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8-K/A - 8-K/A - SYNCHRONOSS TECHNOLOGIES INCa12-14702_18ka.htm
EX-99.2 - EX-99.2 - SYNCHRONOSS TECHNOLOGIES INCa12-14702_1ex99d2.htm
EX-23.1 - EX-23.1 - SYNCHRONOSS TECHNOLOGIES INCa12-14702_1ex23d1.htm
EX-23.2 - EX-23.2 - SYNCHRONOSS TECHNOLOGIES INCa12-14702_1ex23d2.htm
EX-99.1 - EX-99.1 - SYNCHRONOSS TECHNOLOGIES INCa12-14702_1ex99d1.htm

Exhibit 99.3

 

UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS

 

On July 19, 2010, Synchronoss Technologies, Inc. (the “Company”) completed the acquisition of FusionOne, Inc. (“FusionOne”) pursuant to the Agreement and Plan of Merger dated July 6, 2010.

 

The unaudited pro forma combined condensed balance sheet as of June 30, 2010 is presented as if the acquisition of FusionOne had occurred on June 30, 2010. The unaudited pro forma combined condensed statements of operations are presented as if the acquisitions of FusionOne had occurred on January 1, 2009 with recurring merger-related adjustments reflected in each of the periods presented.

 

The acquisitions have been accounted for using the acquisition method of accounting and, accordingly, the total estimated purchase consideration of the acquisitions were allocated to the tangible assets and identifiable intangible assets acquired and liabilities assumed based on their relative fair values. The excess of the purchase consideration over the net tangible and identifiable intangible assets acquired and liabilities assumed were recorded as goodwill. Determination of the FusionOne purchase price and allocations of the FusionOne purchase price used in the unaudited pro forma combined condensed financial statements are based upon preliminary estimates and assumptions. These preliminary estimates and assumptions could change significantly during the measurement period as the Company finalizes the valuations of the net tangible assets and intangible assets acquired and liabilities assumed. Any change could result in material variances between our future financial results and the amounts presented in these unaudited combined condensed financial statements, including variances in fair values recorded, as well as expenses associated with these items.

 

The unaudited pro forma combined condensed statements of operations do not reflect nonrecurring acquisition related charges resulting from the acquisition transactions.

 

The unaudited pro forma combined condensed statements are for information purposes only and do not purport to represent what the Company’s actual results would have been if the acquisitions had been completed as of the date indicated above or that may be achieved in the future. The unaudited pro forma combined condensed statement of operations does not include the effects of any cost savings from operating efficiencies and synergies that may result from the acquisitions.

 

The unaudited pro forma combined condensed financial statements, including the notes thereto, should be read in conjunction with the Company’s historical financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2009 filed on March 9, 2010, and FusionOne’s historical financial statements for the year ended December 31, 2009 and for the six-month period ended June 30, 2010 included as Exhibits 99.1 and 99.2 in this Current Report on Form 8-K/A.

 



 

SYNCHRONOSS TECHNOLOGIES, INC.

UNAUDITED PRO FORMA COMBINED CONDENSED BALANCE SHEET

 

(In thousands)

 

 

 

Historical

 

 

 

 

 

 

 

As of June 30, 2010

 

Pro Forma

 

Pro Forma

 

 

 

Synchronoss

 

FusionOne

 

Adjustments

 

Combined

 

ASSETS

 

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

92,168

 

$

2,664

 

$

(32,172

)(a)

$

62,660

 

Marketable securities

 

2,204

 

 

 

 

2,204

 

Accounts receivable, net

 

30,375

 

374

 

 

 

30,749

 

Prepaid expenses and other current assets

 

6,251

 

167

 

 

 

6,418

 

Deferred tax assets

 

1,468

 

 

 

 

1,468

 

Total current assets

 

132,466

 

3,205

 

(32,172

)

103,499

 

 

 

 

 

 

 

 

 

 

 

Marketable Securities

 

7,909

 

 

 

 

7,909

 

Property and equipment, net

 

25,690

 

631

 

 

 

26,321

 

Goodwill

 

6,911

 

 

25,957

(b)

32,868

 

Intangible assets, net

 

2,221

 

 

32,700

(b)

34,921

 

Deferred tax assets

 

9,000

 

 

 

 

9,000

 

Other assets

 

2,314

 

48

 

 

 

2,362

 

 

 

 

 

 

 

 

 

 

