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8-K/A - FORM 8-K/A - LIFELOCK, INC.lock-8ka_20131211.htm
EX-99 - EX-99.1 - LIFELOCK, INC.lock-ex991_2013121139.htm
EX-99 - EX-99.2 - LIFELOCK, INC.lock-ex992_2013121141.htm
EX-23 - EX-23.1 - LIFELOCK, INC.lock-ex23_2013121138.htm

Exhibit 99.3

UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS

The following unaudited pro forma condensed combined statement of operations for the year ended December 31, 2012 and for the nine months ended September 30, 2013 presents the results of operations of LifeLock as if LifeLock’s acquisition of Lemon had been consummated on January 1, 2012.

The historical financial information has been adjusted to give effect to pro forma events that are directly attributable to the acquisition and factually supportable. Our unaudited pro forma condensed combined financial statements and explanatory notes present how our financial statements may have appeared had the businesses actually been combined as of January 1, 2012. The unaudited pro forma condensed combined financial statements show the impact on the combined statements of operations under the purchase method of accounting under Financial Accounting Standards Board ASC 805, Business Combinations, with LifeLock treated as the acquirer. Under the purchase method of accounting, the total purchase price is allocated to the assets acquired and liabilities assumed based on their estimated fair values as of the acquisition date. The excess of the purchase price over the amounts assigned to tangible or intangible assets acquired and liabilities assumed is recorded as goodwill.

The following unaudited pro forma condensed combined financial statements are presented for illustrative purposes only and do not purport to reflect the historical results that would have been obtained had LifeLock and Lemon been a combined company during the periods presented or the results the combined company may achieve in future periods.

The unaudited pro forma condensed combined financial information is derived from and should be read in conjunction with the historical financial statements and related notes included elsewhere in this Form 8K/A and our historical filings.

The following pro forma financial statements should be read in conjunction with:

the accompanying notes to the pro forma financial statements;

the consolidated financial statements of LifeLock as of and for the periods ended September 30, 2013 and December 31, 2012 which were previously filed with the Securities and Exchange Commission; and

the financial statements of Lemon as of and for the periods ended September 30, 2013 and December 31, 2012 contained in this Form 8-K/A.

 

 

 

 


 

Pro Forma Condensed Combined Consolidated Statement of Operations

For the Nine Month Period Ended September 30, 2013

(Unaudited)

(Thousands of dollars, except per share data)

 

 

LifeLock Inc.

 

 

Lemon Inc.

 

 

Adjustments

 

 

Footnotes

 

 

Pro Forma
Combined Entity

 

Revenue

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Consumer revenue

$

246,053

 

 

$

503

 

 

$

-  

 

 

 

 

 

 

$

246,556

 

Enterprise revenue

 

21,300

 

 

 

-  

 

 

 

-  

 

 

 

 

 

 

 

21,300

 

Total revenue

 

267,353

 

 

 

503

 

 

 

-  

 

 

 

 

 

 

 

267,856

 

Cost of services

 

73,965

 

 

 

451

 

 

 

-  

 

 

 

 

 

 

 

74,416

 

Gross profit

 

193,388

 

 

 

52

 

 

 

-  

 

 

 

 

 

 

 

193,440

 

Costs and expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Sales and marketing

 

125,651

 

 

 

876

 

 

 

-  

 

 

 

 

 

 

 

126,527

 

Technology and development

 

30,128

 

 

 

2,178

 

 

 

-  

 

 

 

 

 

 

 

32,306

 

General and administrative

 

32,160

 

 

 

978

 

 

 

-  

 

 

 

 

 

 

 

33,138

 

Amortization of acquired intangible assets

 

5,898

 

 

 

-  

 

 

 

353

 

 

 

(A)

 

 

 

6,251

 

 

 

193,837

 

 

 

4,032

 

 

 

353

 

 

 

 

 

 

 

198,222

 

Loss from operations

 

(449

)

 

 

(3,980

)

 

 

(353

)

 

 

 

 

 

 

(4,782

)

Other income (expenses):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense

 

(228

)

 

 

(104

)

