ | 5,427 | |||||||||
Accrued expenses |
33,954 | | | 3,911 | (f) | 37,865 | ||||||||||||||
Accounts payable and accrued expenses |
| 1,988 | 2,256 | (4,244 | )(f) | | ||||||||||||||
Tax payable |
| | 15 | (15 | )(f) | | ||||||||||||||
Deferred rent, current portion |
480 | | | | 480 | |||||||||||||||
Current portion of lease obligations |
| 160 | | | 160 | |||||||||||||||
Deferred tax liability, current portion |
543 | | | 782 | (b) | 1,325 | ||||||||||||||
Deferred revenues, current portion |
144,545 | 9,373 | 6,470 | (10,281 | )(g) | 150,107 | ||||||||||||||
Total current liabilities |
183,512 | 11,521 | 8,741 | (8,410 | ) | 195,364 | ||||||||||||||
Deferred rent, noncurrent portion |
11,792 | 963 | | (963 | )(h) | 11,792 | ||||||||||||||
Lease obligations, net of current portion |
| 64 | 218 | 763 | (i) | 1,045 | ||||||||||||||
Debt, noncurrent portion |
| | 2,906 | (2,906 | )(j) | | ||||||||||||||
Deferred revenues, noncurrent portion |
4,722 | 1,194 | | (786 | )(g) | 5,130 | ||||||||||||||
Deferred tax liability, noncurrent portion |
1,695 | | | 8,024 | (b) | 9,719 | ||||||||||||||
Convertible senior notes, net of debt discount |
159,242 | | | | 159,242 | |||||||||||||||
Stockholders equity (deficit) |
377,277 | (399 | ) | (1,000 | ) | (4,035 | )(k) | 371,843 | ||||||||||||
Total liabilities and stockholders equity (deficit) |
$ | 738,240 | $ | 13,343 | $ | 10,865 | $ | (8,313 | ) | $ | 754,135 | |||||||||
See notes to the unaudited pro forma consolidated financial statements.
2
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
BLACKBOARD INC.
FOR THE SIX MONTHS ENDED JUNE 30, 2010
BLACKBOARD INC.
FOR THE SIX MONTHS ENDED JUNE 30, 2010
Pro Forma | Consolidated | |||||||||||||||||||||||
Blackboard | Saf-T-Net | Wimba | Elluminate | Adjustments | Total | |||||||||||||||||||
(In thousands, except per share and share data) | ||||||||||||||||||||||||
Revenues: |
||||||||||||||||||||||||
Product |
$ | 191,204 | $ | 2,668 | $ | 8,026 | $ | 8,176 | $ | 2,766 | (l) | $ | 212,840 | |||||||||||
Maintenance |
| | | 1,850 | (1,850 | )(l) | | |||||||||||||||||
Professional services |
17,590 | | | 293 | | 17,883 | ||||||||||||||||||
Total revenues |
208,794 | 2,668 | 8,026 | 10,319 | 916 | 230,723 | ||||||||||||||||||
Operating expenses: |
||||||||||||||||||||||||
Cost of revenues |
| 1,299 | 2,265 | | (3,564 | )(n) | | |||||||||||||||||
Cost of product revenues, excludes amortization of
acquired technology included in amortization of
intangibles resulting from acquisitions shown below |
51,943 | | | | 5,604 | (o) | 57,547 | |||||||||||||||||
Cost of professional services revenues |
9,865 | | | | 693 | (p) | 10,558 | |||||||||||||||||
Product and technology development |
| | 1,965 | | (1,965 | )(q) | | |||||||||||||||||
Research and development |
24,252 | | | | 5,475 | (q) | 29,727 | |||||||||||||||||
Sales |
| | | | | | ||||||||||||||||||
Marketing |
| | | | | | ||||||||||||||||||
Sales and marketing |
53,245 | | 3,769 | | 6,293 | (s) | 63,307 | |||||||||||||||||
General and administrative |
31,556 | | 2,792 | | 314 | (t) | 34,662 | |||||||||||||||||
Selling, general and administrative |
| 4,902 | | | (4,902 | )(u) | | |||||||||||||||||
Commissions |
| | | 1,245 | (1,245 | )(v) | | |||||||||||||||||
Direct costs of sales |
| | | 493 | (493 | )(v) | | |||||||||||||||||
Salaries and benefits |
| | | 7,342 | (7,342 | )(v) | | |||||||||||||||||
Consulting fees |
| | | 1,380 | (1,380 | )(v) | | |||||||||||||||||
Rent |
| | | 386 | (386 | )(v) | | |||||||||||||||||
Insurance |
| | | 37 | (37 | )(v) | | |||||||||||||||||
Telecommunications |
| | | 140 | (140 | )(v) | | |||||||||||||||||
Travel |
| | | 715 | (715 | )(v) | | |||||||||||||||||
Advertising and promotion |
| | | 519 | (519 | )(v) | | |||||||||||||||||
Meals and entertainment |
| | | 109 | (109 | )(v) | | |||||||||||||||||
Office |
| | | 319 | (319 | )(v) | | |||||||||||||||||
Professional fees |
| | | 188 | (188 | )(v) | | |||||||||||||||||
Scientific research and development refundable |
| | | | | (v) | | |||||||||||||||||
Bad debts |
| | | (4 | ) | 4 | (v) | | ||||||||||||||||
Bank charges |
| | | 16 | (16 | )(v) | | |||||||||||||||||
Amortization of intangibles resulting from acquisitions |
18,337 | | | 278 | 4,131 | (w) | 22,746 | |||||||||||||||||
Total operating expenses |
189,198 | 6,201 | 10,791 | 13,163 | (806 | ) | 218,547 | |||||||||||||||||
Income from operations |
19,596 | (3,533 | ) | (2,765 | ) | (2,844 | ) | 1,722 | 12,176 | |||||||||||||||
Other income (expense), net: |
||||||||||||||||||||||||
Interest expense |
(5,796 | ) | (350 | ) | (14 | ) | (306 | ) | 642 | (x) | (5,824 | ) | ||||||||||||
Interest income |
71 | 2 | 1 | 11 | (81 | )(y) | 4 | |||||||||||||||||
Other income (expense), net |
(906 | ) | (37 | ) | | (238 | ) | 22 | (1,159 | ) | ||||||||||||||
