Attached files

file filename
8-K/A - FORM 8-K AMENDMENT - CAFEPRESS INC.d465481d8ka.htm
EX-99.1 - AUDITED FINANCIAL STATEMENTS OF EZ PRINTS - CAFEPRESS INC.d465481dex991.htm
EX-99.2 - UNAUDITED CONDENSED FINANCIAL STATEMENTS OF EZ PRINTS - CAFEPRESS INC.d465481dex992.htm
EX-23.01 - CONSENT OF INDEPENDENT AUDITORS - CAFEPRESS INC.d465481dex2301.htm

Exhibit 99.3

UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS

The following unaudited pro forma condensed combined balance sheet and statement of operations are presented to give effect to the purchase of all of the outstanding capital stock by CafePress, Inc. (“CafePress”) through the merger (the “Transaction”) of CafePress with EZ Prints, Inc. (“EZ Prints”). The pro forma information was prepared based on the historical consolidated financial statements and related notes of CafePress and EZ Prints after giving effect to the Transaction using the acquisition method of accounting. In addition, certain historical EZ Prints balances have been reclassified to conform to CafePress’ presentation.

The unaudited pro forma condensed combined balance sheet as of September 30, 2012 is presented as if the Transaction had occurred on September 30, 2012. The unaudited pro forma combined statements of operations combine the results of operations of CafePress and EZ Prints for the nine months ended September 30, 2012, and the results of CafePress for the year ended December 31, 2011 and EZ Prints for the year ended March 31, 2012 and are presented as if the Transaction had occurred on January 1, 2011 and were carried forward through each of the aforementioned periods presented.

The preliminary allocation of the purchase price used in the unaudited pro forma condensed combined financial statements is based upon an estimated valuation of certain assets and liabilities acquired as if the Transaction had occurred on September 30, 2012. The estimates and assumptions are subject to change during the measurement period (up to one year from the acquisition date) upon the finalization of the valuation of the Transaction as of the actual acquisition date of October 25, 2012.

The unaudited pro forma condensed combined financial statements have been prepared for illustrative purposes only and are not intended to represent or be indicative of the consolidated financial position or results of operations in future periods or the results that actually would have been achieved had CafePress and EZ Prints been a combined company during the respective periods presented. The unaudited pro forma condensed combined financial statements do not reflect any operating efficiencies, post-Transaction synergies and/or cost savings that CafePress may achieve with respect to the combined companies.

These unaudited pro forma condensed combined financial statements should be read in conjunction with CafePress’ historical consolidated financial statements and related notes included in its Prospectus filed on March 29, 2012, and Form 10-Q for the nine months ended September 30,2012, as well as EZ Prints’ historical financial statements and related notes for the year ended March 31, 2012, and for the three months ended June 30, 2012 and 2011, which are included as Exhibits 99.1 and 99.2, respectively, to this Form 8-K/A.


CAFEPRESS, INC.

UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET

AS OF SEPTEMBER 30, 2012

(in thousands)

 

     Historical                     
     CafePress     EZ Prints     Pro forma
Adjustments
           Pro forma
Combined
 

ASSETS

           

Current assets:

           

Cash and cash equivalents

   $ 45,507      $ 1,464      $ (30,000     A       $ 16,971   

Short-term investments

     9,652        —          —             9,652   

Accounts receivable, net

     3,466        2,636        (25     B         6,077   

Inventory

     7,591        724        —             8,315   

Deferred tax assets

     1,842        —          1,550        D         3,392   

Deferred costs

     3,405        —          —             3,405   

Prepaid expenses and other current assets

     8,302        132        (250     B         8,184   
  

 

 

   

 

 

   

 

 

      

 

 

 

Total current assets

     79,765        4,956        (28,725        55,996   

Property and equipment, net

     16,683        3,427        (1,556     C         18,554   

Goodwill

     17,204        —          22,775        D         39,979   

Intangible assets, net

     10,001        —          11,130        D         21,131   

Deferred tax assets

     3,250        —          —             3,250   

Other assets

     314        42        —             356   

Total assets

   $ 127,217      $ 8,425      $ 3,624         $ 139,266   
  

 

 

   

 

 

   

 

 

      

 

 

 

LIABILITIES, AND STOCKHOLDERS’ EQUITY (DEFICIT)

           

Current liabilities:

           

Line of credit

   $ —        $ 894        —           $ 894   

Accounts payable

     7,010        1,223        (25     B         8,208   

Accrued royalties payable and payable to partners

     4,605        5,797        —             10,402   

Accrued liabilities

     13,277        632        3,673        E         17,582   

Income tax payable

     —          —          —             —     

Deferred revenue

     6,717        —          —             6,717   

Capital lease obligation, current

     495        28        —             523   
  

 

 

   

 

 

   

 

 

      

 

 

 

Total current liabilities

     32,104        8,574        3,648           44,326   

Capital lease obligation, non-current

     2,327        90        —             2,417   

Other long-term liabilities

     3,668        200        (200     B         3,668   
  

 

 

   

 

 

   

 

 

      

 