 

 

104

 

 

 

(B)

 

 

 

(228

)

Interest and other income

 

75

 

 

 

270 

 

 

 

-  

 

 

 

 

 

 

 

345

 

Change in fair value of warrant
liabilities

 

-  

 

 

 

-  

 

 

 

-  

 

 

 

 

 

 

 

-

 

Change in fair value of embedded derivative

 

-  

 

 

 

-  

 

 

 

-  

 

 

 

 

 

 

 

-

 

Other

 

(11

)

 

 

-  

 

 

 

-  

 

 

 

 

 

 

 

(11

)

Total other expenses

 

(164

)

 

 

166

 

 

 

104

 

 

 

 

 

 

 

106

 

Income (loss) before provision for income taxed

 

(613

)

 

 

(3,814

)

 

 

(249

)

 

 

 

 

 

 

(4,676

)

Income tax (benefit) expense

 

142

 

 

 

1

 

 

 

-  

 

 

 

 

 

 

 

143

 

Net income (loss)

$

(755

)

 

$

(3,815

)

 

$

(249

)

 

 

 

 

 

$

(4,819

)

Net income attributable per share to common stockholders

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

$

(0.01

)

 

 

 

 

 

 

 

 

 

 

 

 

 

$

(0.05

)

Diluted

$

(0.01

)

 

 

 

 

 

 

 

 

 

 

 

 

 

$

(0.05

)

Weighted-average common shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

87,841

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

87,841

 

Diluted

 

87,841

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

87,841

 

 

 

 

 


 

Pro Forma Condensed Combined Consolidated Statement of Operations

For the Year Ended December 31, 2012

(Unaudited)

(Thousands of dollars, except per share data)

 

 

LifeLock Inc.

 

 

Lemon Inc.

 

 

Adjustments

 

 

Footnotes

 

 

Pro Forma
Combined Entity

 

Revenue

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Consumer revenue

$

254,678

 

 

$

195

 

 

$

-  

 

 

 

 

 

 

$

254,873

 

Enterprise revenue

 

21,750

 

 

 

-  

 

 

 

-  

 

 

 

 

 

 

 

21,750

 

Total revenue

 

276,428

 

 

 

195

 

 

 

-  

 

 

 

 

 

 

 

276,623

 

Cost of services

 

79,916

 

 

 

1,065

 

 

 

-  

 

 

 

 

 

 

 

80,981

 

Gross profit

 

196,512

 

 

 

(870

)

 

 

-  

 

 

 

 

 

 

 

195,642

 

Costs and expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Sales and marketing

 

122,989

 

 

 

1,056

 

 

 

-  

 

 

 

 

 

 

 

124,045

 

Technology and development

 

29,543

 

 

 

1,533

 

 

 

-  

 

 

 

 

 

 

 

31,076

 

General and administrative

 

24,629

 

 

 

1,538

 

 

 

-  

 

 

 

 

 

 

 

26,167

 

Amortization of acquired intangible assets

 

6,258

 

 

 

-  

 

 

 

950

 

 

 

(A)

 

 

 

7,208

 

 

 

183,419

 

 

 

4,127

 

 

 

950

 

 

 

 

 

 

 

188,496

 

Loss from operations

 

13,093

 

 

 

(4,997

)

 

 

(950

)

 

 

 

 

 

 

7,146

 

Other income (expenses):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense

 

(3,677

)

 

 

-  

 

 

 

-  

 

 

 

 

 

 

 

(3,677

)

Interest income

 

30

 

 

 

122

 

 

 

-  

 

 

 

 

 

 

 

152

 

Change in fair value of warrant
liabilities

 

3,117

 

 

 

-  

 

 

 

-  

 

 

 

 

 

 

 

3,117

 

Change in fair value of embedded derivative

 

(2,785

)

 

 

-  

 

 

 

-  

 

 

 

 

 

 

 

(2,785

)

Other

 

(5

)

 

 

-  

 

 

 

-  

 

 

 

 

 

 

 

(5

)

Total other expenses

 

(3,320

)

 

 

122

 