Income (loss) before (provision) benefit for income taxes |
12,965 | (3,918 | ) | (2,778 | ) | (3,377 | ) | 2,305 | 5,197 | |||||||||||||||
(Provision) benefit for income taxes |
(3,569 | ) | 5 | | (3 | ) | 1,769 | (z) | (1,798 | ) | ||||||||||||||
Net income (loss) |
$ | 9,396 | $ | (3,913 | ) | $ | (2,778 | ) | $ | (3,380 | ) | $ | 4,074 | $ | 3,399 | |||||||||
Preferred stock dividend |
| | (1,341 | ) | | 1,341 | (aa) | | ||||||||||||||||
Accretion of preferred stock |
| | (103 | ) | | 103 | (bb) | | ||||||||||||||||
Net income (loss) attributable to common stockholders |
$ | 9,396 | $ | (3,913 | ) | $ | (4,222 | ) | $ | (3,380 | ) | $ | 5,518 | $ | 3,399 | |||||||||
Net income per common share: |
||||||||||||||||||||||||
Basic |
$ | 0.28 | $ | 0.10 | ||||||||||||||||||||
Diluted |
$ | 0.27 | $ | 0.10 | ||||||||||||||||||||
Weighted average number of common shares: |
||||||||||||||||||||||||
Basic |
33,798,698 | 33,798,698 | ||||||||||||||||||||||
Diluted |
34,629,788 | 34,629,788 | ||||||||||||||||||||||
See notes to the unaudited pro forma consolidated financial statements.
3
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
BLACKBOARD INC.
FOR THE YEAR ENDED DECEMBER 31, 2009
BLACKBOARD INC.
FOR THE YEAR ENDED DECEMBER 31, 2009
Pro Forma | Consolidated | |||||||||||||||||||||||||||
Blackboard | ANGEL | Saf-T-Net | Wimba | Elluminate | Adjustments | Total | ||||||||||||||||||||||
(January 1, 2009 to | ||||||||||||||||||||||||||||
May 8, 2009) | ||||||||||||||||||||||||||||
(In thousands, except per share and share data) | ||||||||||||||||||||||||||||
Revenues: |
||||||||||||||||||||||||||||
Product |
$ | 342,144 | $ | 7,423 | $ | 9,785 | $ | 15,837 | $ | 18,744 | $ | 207 | (l) | $ | 394,140 | |||||||||||||
Maintenance |
| | | | 2,278 | (2,278 | )(l) | | ||||||||||||||||||||
Professional services |
34,856 | 740 | | | 663 | | 36,259 | |||||||||||||||||||||
Other |
| 15 | | | | (15 | )(m) | | ||||||||||||||||||||
Total revenues |
377,000 | 8,178 | 9,785 | 15,837 | 21,685 | (2,086 | ) | 430,399 | ||||||||||||||||||||
Operating expenses: |
||||||||||||||||||||||||||||
Cost of revenues |
| 3,629 | 3,016 | 4,052 | | (10,697 | )(n) | | ||||||||||||||||||||
Cost of product revenues, excludes amortization of
acquired technology included in amortization of intangibles
resulting from acquisitions shown below |
90,968 | | | | | 14,358 | (o) | 105,326 | ||||||||||||||||||||
Cost of professional services revenues |
20,024 | | | | | 1,811 | (p) | 21,835 | ||||||||||||||||||||
Product and technology development |
| | | 2,878 | | (2,878 | )(q) | | ||||||||||||||||||||
Research and development |
45,967 | 1,407 | | | | 9,185 | (q) | 56,559 | ||||||||||||||||||||
Sales |
| 1,037 | | | | (1,037 | )(r) | | ||||||||||||||||||||
Marketing |
| 275 | | | | (275 | )(r) | | ||||||||||||||||||||
Sales and marketing |
98,751 | | | 6,680 | | 15,135 | (s) | 120,566 | ||||||||||||||||||||
General and administrative |
56,387 | 1,125 | | 5,877 | | 5,895 | (t) | 69,284 | ||||||||||||||||||||
Selling, general and administrative |
| | 9,760 | | | (9,760 | )(u) | | ||||||||||||||||||||
Commissions |
| | | | 2,960 | (2,960 | )(v) | | ||||||||||||||||||||
Direct costs of sales |
| | | | 886 | (886 | )(v) | | ||||||||||||||||||||
Salaries and benefits |
| | | | 11,665 | (11,665 | )(v) | | ||||||||||||||||||||
Consulting fees |
| | | | 2,537 | (2,537 | )(v) | | ||||||||||||||||||||
Rent |
| | | | 721 | (721 | )(v) | | ||||||||||||||||||||
Insurance |
| | | | 175 | (175 | )(v) | | ||||||||||||||||||||
Telecommunications |
| | | | 229 | (229 | )(v) | | ||||||||||||||||||||
Travel |
| | | | 1,464 | (1,464 | )(v) | | ||||||||||||||||||||
Advertising and promotion |
| | | | 1,069 | (1,069 | )(v) | | ||||||||||||||||||||
Meals and entertainment |
| | | | 250 | (250 | )(v) | | ||||||||||||||||||||
Office |
| | | | 812 | (812 | )(v) | | ||||||||||||||||||||
Professional fees |
| | | | 1,197 | (1,197 | )(v) | | ||||||||||||||||||||
Scientific research and development refundable |
| | | | (552 | ) | 552 | (v) | | |||||||||||||||||||
Bad debts |
| | | | 230 | (230 | )(v) | | ||||||||||||||||||||
Bank charges |
| | | | 17 | (17 | )(v) | | ||||||||||||||||||||
Proceeds from patent judgment |
10,984 | | | | | | 10,984 | |||||||||||||||||||||
Amortization of intangibles resulting from acquisitions |
34,994 | | | | 452 | 13,692 | (w) | 49,138 | ||||||||||||||||||||
Total operating expenses |
358,075 | 7,473 | 12,776 | 19,487 | 24,112 | 11,769 | 433,692 | |||||||||||||||||||||
Income from operations |
18,925 | 705 | (2,991 | ) | (3,650 | ) | (2,427 | ) | (13,855 | ) | (3,293 | ) | ||||||||||||||||
Other income (expense), net: |
||||||||||||||||||||||||||||
Interest expense |
(11,999 | ) | | (635 | ) | (244 | ) | (328 | ) | (5,470 | )(x) | (18,676 | ) | |||||||||||||||
Interest income |