 

 

TOTAL LIABILITIES

     38,099        8,864        3,448           50,411   
  

 

 

   

 

 

   

 

 

      

 

 

 

Stockholders’ Equity:

           

Preferred stock Series 1 and 2

     —          35,887        (35,887     F         —     

Common stock

     2        4        (4     F         2   

Additional paid-in capital

     92,804        1,101        (1,101     F         92,804   

Treasury stock

     —          (190     190        F         —     

Accumulated deficit

     (3,688     (37,241     36,978        F         (3,951
  

 

 

   

 

 

   

 

 

      

 

 

 

TOTAL STOCKHOLDERS’ EQUITY (DEFICIT)

     89,118        (439     176        F         88,855   

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY

   $ 127,217      $ 8,425      $ 3,624         $ 139,266   
  

 

 

   

 

 

   

 

 

      

 

 

 

See accompanying notes to the unaudited pro forma condensed combined financial statements.


CAFEPRESS, INC.

UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2012 (in thousands, except per share data)

 

     Historical                     
     CafePress     EZ Prints     Pro  forma
Adjustments
           Pro forma
Combined
 

Net revenue

   $ 130,537      $ 19,141      $ (176     B       $ 149,502   

Cost of net revenues:

     76,015        14,222        (176     B         90,061   
  

 

 

   

 

 

   

 

 

      

 

 

 

Gross profit:

     54,522        4,919        —             59,441   
  

 

 

   

 

 

   

 

 

      

 

 

 

Operating expenses:

           

Sales and marketing

     34,338        2,081        238        G         36,657   

Technology and development

     9,810        1,677        1,224        H         12,711   

General and administrative

     12,181        3,530        —             15,711   

Acquisition-related costs

     2,508        —          (283     I         2,225   
  

 

 

   

 

 

   

 

 

      

 

 

 

Total operating expenses

     58,837        7,288        1,179           67,304   
  

 

 

   

 

 

   

 

 

      

 

 

 

Loss from operations

     (4,315     (2,369     (1,179        (7,863

Interest income

     58        —          (58     J         —     

Interest expense

     (146     (54     —             (200
  

 

 

   

 

 

   

 

 

      

 

 

 

Loss before provision for income taxes

     (4,403     (2,423     (1,237        (8,063

Benefit from income taxes

     (1,216     —          (420     K         (1,636
  

 

 

   

 

 

   

 

 

      

 

 

 

Net loss

   $ (3,187   $ (2,423   $ (817      $ (6,427
  

 

 

   

 

 

   

 

 

      

 

 

 

Net loss per share of common stock

           

Basic and diluted

   $ (0.22          $ (0.45
  

 

 

          

 

 

 

Shares used in computing net loss per share of common stock

           

Basic and diluted

     14,319               14,319   
  

 

 

          

 

 

 

See accompanying notes to the unaudited pro forma condensed combined financial statements.


CAFEPRESS, INC.

UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS

FOR THE YEAR ENDED DECEMBER 31, 2011 AND MARCH 31, 2012 (in thousands, except per share data)

 

     Historical                     
     CafePress     EZ Prints     Pro forma
Adjustments
           Pro forma
Combined
 

Net revenue

   $ 175,482      $ 33,979      $ (21     B       $ 209,440   

Cost of net revenues:

     100,191        24,455        (21     B         124,625   
  

 

 

   

 

 

   

 

 

      

 

 

 

Gross profit:

     75,291        9,524        —             84,815   
  

 

 

   

 

 

   

 

 

      

 

 

 

Operating expenses:

           

Sales and marketing

     40,809        2,436        318        G         43,563   

Technology and development

     12,768        2,413        1,797        H         16,978   

General and administrative

     13,573        4,508        —             18,081   

Acquisition-related costs

     2,696        —          —             2,696   
  

 

 

   

 

 

   

 

 

      

 

 

 

Total operating expenses

     69,846        9,357        2,115           81,318   
  

 

 

   

 

 

   

 

 

      

 

 

 

Income from operations

     5,445        167        (2,115        3,497   

Interest income

     56        —          (56     J         —     

Interest expense

     (194     (62     —             (256
  

 

 

   

 

 

   

 

 

      

 

 

 

Income before provision for income taxes

     5,307        105        (2,171        3,241   

Provision (benefit) for income taxes

     1,701        —          (738     K         963   
  

 

 

   

 

 

   

 

 

      

 

 

 

Net income (loss)

   $ 3,606      $ 105      $ (1,433      $ 2,278   
  

 

 

   

 

 

   

 

 

      

 

 

 

Net income per share of common stock:

           

Basic

   $ 0.17             $ 0.07   
  

 

 

          

 

 

 

Diluted

   $ 0.16             $ 0.07   
  

 

 

          

 

 

 

Shares used in computing net income per share of common stock:

           

Basic

     8,798               8,798   
  

 

 

          

 

 

 

Diluted

     9,403               9,403   
  

 

 

          

 

 

 

See accompanying notes to the unaudited pro forma condensed combined financial statements.


CAFEPRESS, INC.

NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS

 

  1. Basis of Presentation

Pro forma combined income statement for the year ended December 31, 2011 includes historical income statement of EZ Prints for the year ended March 31, 2012. Pro forma combined income statement for the nine months ended September 30, 2012 includes historical income statement of EZ Prints for the period from January 1, 2012 to September 30, 2012. As such the following results of EZ Prints for the three months period ended March 31, 2012 were included in both periods presented:

 

     Three months ended
March 31, 2012
 

Net revenue

   $ 6,767   

Costs of net revenues:

     5,187   
  

 

 

 

Gross profit:

     1,580   
  

 

 

 

Operating expenses:

  

Sales and marketing

     711   

Technology and development

     324   

General and administrative

     866   

Bad debt expense

     1,091   
  

 

 

 

Total operating expenses

     2,992   
  

 

 

 

Loss from operations

     (1,412

Other expenses, net

     22   
  

 

 

 

Loss before provision for income taxes

     (1,434

Provision for income taxes

     —     
  

 

 

 

Net loss

   $ (1,434
  

 

 

 

 

  2. Acquisition of EZ Prints, Inc.

The Company acquired EZ Prints Inc., a complete deployable e-commerce platform, on October 25, 2012. The purchase consideration issued included cash payment of $30 million, and additional cash earn-outs (not to exceed $10 million in aggregate) contingent upon achieving certain performance targets for the twelve months following the closing of the Transaction. The contingent earn-outs are valued using a probability-based approach on various revenue assumptions. Final determination of the earn-out liability can range from zero to $10 million based on the actual achievement of the revenue targets.

The preliminary purchase price of and purchase price allocation for EZ Prints, as presented below, are our best estimates. These estimates are preliminary as the Company is currently in the process of finalizing many of the purchase amounts presented below.

Preliminary purchase price

 

     In thousands  

Cash

   $ 30,000   

Fair value of contingent consideration

     3,460   
  

 

 

 
   $ 33,460   
  

 

 

 


The total preliminary purchase price was allocated to EZ Prints’ net tangible and identifiable intangible assets based on their estimated fair values as of October 25, 2012 as set forth below.

Preliminary purchase price allocation

 

     In thousands     Estimated
useful lives
(in years)
   Method of
amortization
 

Current assets

   $ 4,956      N/A   

Fixed assets and other long-term assets

     1,913      2-5      Straight-line   

Intangible assets:

       

Customer relationships

     2,540      8      Straight-line   

Developed technology (Builder)

     6,940      4      Straight-line   

Developed technology (E-Commerce)

     550      3      Straight-line   

Developed technology (Order to Store)

     90      4      Straight-line   

Developed technology (Back-end)

     1,010      5      Straight-line   

Goodwill

     22,775      N/A   

Deferred tax asset, net

     1,550      N/A   

Liabilities assumed

     (8,864   N/A   
  

 

 

      
   $ 33,460        
  

 

 

      

 

  3. Pro forma financial statement adjustments

 

  A To record the purchase price of $30.0 million paid in cash

 

  B To eliminate Intercompany balances and transactions

 

  C To eliminate historical EZ Prints technology related assets to be replaced with a fair market value of developed technology acquired

 

  D To record preliminary goodwill and intangible assets acquired and deferred taxes

 

  E To record following adjustments to liabilities:

 

To record a fair value of the estimated potential earn out payment

   $ 3,460   

To record direct acquisition-related costs incurred by CafePress

     263   

To eliminate Intercompany balances and transactions

     (50)   
   $ 3,673   
  

 

 

 

 

  F To record following adjustments to stockholders’ equity:

To eliminate EZ Prints historical stockholders’ equity:

 

Preferred stock Series 1 and 2

   $ (35,887

Common stock

     (4

Additional paid-in capital

     (1,101

Treasury Stock

     190   

Accumulated deficit

     37,241   
  

 

 

 
     439   
  

 

 

 
To record direct acquisition-related costs incurred by CafePress      (263
  

 

 

 
   $ 176   
  

 

 

 


  G To record the estimated amount of amortization of customer relationships acquired by CafePress over its estimated useful life

 

  H To record following adjustments to Technology and development expenses:

 

     Nine months
ended
September 30,
2012
    Year ended
December 31,
2011 and
March 31,
2012
 

To record the estimated amount of amortization of developed technology asset acquired by CafePress over its estimated useful life

   $ 1,607      $ 2,143   

To eliminate amortization of internally developed software historically capitalized by EZ Prints

     (383     (346
  

 

 

   

 

 

 
   $ 1,224      $ 1,797   
  

 

 

   

 

 

 

 

  I To eliminate CafePress’ acquisition-related costs included in their respective historical financials that are non-recurring in nature.

 

  J To record the estimated decrease in interest income due to the reduction in cash used for the acquisition.

 

  K To record tax benefit to reflect the pro forma income tax impact at the statutory federal income tax rate. The pro forma combined provision and benefit for income taxes do not reflect the amounts that would have resulted had the Company and EZ Prints filed consolidated income tax returns during the period presented.