Attached files
file | filename |
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8-K/A - 8-K/A - ARI NETWORK SERVICES INC /WI | aris-20130211x8ka.htm |
EX-23 - EX-23 - ARI NETWORK SERVICES INC /WI | aris-20130211xex23.htm |
EX-99.3 - EX-99.3 - ARI NETWORK SERVICES INC /WI | aris-20130211ex993401a62.htm |
EX-99.2 - EX-99.2 - ARI NETWORK SERVICES INC /WI | aris-20130211ex9927f6e59.htm |
Exhibit 99.4 Unaudited pro forma combined financial statements of ARI Network Services, Inc. and the Retail Services Division of Fifty Below Sales & Marketing, Inc.
The following unaudited pro forma financial information relates to the November 28, 2012 acquisition by ARI Network Services, Inc. (the “Company”) of substantially all of the assets of the Retail Services Division of Fifty Below Sales & Marketing, Inc. (“50 Below RSD”) out of Chapter 11 Bankruptcy pursuant to Section 363 and 365 of the United States Bankruptcy Code. Consideration for the acquisition included $5,000,000 in cash and $4,837,881 in assumed liabilities. The pro forma amounts have been prepared based on certain preliminary purchase accounting and other pro forma adjustments (as described in the accompanying notes) to the historical financial statements of the Company and 50 Below RSD.
The unaudited pro forma balance sheet at October 31, 2012 reflects the historical financial position of the Company with pro forma adjustments to reflect the purchase price allocation of the assets of 50 Below RSD. The unaudited pro forma statement of operations for the twelve months ended July 31, 2012 reflects the historical results of both companies with pro forma adjustments as if the acquisition had occurred on August 1, 2011. The unaudited pro forma statement of operations for the three months ended October 31, 2012 reflects the historical results of operations of both companies, with pro forma adjustments as if the acquisition had occurred on August 1, 2012. The pro forma adjustments are described in the accompanying notes and give effect to events that are (a) directly attributable to the acquisition, (b) factually supportable, and (c) in the case of certain statement of operations adjustments, expected to have a continuing impact.
The unaudited pro forma financial statements should be read in connection with the Company's and 50 Below RSD’s historical financial statements and related footnotes. The unaudited pro forma combined financial information does not reflect any cost savings, operating synergies, revenue enhancements or implementation costs that the combined company may achieve as a result of the acquisition. The unaudited pro forma financial information presented is for information purposes only and does not purport to represent what the Company's and 50 Below RSD's financial position or results of operations as of the dates presented would have been had the acquisition in fact occurred on such date or at the beginning of the period indicated or to project the Company's and 50 Below RSD's financial position or results of operations for any future date or period.
ARI Network Services, Inc. |
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Unaudited Pro Forma Balance Sheet |
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As of October 31, 2012 |
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(Dollars in Thousands, Except per Share Data) |
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Pro Forma |
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ARI |
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Adjustments |
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Note |
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Pro Forma |
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ASSETS |
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|
Cash and cash equivalents |
$ |
261 |
|
$ |
(261) |
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(2)(3) |
|
$ |
- |
Trade receivables, less allowance for doubtful accounts of $251 |
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|
|
|
|
|
|
|
|
|
at October 31, 2012 |
|
1,364 |
|
|
|
|
|
|
|
1,364 |
Work in process |
|
270 |
|
|
|
|
|
|
|
270 |
Prepaid expenses and other |
|
768 |
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|
|
|
|
|
|
768 |
Deferred income taxes |
|
2,632 |
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|
|
|
|
|
|
2,632 |
Total current assets |
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5,295 |
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(261) |
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5,034 |
Equipment and leasehold improvements: |
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|
|
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|
|
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|
|
|
Computer equipment and software for internal use |
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2,645 |
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106 |
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(1) |
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2,751 |
Leasehold improvements |
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609 |
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|
609 |
Furniture and equipment |
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2,304 |
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2,304 |
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5,558 |
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106 |
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5,664 |
Less accumulated depreciation and amortization |
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3,408 |
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3,408 |
Net equipment and leasehold improvements |
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2,150 |
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106 |
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2,256 |
Capitalized software product costs: |
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|
Amounts capitalized for software product costs |
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19,009 |
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|
950 |
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(1) |
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19,959 |
Less accumulated amortization |
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15,694 |
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15,694 |
Net capitalized software product costs |
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3,315 |
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|
950 |
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4,265 |
Deferred income taxes |
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2,392 |
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2,392 |
Other long term assets |
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1,032 |
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1,032 |
Other intangible assets |
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2,224 |
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2,160 |
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(1) |
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4,384 |
Goodwill |
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5,972 |
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6,622 |
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(1) |
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12,594 |
Total assets |
$ |
22,380 |
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$ |
9,577 |
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$ |
31,957 |
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Pro Forma |
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ARI |
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Adjustments |
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Note |
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Pro Forma |
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LIABILITIES |
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Current borrowings on line of credit |
$ |
220 |
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$ |
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$ |
220 |
Current portion of long-term debt |
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1,085 |
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|
1,085 |
Current portion of contingent liabilities |
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331 |
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|
331 |
Accounts payable |
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530 |
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|
530 |
Deferred revenue |
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4,717 |
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4,838 |