230 | 36 | | 2 | 36 | (304 | )(y) | | ||||||||||||||||||||
Other income (expense), net |
1,453 | | | | (1,426 | ) | | 27 | ||||||||||||||||||||
Income (loss) before (provision) benefit for income taxes |
8,609 | 741 | (3,626 | ) | (3,892 | ) | (4,145 | ) | (19,629 | ) | (21,942 | ) | ||||||||||||||||
(Provision) benefit for income taxes |
(697 | ) | (269 | ) | | | 659 | 9,125 | (z) | 8,818 | ||||||||||||||||||
Net income (loss) |
$ | 7,912 | $ | 472 | $ | (3,626 | ) | $ | (3,892 | ) | $ | (3,486 | ) | $ | (10,504 | ) | $ | (13,124 | ) | |||||||||
Preferred stock dividend |
| | | (2,474 | ) | | 2,474 | (aa) | | |||||||||||||||||||
Accretion of preferred stock |
| | | (211 | ) | | 211 | (bb) | | |||||||||||||||||||
Net income (loss) attributable to common stockholders |
$ | 7,912 | $ | 472 | $ | (3,626 | ) | $ | (6,577 | ) | $ | (3,486 | ) | $ | (7,819 | ) | $ | (13,124 | ) | |||||||||
Net income per common share: |
||||||||||||||||||||||||||||
Basic |
$ | 0.25 | $ | (0.41 | ) | |||||||||||||||||||||||
Diluted |
$ | 0.24 | $ | (0.41 | ) | |||||||||||||||||||||||
Weighted average number of common shares: |
||||||||||||||||||||||||||||
Basic |
32,065,700 | (168,336 | )(cc) | 32,234,036 | ||||||||||||||||||||||||
Diluted |
33,100,858 | | )(cc) | 32,234,036 | ||||||||||||||||||||||||
See notes to the unaudited pro forma consolidated financial statements.
4
NOTES TO THE UNAUDITED PRO FORMA
CONSOLIDATED FINANCIAL STATEMENTS OF
BLACKBOARD INC.
CONSOLIDATED FINANCIAL STATEMENTS OF
BLACKBOARD INC.
Note 1. Basis of Pro Forma Presentation
The unaudited pro forma consolidated financial statements have been prepared by Blackboard
Inc. (Blackboard or the Company) pursuant to the rules and regulations of the Securities and
Exchange Commission for the purposes of inclusion in Blackboards amended Form 8-K prepared and
filed in connection with the completion of the acquisitions of Elluminate, Inc. (Elluminate) and Wimba, Inc. (Wimba).
Certain information and certain disclosures normally included in financial statements
prepared in accordance with U.S. generally accepted accounting principles (GAAP) have been
condensed or omitted pursuant to such rules and regulations. However, the Company believes that
the disclosures provided herein are adequate to make the information presented not misleading.
The information concerning Blackboard has been derived from the audited consolidated
financial statements of Blackboard for the year ended December 31, 2009 and unaudited historical
consolidated financial statements of Blackboard as of and for the six months ended June 30, 2010.
The information concerning ANGEL Learning, Inc. (ANGEL) has been derived from the unaudited
internally prepared financial statements of ANGEL for the period from January 1, 2009 to May 8,
2009. The information concerning Saf-T-Net, Inc. (Saf-T-Net) has been derived from the audited
financial statements of Saf-T-Net for the year ended December 31, 2009 and unaudited internally
prepared financial statements for the period from January 1, 2010 to March 19, 2010. The
information concerning Elluminate has been derived from unaudited internally
prepared financial statements of Elluminate for the year ended December 31, 2009 and as of and for
the six months ended June 30, 2010 and converted into U.S dollars at the prevailing exchange
rates. The information concerning Wimba has been derived from the audited
financial statements of Wimba for the year ended December 31, 2009 and the unaudited historical
financial statements as of and for the six months ended June 30, 2010.
The unaudited pro forma consolidated financial statements are provided for informational
purposes only and do not purport to be indicative of the Companys financial position or results
of operations which would actually have been obtained had such transactions been completed as of
the date or for the periods presented, or of the financial position or results of operations that
may be obtained in the future.
Note 2. Purchase Price Allocation
Elluminate, Inc.
On August 4, 2010, Blackboard completed its acquisition of Elluminate. Elluminate is a
provider of web, audio, video and social networking solutions optimized for teaching, learning and
collaboration. The unaudited pro forma consolidated financial statements have been prepared to
give effect to the completed acquisition of Elluminate, which was accounted for under the
acquisition method of accounting. A total estimated purchase price of approximately $59.5 million
(or $58.4 million net of $1.1 million in cash acquired) was used for purposes of preparing the unaudited
pro forma consolidated financial statements and total estimated direct transaction costs of approximately $1.0 million were
excluded for purposes of preparing the unaudited pro forma consolidated financial statements.