 

Total assets

 

$

186,511

 

$

3,884

 

$

26,485

 

$

216,880

 

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

 

Accounts payable

 

$

4,757

 

$

528

 

 

 

$

5,285

 

Accrued expenses

 

6,079

 

1,847

 

2,161

(c)

10,087

 

Current portion of capital lease obligations

 

 

167

 

 

 

167

 

Customer advances

 

 

1,280

 

 

 

1,280

 

Deferred revenue, current

 

4,023

 

7,118

 

(4,510

)(d)

6,631

 

Total current liabilities

 

14,859

 

10,940

 

(2,349

)

23,450

 

 

 

 

 

 

 

 

 

 

 

Lease financing obligation — long-term

 

9,181

 

 

 

 

9,181

 

Warrant liability

 

 

6,000

 

(6,000

)(e)

 

Capital lease obligations, less current portion

 

 

3

 

 

 

3

 

Deferred revenue, less current portion

 

 

3,000

 

(2,800

)(d)

200

 

Contingent purchase price

 

 

 

16,600

 

16,600

 

Other liabilities

 

1,605

 

 

 

 

1,605

 

 

 

 

 

 

 

 

 

 

 

Stockholders equity:

 

 

 

 

 

 

 

 

 

Convertible preferred stock

 

 

103

 

(103

)(f)

 

Common stock

 

3

 

20

 

(20

)(f)

3

 

Treasury stock

 

(23,713

)

 

 

 

(23,713

)

Additional paid-in capital

 

126,504

 

161,476

 

(154,340

)(f)(g)

133,640

 

Accumulated other comprehensive income

 

2

 

(11

)

11

(f)

2

 

Retained earnings

 

58,070

 

(177,647

)

175,486

(c)(f)

55,909

 

Total stockholders’ equity

 

160,866

 

(16,059

)

21,034

 

165,841

 

 

 

 

 

 

 

 

 

 

 

Total liabilities and stockholders’ equity

 

$

186,511

 

$

3,884

 

$

26,485

 

$

216,880

 

 

See notes to Unaudited Pro Forma Combined Condensed Financial Statements

 

2



 

SYNCHRONOSS TECHNOLOGIES, INC.

UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENT OF OPERATIONS

FOR THE TWELVE MONTHS ENDED DECEMBER 31, 2009

 

(In thousands, except per share data)

 

 

 

Historical

 

 

 

 

 

 

 

For the twelve months ended

 

 

 

 

 

 

 

December 31, 2009

 

Pro Forma

 

Pro Forma

 

 

 

Synchronoss

 

FusionOne

 

Adjustments

 

Combined

 

Net revenues

 

$

128,805

 

$

9,126

 

 

 

$

137,931

 

Costs and expenses:

 

 

 

 

 

 

 

 

 

Cost of services*

 

64,455

 

1,822

 

 

 

66,277

 

Research and development

 

13,153

 

11,480

 

 

 

24,633

 

Selling, general and administrative

 

23,650

 

10,655

 

 

 

34,305

 

Depreciation and amortization

 

8,499

 

1,043

 

2,638

(h)

12,180

 

Total costs and expenses

 

109,757

 

25,000

 

2,638

 

137,395

 

Income/(loss) from operations

 

19,048

 

(15,874

)

(2,638

)

536

 

Interest and other income/(expense)

 

(215

)

(135

)

 

 

(350

)

Income before income tax expense

 

18,833

 

(16,009

)

(2,638

)

186

 

Income tax expense

 

(6,536

)

62

 

 

 

(6,474

)

Net income

 

$

12,297

 

$

(15,947

)

$

(2,638

)

$

(6,288

)

 

 

 

 

 

 

 

 

 

 

Net income per common share:

 

 

 

 

 

 

 

 

 

Basic

 

$

0.40

 

 

 

 

 

$

(0.20

)

Diluted

 

$

0.39

 

 

 

 

 

$

(0.20

)

 

 

 

 

 

 

 

 

 

 

Weighted-average common shares outstanding:

 

 

 

 

 

 

 

 

 

Basic

 

30,813

 

 

 

398

 

31,211

 

Diluted

 

31,145

 

 

 

398

 

31,543

 

 

See notes to Unaudited Pro Forma Combined Condensed Financial Statements

 

3



 

SYNCHRONOSS TECHNOLOGIES, INC.

UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENT OF OPERATIONS

FOR THE SIX MONTHS ENDED JUNE 30, 2010

 

(In thousands, except per share data)

 

 

 

Historical

 

 

 

 

 

 

 

For the six months ended

 

 

 

 

 

 

 

June 30, 2010

 

Pro Forma

 

Pro Forma

 

 

 

Synchronoss

 

FusionOne

 

Adjustments

 

Combined

 

Net revenues

 

$

72,281

 

$

9,989

 

 

 

$

82,270

 

Costs and expenses:

 

 

 

 

 

 

 

 

 

Cost of services*

 

36,655

 

851

 

 

 

37,506

 

Research and development

 

9,191

 

5,423

 

 

 

14,614

 

Selling, general and administrative

 

12,845

 

4,620

 

 

 

17,465

 

Depreciation and amortization

 

3,852

 

358

 

1,319

(h)

5,529

 

Total costs and expenses

 

62,543

 

11,252

 

1,319

 

75,114

 

Income/(loss) from operations

 

9,738

 

(1,263

)

(1,319

)

7,156

 

Interest expense and other expense

 

(334

)

(12

)

 

 

(346

)

Income before income tax expense

 

9,404

 

(1,275

)

(1,319

)

6,810

 

Income tax expense

 

(3,718

)

 

 

 

(3,718

)

Net income

 

$

5,686

 

$

(1,275

)

$

(1,319

)

$

3,092

 

 

 

 

 

 

 

 

 

 

 

Net income per common share:

 

 

 

 

 

 

 

 

 

Basic

 

$

0.18

 

 

 

 

 

$

0.10

 

Diluted

 

$

0.18

 

 

 

 

 

$

0.10

 

 

 

 

 

 

 

 

 

 

 

Weighted-average common shares outstanding:

 

 

 

 

 

 

 

 

 

Basic

 

31,124

 

 

 

398

 

31,522

 

Diluted

 

32,057

 

 

 

398

 

32,455

 

 

See notes to Unaudited Pro Forma Combined Condensed Financial Statements

 

4



 

SYNCHRONOSS TECHNOLOGIES, INC.

NOTES TO UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS

 

1. BASIS OF PRO FORMA PRESENTATION

 

On July 19, 2010, Synchronoss Technologies, Inc. (the “Company”) completed the acquisition of FusionOne, Inc. (“FusionOne”) pursuant to the Agreement and Plan of Merger and Reorganization dated July 6, 2010 (the Merger Agreement).

 

The unaudited pro forma combined condensed balance sheet as of June 30, 2010 is based on the historical financial statements of the Company and FusionOne after giving effect to the acquisition adjustments resulting from the acquisition of FusionOne. The unaudited pro forma combined balance sheet as of June 30, 2010 is presented as if the acquisition had occurred on June 30, 2010.

 

The unaudited pro forma combined condensed statements of operations for the year ended December 31, 2009 are based on the historical financial statements of the Company for the year then ended and FusionOne’s historical financial statements for the year then ended after giving effect to the acquisition adjustments. The unaudited pro forma combined condensed statements of operations for the six months ended June 30, 2010 are based on the historical financial statements of the Company for the period then ended and FusionOne’s historical financial statements for the period then ended after giving effect to the acquisition adjustments. The unaudited pro forma combined condensed statements of operations is presented as if the FusionOne acquisition had occurred on January 1, 2009.

 

2. FUSIONONE ACQUISITION

 

On July 19, 2010, the Company completed the acquisition of FusionOne. Pursuant to the Merger Agreement, the Company paid approximately $32.0 million in cash and issued approximately 400 thousand common shares of the Company’s Common Stock valued at approximately $7.1 million based on the Company’s July 19, 2010 closing stock price per share, and potentially may make payments totaling up to $35 million in cash and stock, based on achievements of certain financial targets for the period from July 1, 2010 through December 31, 2011.

 

The Company accounted for this business combination by applying the acquisition method, and accordingly, the estimated purchase price was allocated to the tangible assets and identifiable intangible assets acquired and liabilities assumed based upon their relative fair values. The excess of the purchase price over the net tangible and identifiable intangible assets and liabilities was recorded as goodwill.