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(1) |
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9,555 |
Accrued payroll and related liabilities |
|
845 |
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|
845 |
Accrued sales, use and income taxes |
|
119 |
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|
119 |
Other accrued liabilities |
|
574 |
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|
1,239 |
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(3) |
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1,813 |
Current portion of capital lease obligations |
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118 |
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118 |
Total current liabilities |
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8,539 |
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6,077 |
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14,616 |
Long-term debt |
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3,640 |
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2,915 |
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(2)(8) |
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6,555 |
Long-term portion of contingent liabilities |
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418 |
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418 |
Capital lease obligations |
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41 |
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41 |
Other long term liabilities |
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255 |
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|
255 |
Total non-current liabilities |
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4,354 |
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2,915 |
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7,269 |
Total liabilities |
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12,893 |
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8,992 |
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21,885 |
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SHAREHOLDERS' EQUITY |
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Cumulative preferred stock, par value $.001 per share, 1,000,000 shares authorized; 0 shares issued and outstanding at October 31, 2012 |
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- |
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- |
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- |
Junior preferred stock, par value $.001 per share, 100,000 shares authorized; 0 shares issued and outstanding at October 31, 2012 |
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- |
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- |
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- |
Common stock, par value $.001 per share, 25,000,000 shares authorized; 8,169,550 shares issued and outstanding at October 31, 2012 |
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8 |
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8 |
Common stock warrants and options |
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1,324 |
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1,324 |
Additional paid-in capital |
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96,062 |
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|
585 |
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(8) |
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|
96,647 |
Accumulated deficit |
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(87,896) |
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(87,896) |
Other accumulated comprehensive loss |
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(11) |
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(11) |
Total shareholders' equity |
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9,487 |
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|
585 |
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|
10,072 |
Total liabilities and shareholders' equity |
$ |
22,380 |
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$ |
9,577 |
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$ |
31,957 |
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See accompanying notes |
ARI Network Services, Inc. |
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Unaudited Pro Forma Statements of Income |
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For the Twelve months ended July 31, 2012 |
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(Dollars in Thousands, Except per Share Data) |
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Pro Forma |
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ARI |
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50 Below RSD |
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Adjustments |
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Note |
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Pro Forma |
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Net revenue |
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$ |
22,494 |
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$ |
8,811 |
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$ |
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$ |
31,305 |
Cost of revenue |
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|
5,266 |
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2,742 |
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|
106 |
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(4) |
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|
8,114 |
Gross profit |
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17,228 |
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|
6,069 |
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(106) |
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23,191 |
Operating expenses: |
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Sales and marketing |
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4,249 |
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4,411 |
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8,660 |
Customer operations and support |
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|
3,379 |
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3,680 |
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7,059 |
Software development and technical support (net of |
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capitalized software product costs |
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1,864 |
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|
823 |
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|
|
|
|
2,687 |
General and administrative |
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|
5,027 |
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|
1,237 |
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|
6,264 |
Depreciation and amortization (exclusive of amortization of |
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|
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|
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software product costs included in cost of revenue) |
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|
1,414 |
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69 |
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|
200 |
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(5) |
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|
1,683 |
Net operating expenses |
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|
15,933 |
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|
10,220 |
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|
200 |
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|
|
|
26,353 |
Operating income (loss) |
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|
1,295 |
|
|
(4,151) |
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(306) |
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|
|
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(3,162) |
Other income (expense): |
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|
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|
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|
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Interest income (expense) |
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(235) |
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- |
|
|
(517) |
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(6)(8) |
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|
(752) |
Other, net |
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|
222 |
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- |
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|
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|
|
|