Under the acquisition method of accounting, the total estimated purchase price is allocated
to Elluminates net tangible and intangible assets acquired and liabilities assumed based on their
estimated fair values as of August 4, 2010, the effective date of the acquisition of Elluminate.
Based on managements preliminary valuation of the fair value of tangible and intangible assets
acquired and liabilities assumed, which are based on estimates and
assumptions that are subject to change, and other factors as described in the introduction to
these unaudited pro forma consolidated financial statements, the preliminary estimated purchase
price is allocated as follows (in thousands):
Cash and cash equivalents |
$ | 1,060 | ||
Accounts receivable |
5,161 | |||
Prepaid expenses and other current assets |
1,176 | |||
Property and equipment |
1,030 | |||
Accounts payable |
(657 | ) | ||
Accrued liabilities |
(3,734 | ) | ||
Deferred tax liabilities, net |
(7,331 | ) | ||
Deferred revenue |
(2,747 | ) | ||
Net tangible liabilities assumed |
(6,042 | ) | ||
Definite-lived intangible assets acquired |
24,190 | |||
Goodwill |
41,304 | |||
Total estimated purchase price |
$ | 59,452 | ||
5
Prior to the end of the measurement period for finalizing the purchase price allocation, if
information becomes available which would indicate adjustments are required to the purchase price
allocation, such adjustments will be included in the purchase price allocation retrospectively.
The areas of the purchase price allocation that are not yet finalized relate primarily to income
and non-income based taxes.
Of the total estimated purchase price, a preliminary estimate of $6.0 million has been
allocated to net tangible liabilities assumed, and $24.2 million has been allocated to
definite-lived intangible assets acquired. Definite-lived intangible assets of $24.2 million
consist of the value assigned to Elluminates customer relationships of $18.2 million, developed
and core technology of $3.7 million, and trademarks of $2.3 million.
The value assigned to Elluminates customer relationships was determined by discounting the
estimated cash flows associated with the existing customers as of the date the acquisition was
consummated taking into consideration estimated attrition of the existing customer base. The
estimated cash flows were based on revenues for those existing customers net of operating expenses
and net of capital charges for other tangible and intangible assets that contribute to the
projected cash flow from those customers. The projected revenues were based on assumed revenue
growth rates and customer renewal rates. Operating expenses were estimated based on the supporting
infrastructure expected to sustain the assumed revenue growth rates. Net capital charges for
assets that contribute to projected customer cash flow were based on the estimated fair value of
those assets. A discount rate of 16.5% was deemed appropriate for valuing the existing customer
base and was based on the risks associated with the respective cash flows taking into
consideration the Companys weighted average cost of capital. Blackboard expects to amortize the
value of Elluminates customer relationships on a straight-line basis over seven years.
Amortization of customer relationships is not deductible for tax purposes.
The value assigned to Elluminates developed and core technology was determined by
discounting the estimated royalty savings associated with an estimated royalty rate for the use of
the technology to their present value. Developed and core technology, which consists of products
that have reached technological feasibility, includes products in Elluminates current product
line. The royalty rates used to value the technology were based on estimates of prevailing royalty
rates paid for the use of similar technology and technology in market transactions involving
licensing arrangements of companies that operate in service-related industries. A discount rate of
16.5% was deemed appropriate for valuing developed and core technology and was based on the risks
associated with the respective royalty savings taking into consideration the Companys weighted
average cost of capital. Blackboard expects to amortize the developed and core technology on a
straight-line basis over three years. Amortization of developed and core technology is not
deductible for tax purposes.
The value assigned to Elluminates trademarks was determined by discounting the estimated
royalty savings associated with an estimated royalty rate for the use of the trademarks to their
present value. The trademarks consist of Elluminates trade name and various trademarks related to
its existing product lines. The royalty rates used to value the trademarks were based on estimates
of prevailing royalty rates paid for the use of similar trade names and trademarks in market
transactions involving licensing arrangements of companies that operate in service-related
industries. A discount rate of 16.5% was deemed appropriate for valuing Elluminates trademarks
and was based on the risks associated with the respective royalty savings taking into
consideration the Companys weighted average cost of capital. Blackboard expects to amortize the
trademarks on a straight-line basis over three years. Amortization of trademarks is not deductible
for tax purposes.
The definite-lived intangible assets acquired will result in approximately the following annual
amortization expense (in millions):
2010 |
$ | 1.8 | ||
2011 |
$ | 4.6 | ||
2012 |
$ | 4.6 | ||
2013 |
$ | 3.8 | ||
2014 |
$ | 2.6 | ||
Thereafter |
$ | 6.8 | ||
$ | 24.2 | |||
Of the total estimated purchase price, approximately $41.3 million has been allocated to goodwill and is not deductible for tax purposes. Goodwill represents factors including expected synergies from combining operations and is the excess of the purchase price of an acquired business over the fair value of the net tangible and intangible assets acquired and liabilities assumed. Goodwill will not be amortized but |
6
instead will be tested for impairment at least annually (more frequently if indicators of
impairment arise). In the event that management determines that the goodwill has become impaired,
the Company will incur an accounting charge for the amount of the impairment during the fiscal
quarter in which the determination is made.
As a result of the acquisition of Elluminate, the Company recorded a net deferred tax
liability of approximately $7.3 million in its preliminary purchase price allocation. This balance
is comprised of approximately $8.3 million in deferred tax liabilities resulting primarily from
the estimated amortization expense of identified intangibles and approximately $1.0 million in
deferred tax assets that relate primarily to Canadian tax credits and net operating loss
carryforwards.