 

Total estimated purchase price is summarized as follows:

 

Cash consideration

 

$

32,200

 

Value of Synchronoss common stock issued

 

7,100

 

Estimated fair value of contingent cash payments (earnout)

 

16,600

 

 

 

 

 

Total preliminary estimated purchase price

 

$

55,900

 

 

For purposes of this pro forma analysis, the above estimated purchase price has been allocated based upon a preliminary estimate of the fair value of assets acquired and liabilities assumed (the Company expects the purchase price allocation will be finalized in 2011):

 

Net tangible assets (liabilities)

 

$

(2,757

)

Identifiable intangible assets

 

 

 

Trade name

 

500

 

Technology

 

15,000

 

Customer relationships

 

17,200

 

Assembled workforce

 

2,900

 

Goodwill, excluding assembled workforce

 

23,057

 

Total purchase price

 

$

55,900

 

 

5



 

The fair values of the trade name and the technology were determined based on an income approach using the relief-from-royalty method. A royalty rate of 10% was used to value both the trade name and the technology. The royalty rate was based on third-party licensing transactions for similar technologies and companies. The remaining useful lives of the trade name and the technology were estimated based on the pattern of projected economic benefit of the asset and expected migration from existing to future technology.

 

The fair value of the customer relationships were determined based on an income approach using the excess earnings method. A discount rate of 17.0% was used to value the customer relationships. The discount rate was estimated using a discount rate based on the implied rate of return of the transaction, adjusted for the specific risk profile of the asset. The remaining useful life of the customer relationships was estimated based on projected customer attrition rates and new customer acquisition, and the pattern of projected economic benefit of the asset.

 

The fair value of the assembled workforce was determined based on a cost approach using the replacement cost. The fair value was determined by considering hiring and training costs which were estimated to be 20% of total compensation multiplied by the current workforce. The assembled workforce is considered a component of goodwill, therefore, there is no estimated useful life and it will not be amortized. Rather, it will be tested for impairment at least annually as a component of goodwill.

 

Of the total purchase price, $26.0 million remains as goodwill. Goodwill represents the excess of the purchase price over the fair value of the underlying net tangible and identifiable intangible assets acquired and liabilities assumed and goodwill is not deductible for tax purposes. The acquisition of FusionOne is intended to complement and to further enhance the Company’s product offerings. These new opportunities, among other factors were the reasons for the purchase price resulting in the recognition of a significant amount of goodwill. Goodwill amounts are not amortized, but rather are tested for impairment at least annually. In the event that the Company determines that the value of goodwill has become impaired, the Company will record an accounting charge for the amount of impairment during the fiscal quarter in which such determination is made.

 

3. PRO FORMA ADJUSTMENTS

 

The unaudited pro forma combined condensed balance sheets and statements of operations give effect to the following pro forma adjustments:

 

(a) To record the payment of the cash portion of the FusionOne merger consideration of approximately $32.2 million.

 

(b) To record the estimated fair value of identifiable intangible assets and goodwill resulting from the FusionOne acquisition (see footnote 2 above).

 

(c) To record direct transaction costs related to the acquisition of FusionOne.

 

(d) To adjust FusionOne’s deferred revenue balance to fair value, as there is a legal performance obligation for contracts acquired.

 

6



 

(e) To eliminate FusionOne’s warrant liability cancelled with closing date gross closing consideration in pursuant to Section 2.01(c) (iii) of the July 6, 2010 merger agreement.

 

(f) To eliminate FusionOne’s historical redeemable convertible preferred stock, common stock, additional paid-in capital, accumulated comprehensive loss and accumulated deficit.

 

(g) To record the issuance of 397,990 shares of the Company’s common stock valued at approximately $7.1 million based on the Company’s July 19, 2010 closing stock price per share.

 

(h) To record amortization expense for the year ended December 31, 2009 and for the six months ended June 30, 2010, related to acquired intangibles resulting from the FusionOne acquisition as follows:

 

 

 

 

 

 

 

Expense for the

 

Expense for the

 

 

 

 

 

Estimated useful

 

year ended

 

six months ended

 

Intangible Assets

 

Estimated fair value

 

life (in years)

 

December 31, 2009

 

June 30, 2010

 

Trade name

 

$

500

 

8.0

 

$

63

 

$

31

 

Technology

 

15,000

 

10.0

 

1,500

 

750

 

Customer relationships

 

17,200

 

16.0

 

1,075

 

538

 

 

 

 

 

 

 

 

 

 

 

Total preliminary estimated purchase price

 

$

32,700

 

 

 

$

2,638

 

$

1,319

 

 

7