222 |
Total other income (expense) |
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|
(13) |
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|
- |
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|
(517) |
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|
|
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(530) |
Income (loss) before provision for income tax |
|
|
1,282 |
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|
(4,151) |
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|
(823) |
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|
|
|
(3,692) |
Income tax benefit (expense) |
|
|
(227) |
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|
- |
|
|
1,990 |
|
(7) |
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|
1,763 |
Net income (loss) |
|
$ |
1,055 |
|
$ |
(4,151) |
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$ |
1,167 |
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$ |
(1,929) |
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Weighted average common shares outstanding: |
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Basic |
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7,997 |
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|
440 |
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(8) |
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|
8,437 |
Diluted |
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8,171 |
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|
440 |
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(8) |
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|
8,611 |
Net income (loss) per common share: |
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|
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|
|
|
|
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Basic |
|
$ |
0.13 |
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|
|
|
|
|
|
|
|
$ |
(0.23) |
Diluted |
|
$ |
0.13 |
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|
|
|
|
|
|
|
|
$ |
(0.22) |
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See accompanying notes |
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ARI Network Services, Inc. |
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Unaudited Pro Forma Statements of Income |
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For the Three months ended October 31, 2012 |
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(Dollars in Thousands, Except per Share Data) |
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Pro Forma |
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ARI |
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50 Below RSD |
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Adjustments |
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Note |
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Pro Forma |
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Net revenue |
|
$ |
5,942 |
|
$ |
2,481 |
|
$ |
|
|
|
|
$ |
8,423 |
Cost of revenue |
|
|
1,408 |
|
|
640 |
|
|
26 |
|
(4) |
|
|
2,074 |
Gross profit |
|
|
4,534 |
|
|
1,841 |
|
|
(26) |
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|
|
|
6,349 |
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
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Sales and marketing |
|
|
1,046 |
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|
952 |
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|
|
|
|
|
|
1,998 |
Customer operations and support |
|
|
1,008 |
|
|
862 |
|
|
|
|
|
|
|
1,870 |
Software development and technical support (net of |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
capitalized software product costs |
|
|
577 |
|
|
203 |
|
|
|
|
|
|
|
780 |
General and administrative |
|
|
1,320 |
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|
340 |
|
|
|
|
|
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|
1,660 |
Depreciation and amortization (exclusive of amortization of |
|
|
|
|
|
|
|
|
|
|
|
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|
software product costs included in cost of revenue) |
|
|
280 |
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|
21 |
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|
50 |
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(5) |
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|
351 |
Net operating expenses |
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|
4,231 |
|
|
2,377 |
|
|
50 |
|
|
|
|
6,658 |
Operating income (loss) |
|
|
303 |
|
|
(536) |
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|
(76) |
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|
|
|
(310) |
Other income (expense): |
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|
|
|
|
|
|
|
|
|
|
|
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|
Interest income (expense) |
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(68) |
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|
- |
|
|
(129) |
|
(6)(8) |
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|
(197) |
Other, net |
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|
4 |
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|
- |
|
|
|
|
|
|
|
4 |
Total other income (expense) |
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|
(64) |
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|
- |
|
|
(129) |
|
|
|
|
(193) |
Income (loss) before provision for income tax |
|
|
239 |
|
|
(536) |
|
|
(206) |
|
|
|
|
(503) |
Income tax benefit (expense) |
|
|
(126) |
|
|
- |
|
|
297 |
|
(7) |
|
|
171 |
Net income (loss) |
|
$ |
113 |
|
$ |
(536) |
|
$ |
91 |
|
|
|
$ |
(332) |
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Weighted average common shares outstanding: |
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|
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|
|
|
|
|
|
|
|
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|
Basic |
|
|
8,123 |
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|
|
440 |
|
(8) |
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|
8,563 |
Diluted |
|
|
8,249 |
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|
|
|
|
440 |
|
(8) |
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|
8,689 |
Net income (loss) per common share: |
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|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
$ |
0.01 |
|
|
|
|
|
|
|
|
|
$ |
(0.04) |
Diluted |
|
$ |
0.01 |
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|
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|
|
|
$ |
(0.04) |
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See accompanying notes |
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ARI Network Services, Inc.
Notes to Unaudited Pro Forma Financial Statements
1. |
Represents adjustments for the preliminary purchase price allocation to the historical balances at October 31, 2012. Such adjustments were primarily based on the audited financial statements of 50 Below RSD and an independent valuation of the intangible assets as follows: |
Allocation of Purchase Price: |
|
|
Fixed Assets |
$ |
106,254 |
Internally Developed Technology |
|
950,000 |
Tradenames |
|
130,000 |
Customer relationships |
|
2,030,000 |
Goodwill |
|
6,621,627 |
Total |
$ |
9,837,881 |
|
|
|
2. |
Pro Forma adjustment represents the purchase price funding of $1,500,000 in cash, $4,837,881 of assumed liabilities and $3,500,000 through third party debt. |
3. |
Pro Forma adjustment represents a reclassification of the pro forma negative cash balance to accrued liabilities. |
1. |
Pro Forma adjustment represents the increase in amortization costs related to internally developed technology costs amortized over 9 years of approximately $106,000 for the twelve months ended July 31, 2012 and $26,000 for the three months ended October 31, 2012. |
2. |
Pro Forma adjustment represents amortization of intangibles related to capitalized tradenames amortized over 2 years and customer relationships amortized over 15 years of approximately $200,000 for the twelve months ended July 31, 2012 and $50,000 for the three months ended October 31, 2012. |
3. |
Pro Forma adjustment represents interest expense on the debt incurred to acquire the assets of 50 Below RSD at an annual interest rate of 10% plus the amortization of debt discount of $585,000 over 42 months. |
4. |
Pro Forma adjustment represents the tax effect of the historical 50 Below RSD results of operations and the pro forma adjustments at an estimated tax rate of 40%, resulting in a tax benefit of $1,990,000 for the twelve months ended July 31, 2012 and $297,000 for the three months ended October 31, 2012. |
5. |
Pro Forma adjustment represents the 440,000 shares of the Company’s common stock issued as consideration for the third party promissory note at a market price of $1.33 per share, recorded as a debt discount and amortized over the life of the note. |