In connection with the preliminary purchase price allocation, the Company determined the
estimated fair value of the support obligation assumed from Elluminate in connection with the
acquisition utilizing a cost build-up approach. The cost build-up approach determines fair value
by estimating the costs relating to fulfilling the obligation plus a normal profit margin. The sum
of the costs and operating profit approximates the amount that the Company would be required to
pay a third party to assume the support obligation. The Company based its estimated costs to
fulfill the support obligation on the historical direct costs related to providing the support
services and correcting any errors in Elluminates software products. These estimated costs did
not include any costs associated with selling efforts or research and development or the related
fulfillment margins on these costs. Profit associated with selling efforts is excluded because
Elluminate had concluded the selling effort on the support contracts prior to August 4, 2010. The
Company estimated the profit margin to be approximately 24%, which approximates the Companys
operating profit margin to fulfill the obligations. In allocating the purchase price, the Company
recorded an adjustment to reduce the carrying value of Elluminates August 4, 2010 deferred
support revenue by approximately $10.2 million to $2.7 million, which represents the Companys
estimate of the fair value of the support obligation assumed. As former Elluminate customers renew
these support contracts, the Company will recognize revenue for the full value of the support
contracts over the remaining term of the contracts, the majority of which are one year.
Wimba, Inc.
On August 5, 2010, Blackboard completed its acquisition of Wimba. Wimba is a provider of
collaborative learning software applications and services to the education industry. The unaudited
pro forma consolidated financial statements have been prepared to give effect to the completed
acquisition of Wimba, which was accounted for under the acquisition method of accounting. A total
estimated purchase price of approximately $59.6 million (or $57.5 million net of $2.1 million in
cash acquired) was used for purposes of preparing the unaudited pro forma consolidated financial statements
and total estimated direct transaction costs of approximately $0.6 million were excluded for purposes of preparing the unaudited pro forma consolidated
financial statements.
Under the acquisition method of accounting, the total estimated purchase price is allocated
to Wimbas net tangible and intangible assets acquired based on their
estimated fair values as of August 5, 2010, the effective date of the acquisition of Wimba. Based
on managements preliminary valuation of the fair value of tangible and intangible assets acquired,
which are based on estimates and assumptions that are subject to change,
and other factors as described in the introduction to these unaudited pro forma consolidated
financial statements, the preliminary estimated purchase price is allocated as follows (in
thousands):
Cash and cash equivalents |
$ | 2,144 | ||
Accounts receivable |
4,593 | |||
Prepaid expenses and other current assets |
308 | |||
Property and equipment |
1,767 | |||
Deferred tax assets, net |
7,063 | |||
Restricted cash |
753 | |||
Accounts payable |
(161 | ) | ||
Other accrued liabilities |
(2,496 | ) | ||
Deferred revenue |
(3,547 | ) | ||
Net tangible assets acquired |
10,424 | |||
Definite-lived intangible assets acquired |
15,430 | |||
Goodwill |
33,713 | |||
Total estimated purchase price |
$ | 59,567 | ||
Prior to the end of the measurement period for finalizing the purchase price allocation, if
information becomes available which would indicate adjustments are required to the purchase price
allocation, such adjustments will be included in the purchase price
7
allocation retrospectively.
The areas of the purchase price allocation that are not yet finalized relate primarily to income
and non-income based taxes.
Of the total estimated purchase price, a preliminary estimate of $10.4 million has been
allocated to net tangible assets acquired, and $15.4 million has been allocated to definite-lived
intangible assets acquired. Definite-lived intangible assets of $15.4 million consist of the value
assigned to Wimbas customer relationships of $12.3 million, developed and core technology of $1.8
million, and trademarks of $1.3 million.
The value assigned to Wimbas customer relationships was determined by discounting the
estimated cash flows associated with the existing customers as of the date the acquisition was
consummated taking into consideration estimated attrition of the existing customer base. The
estimated cash flows were based on revenues for those existing customers net of operating expenses
and net of capital charges for other tangible and intangible assets that contribute to the
projected cash flow from those customers. The projected revenues were based on assumed revenue
growth rates and customer renewal rates. Operating expenses were estimated based on the supporting
infrastructure expected to sustain the assumed revenue growth rates. Net capital charges for
assets that contribute to projected customer cash flow were based on the estimated fair value of
those assets. A discount rate of 16.5% was deemed appropriate for valuing the existing customer
base and was based on the risks associated with the respective cash flows taking into
consideration the Companys weighted average cost of capital. Blackboard expects to amortize the
value of Wimbas customer relationships on a straight-line basis over seven years. Amortization of
customer relationships is not deductible for tax purposes.
The value assigned to Wimbas developed and core technology was determined by discounting the
estimated royalty savings associated with an estimated royalty rate for the use of the technology
to their present value. Developed and core technology, which consists of products that have
reached technological feasibility, includes products in Wimbas current product line. The royalty
rates used to value the technology were based on estimates of prevailing royalty rates paid for
the use of similar technology and technology in market transactions involving licensing
arrangements of companies that operate in service-related industries. A discount rate of 16.0% was
deemed appropriate for valuing developed and core technology and was based on the risks associated
with the respective royalty savings taking into consideration the Companys weighted average cost
of capital. Blackboard expects to amortize the developed and core technology on a straight-line
basis over three years. Amortization of developed and core technology is not deductible for tax
purposes.
The value assigned to Wimbas trademarks was determined by discounting the estimated royalty
savings associated with an estimated royalty rate for the use of the trademarks to their present
value. The trademarks consist of Wimbas trade name and various trademarks related to its existing
product lines. The royalty rates used to value the trademarks were based on estimates of
prevailing royalty rates paid for the use of similar trade names and trademarks in market
transactions involving licensing arrangements of companies that operate in service-related
industries. A discount rate of 16.0% was deemed appropriate for valuing Wimbas trademarks and was
based on the risks associated with the respective royalty savings taking into consideration the
Companys weighted average cost of capital. Blackboard expects to amortize the trademarks on a
straight-line basis over three years. Amortization of trademarks is not deductible for tax
purposes.
The definite-lived intangible assets acquired will result in approximately the following annual
amortization expense (in millions):
2010 |
$ | 1.1 | ||
2011 |
$ | 2.8 | ||
2012 |
$ | 2.8 | ||
2013 |
$ | 2.4 | ||
2014 |
$ | 1.8 | ||
Thereafter |
$ | 4.5 | ||
$ | 15.4 | |||
Of the total estimated purchase price, approximately $33.7 million has been allocated to
goodwill and is not deductible for tax purposes. Goodwill represents factors including expected
synergies from combining operations and is the excess of the purchase price of an acquired
business over the fair value of the net tangible and intangible assets acquired. Goodwill will not
be amortized but instead will be tested for impairment at least annually (more frequently if
indicators of impairment arise). In the event that management determines that the goodwill has
become impaired, the Company will incur an accounting charge for the amount of the impairment
during the fiscal quarter in which the determination is made.
As a result of the acquisition of Wimba, the Company recorded a net deferred tax asset of
approximately $7.1 million in its preliminary purchase price allocation. This balance is comprised
of approximately $0.5 million in deferred tax liabilities resulting
8
primarily from the estimated amortization expense of identified intangibles and approximately $7.6
million in deferred tax assets that relate primarily to federal and state net operating loss carry
forwards.
In connection with the preliminary purchase price allocation, the Company determined the
estimated fair value of the support obligation assumed from Wimba in connection with the
acquisition utilizing a cost build-up approach. The cost build-up approach determines fair value
by estimating the costs relating to fulfilling the obligation plus a normal profit margin. The sum
of the costs and operating profit approximates the amount that the Company would be required to
pay a third party to assume the support obligation. The Company based its estimated costs to
fulfill the support obligation on the historical direct costs related to providing the support
services and correcting any errors in Wimbas software products. These estimated costs did not
include any costs associated with selling efforts or research and development or the related
fulfillment margins on these costs. Profit associated with selling efforts is excluded because
Wimba had concluded the selling effort on the support contracts prior to August 5, 2010. The
Company estimated the profit margin to be approximately 24%, which approximates the Companys
operating profit margin to fulfill the obligations. In allocating the purchase price, the Company
recorded an adjustment to reduce the carrying value of Wimbas August 5, 2010 deferred support
revenue by approximately $6.9 million to $3.5 million, which represents the Companys estimate of
the fair value of the support obligation assumed. As former Wimba customers renew these support
contracts, the Company will recognize revenue for the full value of the support contracts over the
remaining term of the contracts, the majority of which are one year.
Note 3. Pro Forma Adjustments
Pro forma adjustments are made to reflect the estimated purchase price, to adjust amounts
related to Elluminates and Wimbas tangible assets and liabilities and intangible assets to a preliminary estimate
of the fair values of those assets and liabilities, to reflect the amortization expense related to
the intangible assets and to reclassify certain financial statement amounts to conform to
Blackboards financial statement presentation.
The specific pro forma adjustments included in the unaudited pro forma consolidated financial
statements are as follows:
a) To reflect cash payments made in connection with closing the Elluminate and Wimba
acquisitions of $119.1 million.
b) To reflect net deferred tax assets and liabilities related to the Elluminate and Wimba
acquisitions.
c) To reflect the fair value of acquired goodwill based on net assets acquired and liabilities assumed as if the
Elluminate and Wimba acquisitions
occurred on June 30, 2010. The difference between the amount recorded on a pro forma basis and the
actual balance as of the effective dates of the Elluminate and Wimba acquisitions is the result of
changes in the assets and liabilities of Elluminate and Wimba between June 30, 2010 and their respective
closing dates of August 4, 2010 and August 5, 2010.
d) To reflect the fair value from the
acquisitions of Elluminate and Wimba of customer relationships estimated to be $18.2 million and
$12.3 million, respectively, acquired developed and core technology estimated to be $3.7 million
and $1.8 million, respectively, and acquired trademarks estimated to be $2.3 million and $1.3
million, respectively, offset by the removal of the existing balances of $0.4 million and $0.1 million, respectively.
e) To reflect the fair value of capitalized research and development costs acquired in the
acquisition of Elluminate.
f) To reflect a reclassification of Elluminate and Wimbas accounts payable and accrued
expenses and tax payable to accounts
payable and accrued expenses to conform to Blackboards financial statement presentation and to reflect an accrual of $0.6 million for estimated Blackboard transaction costs associated
with the Elluminate and Wimba acquisitions that were incurred between June 30, 2010 and their respective closing dates of August 4, 2010 and August 5, 2010.
g) To
reflect the fair value of Elluminates and Wimbas assumed legal performance obligations under its
software maintenance and support contracts and to eliminate Elluminates and Wimbas deferred
revenue that does not represent a legal performance obligation to the combined company. No
adjustments were made to the unaudited pro forma consolidated statement of operations related to
this pro forma balance sheet adjustment. The deferred revenue, current portion also reflects a $4.8
million adjustment to Elluminates deferred revenue to conform the balance to U.S. GAAP.
h) To
reflect the fair value adjustment related to Wimbas deferred rent balance.
i) To reflect the fair value adjustment related to Wimbas lease obligations.
j) To reflect the payoff of Elluminates outstanding debt of $2.9 million in connection
with the acquisition.
k) To eliminate the common stock and stockholders deficit balances of Elluminate and
Wimba. The adjustment also reflects the corresponding $4.8 million adjustment to Elluminates deferred revenue to conform the balance to
U.S. GAAP as noted in note g) above and the corresponding $0.6 million adjustment to accrued expenses as noted in note f) above.
l) To reflect a reclassification adjustment of customer fees
for maintenance and support earned by Elluminate that Blackboard classifies as product revenue and
to conform Elluminates revenue recognition for annual licenses to U.S. GAAP. Of the $2.8 million
adjustment to product revenues for the six months ended June 30, 2010, $1.9 million relates to the
reclassification of customer fees for maintenance and support and $0.9 million relates to the
adjustment to U.S. GAAP. Of the $0.2 million adjustment to product revenues for the year ended
December 31, 2009, $2.3 million relates to the reclassification of customer fees for maintenance
and support, partially offset by $2.1 million that relates to the adjustment to U.S. GAAP.
9
m) To reflect a reclassification adjustment of user conference fees received by ANGEL from
customers that Blackboard classifies as a reduction to sales and marketing expenses.
n) To reflect a reclassification adjustment to conform Saf-T-Nets and ANGELs balances to
Blackboards financial statement presentation of separately classifying cost of product revenues
and cost of professional service revenues and to reflect a reclassification of Wimbas cost of
revenues to cost of product revenues to conform to Blackboards financial statement
presentation. Of the $3.6 million adjustment for the six months ended June 30, 2010, $1.3
million relates to Saf-T-Net and $2.3 million relates to Wimba. Of the $1.3 million Saf-T-Net
adjustment, $1.2 million was reclassified to cost of product revenues and $0.1 million relates
to reduction of amortization expense related to fair value adjustment of capitalized software
costs. Of the $2.3 million Wimba adjustment, $2.2 million was reclassified to cost of product
revenues and $0.1 million relates to reduction of amortization expense related to fair value
adjustment of intangible assets. Of the $10.7 million adjustment for the year ended December 31,
2009, $3.6 million relates to ANGEL, $3.0 million relates to Saf-T-Net and $4.1 million relates
to Wimba. Of the $3.6 million ANGEL adjustment, $3.0 million was reclassified to cost of product
revenues and $0.6 million was reclassified to cost of professional services revenues. Of the
$3.0 million Saf-T-Net adjustment, $2.8 million was reclassified to cost of product revenues and
$0.2 million relates to reduction of amortization expense related to fair value adjustment of
capitalized software costs. Of the $4.1 million Wimba adjustment, $4.0 million was reclassified
to cost of product revenues and $0.1 million relates to reduction of amortization expense
related to fair value adjustment of intangible assets.
o) To reflect a reclassification adjustment to conform ANGELs, Saf-T-Nets, Elluminates
and Wimbas balances to Blackboards financial statement presentation. Of the $5.6 million
adjustment for the six months ended June 30, 2010, $1.4 million relates to Saf-T-Net, $2.0
million relates to Elluminate and $2.2 million relates to Wimba. Of the $1.4 million Saf-T-Net
adjustment, $1.2 million relates to the reclassification from cost of revenues noted in note n)
above and $0.2 million is reclassified from selling, general and administrative expenses noted
in note u) below. The $2.0 million Elluminate adjustment relates to the reclassification of
Elluminates income statement noted in note v) below. The $2.2 million Wimba adjustment relates
to the reclassification adjustment from cost of revenues noted in note n) above. Of the $14.4
million adjustment for the year ended December 31, 2009, $3.0 million relates to ANGEL, $4.0
million relates to Saf-T-Net, $3.4 million relates to Elluminate and $4.0 million relates to
Wimba. The $3.0 million ANGEL adjustment relates to the reclassification adjustment from cost of
revenues noted in note n) above. Of the $4.0 million Saf-T-Net adjustment, $2.8 million relates
to the reclassification from cost of revenues noted in note n) above and $1.2 million is
reclassified from selling, general and administrative expenses noted in note u) below. The $3.4
million Elluminate adjustment relates to the reclassification of Elluminates income statement
noted in note v) below. The $4.0 million Wimba adjustment relates to the reclassification adjustment
from cost of revenues noted in note n) above.
p) To reflect the reclassification of Elluminates income statement noted in note v) below
and to reflect a reclassification adjustment from ANGELs cost of revenues noted in note n)
above. The $0.7 million adjustment for the six months ended June 30, 2010 relates to the
Elluminate reclassification. Of the $1.8 million adjustment for the year ended December 31,
2009, $0.6 million relates to the ANGEL reclassification and $1.2 million relates to the
Elluminate reclassification.
q) To reflect a reclassification adjustment from Saf-T-Nets selling, general and
administrative expenses to separately classify research and development expenses to conform to
Blackboards financial statement presentation, to reflect the reclassification of Elluminates
income statement noted in note v) below and to reflect a reclassification adjustment from
Wimbas product and technology development to conform to Blackboards financial statement
presentation. Of the $5.5 million adjustment for the six months ended June 30, 2010, $3.5
million relates to the Elluminate reclassification and $2.0 million relates to the Wimba
reclassification. Of the $9.2 million adjustment for the year ended December 31, 2009, $0.3
million relates to the Saf-T-Net reclassification, $6.0 million relates to the Elluminate
reclassification and $2.9 million relates to the Wimba reclassification.
r) To reflect a reclassification adjustment to conform ANGELs balances to Blackboards
financial
statement presentation of combining sales and marketing expenses as a single financial
statement line item.
s) To reflect a reclassification adjustment to conform ANGELs, Saf-T-Nets and
Elluminates balances to Blackboards financial statement presentation. Of the $6.3 million
adjustment for the six months ended June 30, 2010, $0.4 million relates to the Saf-T-Net
reclassification and $5.9 million relates to the Elluminate reclassification. Of the $15.1
million adjustment for the year ended December 31, 2009, $1.3 relates to the ANGEL
reclassification, $2.3 million relates to the Saf-T-Net reclassification and $11.5 million
relates to the Elluminate reclassification. The ANGEL adjustment relates to the combining of
sales and marketing expenses as a single financial statement line item as noted in note r)
above, net of the reclassification adjustment of user conference fees received by ANGEL from
customers that Blackboard classifies as a reduction to sales and marketing expenses as noted in
note m) above. The Saf-T-Net adjustment is a reclassification from Saf-T-Nets selling, general
and administrative expenses to separately classify sales and marketing expenses to conform to
Blackboards financial statement presentation. The Elluminate adjustment relates to the
reclassification of Elluminates income statement noted in note v) below.
t) To reflect a reclassification adjustment to conform Saf-T-Nets and Elluminates
balances to Blackboards financial statement presentation and the elimination of transaction costs incurred by Blackboard. Of the $0.3 million adjustment for the
six months ended June 30, 2010, $1.0 million relates to the Saf-T-Net reclassification and $0.8
million relates to the Elluminate reclassification, offset by $1.5 million in transaction costs incurred by Blackboard. Of the $5.9 million adjustment for the year
ended December 31, 2009, $5.9 million relates to the Saf-T-Net reclassification and $1.5 million
relates to the Elluminate reclassification, offset by $1.5 million in transaction costs incurred by Blackboard. The Saf-T-Net adjustment is a reclassification from
Saf-T-Nets selling, general and administrative expenses to separately classify
10
general and administrative expenses to conform to Blackboards financial statement presentation as
noted in note
u) below. The Elluminate adjustment relates to the reclassification of Elluminates income
statement noted in note v) below.
u) To reflect a reclassification adjustment from Saf-T-Nets selling, general and
administrative expenses to conform to Blackboards financial statement presentation. Of the $4.9
million adjustment for the year ended December 31, 2009, $0.9 million was reclassified to general
and administrative expenses as noted in note t) above, $0.4 million was reclassified to sales and
marketing expenses as noted in note s) above, $0.2 million was reclassified to cost of product
revenues as noted in note o) above, and $3.4 million relates to elimination of certain settlement
costs associated with the final settlement, but recorded by Saf-T-Net prior to the closing of the
merger with Saf-T-Net. Of the $9.8 million adjustment for the year ended December 31, 2009, $5.9
million was reclassified to general and administrative expenses as noted in note t) above, $2.3
million was reclassified to sales and marketing expenses as noted in note s) above, $0.3 million
was reclassified to research and development expenses as noted in note q) above, $1.2 million was
reclassified to cost of product revenues as noted in note o) above, and $0.1 million relates to
elimination of amortization expense related to deferred financing costs due to repayment of
Saf-T-Nets outstanding notes payable at the closing of the merger with Saf-T-Net.
v) To reflect a
reclassification adjustment to conform Elluminates balances to Blackboards income statement
financial statement presentation.
w) Blackboard has estimated the pro forma amortization expense for the periods preceding the
respective acquisitions for the six months ended June 30, 2010 and the year ended December 31, 2009
related to the intangible assets acquired in the acquisitions of ANGEL, Saf-T-Net, Elluminate and
Wimba to be $4.1 million and $13.7 million, respectively. Of the $4.1 million estimated for the six
months ended June 30, 2010, $0.7 million relates to the Saf-T-Net acquisition, $2.0 million relates
to the Elluminate acquisition, net of previously recorded intangible amortization expense, and $1.4
million relates to the Wimba acquisition. Of the $13.7 million estimated for the year ended
December 31, 2009, $3.9 million relates to the ANGEL acquisition, $2.8 million relates to the
Saf-T-Net acquisition, $4.2 million relates to the Elluminate acquisition, net of previously
recorded intangible amortization expense, and $2.8 million relates to the Wimba acquisition.
x) To adjust interest expense to reflect as if the acquisitions had occurred at the beginning of
the respective periods presented. Of the $0.6 million adjustment to the six months ended June 30,
2010, $0.3 million relates to the elimination of interest expense on Saf-T-Nets notes payable to
reflect the payment of the liability upon closing of the merger with Saf-T-Net and $0.3 million
relates to the elimination of interest expense on Elluminates note payable to reflect the payment
of the liability upon closing of the acquisition of Elluminate. Of the $5.5 million
adjustment to the year ended December 31, 2009, $6.4 million relates to interest expense that would
have been incurred in order to enter into the acquisitions as of the beginning of the period,
partially offset by $0.6 million which relates to the elimination of interest expense on
Saf-T-Nets notes payable to reflect the payment of the liability upon closing of the merger with
Saf-T-Net and $0.3 million relates to the elimination of interest expense on Elluminates note
payable to reflect the payment of the liability upon closing of the acquisition of Elluminate.
y) To eliminate interest income on cash balances paid as consideration in connection with the
ANGEL, Saf-T-Net, Elluminate and Wimba acquisitions.
z) To properly record the income tax provision to reflect the acquisitions.
aa) To eliminate the Wimba preferred stock dividend to reflect the acquisition as if it had
occurred at the beginning of the respective periods presented.
bb) To eliminate the accretion expense related to Wimba preferred stock to reflect the acquisition as if it had occurred at the beginning of the respective periods presented.
cc) To reflect the number of shares of Blackboards common stock issued as consideration in
the acquisition of ANGEL. For the year ended December 31, 2009, the diluted
weighted average number of common shares does not include outstanding stock options as their
inclusion would be anti-dilutive.
The unaudited pro forma consolidated financial statements do not include adjustments for
liabilities related to business integration activities for the acquisitions of Elluminate and
Wimba as management is in the process of assessing what, if any, future actions are necessary.
However, liabilities ultimately may be recorded for costs associated with business integration
activities for the acquisitions of Elluminate and Wimba in the Companys consolidated financial
statements.
Blackboard has not identified any material pre-acquisition contingencies where the related
asset, liability or impairment is probable and the amount of the asset, liability or impairment
can be reasonably estimated.
Note 4. Pro Forma Net Loss Per Common Share
The pro forma basic and diluted net loss per common share is based on the weighted average
number of common shares of Blackboards common stock outstanding during the period as adjusted to
reflect the shares of common stock issued as consideration in the ANGEL merger. The diluted
weighted average number of common shares does not include outstanding stock options as their
inclusion would be anti-dilutive.
11