 

 

-  

 

 

 

 

 

 

 

(3,198

)

Income (loss) before provision for income taxed

 

9,773

 

 

 

(4,875

)

 

 

(950

)

 

 

 

 

 

 

3,948

 

Income tax (benefit) expense

 

(13,730

)

 

 

1

 

 

 

-  

 

 

 

 

 

 

 

(13,729

)

Net income (loss)

 

23,503

 

 

 

(4,876

)

 

 

(950

)

 

 

 

 

 

 

17,677

 

Accretion of convertible redeemable preferred stock

 

(9,378

)

 

 

-  

 

 

 

-  

 

 

 

 

 

 

 

(9,378

)

Beneficial conversion feature on convertible redeemable preferred stock

 

(2,452

)

 

 

-  

 

 

 

-   

 

 

 

 

 

 

 

(2,452

)

Net income allocable to convertible redeemable preferred stockholders

 

(5,504

)

 

 

-  

 

 

 

2,747

 

 

 

(C)

 

 

 

(2,757

)

Net income attributable to common stockholders

$

6,169

 

 

$

(4,876

)

 

$

1,797

 

 

 

 

 

 

$

3,090

 

Net income attributable per share to common stockholders

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

$

0.18

 

 

 

 

 

 

 

 

 

 

 

 

 

 

$

0.09

 

Diluted

$

0.09

 

 

 

 

 

 

 

 

 

 

 

 

 

 

$

0.01

 

Weighted-average common shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

35,082

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

35,082

 

Diluted

 

62,191

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

62,191

 

 

 

 

 


 

Balance Sheet

Pro Forma Condensed Combined Consolidated Balance Sheet

At September 30, 2013

(Unaudited)

(Thousands of dollars)

 

 

LifeLock Inc.

 

 

Lemon Inc.

 

 

Adjustments

 

 

 

Footnotes

 

 

Pro Forma

Combined Entity

 

Assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

 

 

Current assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

$

167,888

 

 

$

3,307

 

 

$

(46,744

)

 

 

(D)

 

 

$

124,451

 

Marketable securities

 

24,048

 

 

 

1,236

 

 

 

 

 

 

 

 

 

 

 

25,284

 

Trade and other receivables, net

 

11,540

 

 

 

24

 

 

 

 

 

 

 

 

 

 

 

11,564

 

Prepaid expenses and other current assets

 

5,359

 

 

 

131

 

 

 

 

 

 

 

 

 

 

 

5,490

 

Total current assets

 

208,835

 

 

 

4,698

 

 

 

 

 

 

 

 

 

 

 

166,789

 

Property and equipment, net

 

12,586

 

 

 

6

 

 

 

 

 

 

 

 

 

 

 

12,592

 

Deferred Tax Asset

 

-  

 

 

 

-  

 

 

 

11,929

 

 

 

(E)

 

 

 

11,929

 

Goodwill

 

129,428

 

 

 

-  

 

 

 

25,626

 

 

 

(F)

 

 

 

155,054

 

Intangible assets, net

 

45,344

 

 

 

-  

 

 

 

3,880

 

 

 

(G)

 

 

 

49,224

 

Other non-current assets

 

1,759

 

 

 

249

 

 

 

(239

)

 

 

(H)

 

 

 

1,769

 

Total assets

$

397,952

 

 

$

4,953

 

 

 

 

 

 

 

 

 

 

$

397,357

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

Liabilities and stockholders’ equity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accounts payable

 

2,922

 

 

 

326

 

 

 

 

 

 

 

 

 

 

 

3,248

 

Accrued expenses and other liabilities

 

33,589

 

 

 

147

 

 

 

 

 

 

 

 

 

 

 

33,736

 

Deferred revenue

 

115,816

 

 

 

-  

 

 

 

 

 

 

 

 

 

 

 

115,816

 

Current portion of long term debt

 

-  

 

 

 

603

 

 

 

(603

)

 

 

(I)

 

 

 

-  

 

Total current liabilities

 

152,327

 

 

 

1,076

 

 

 

 

 

 

 

 

 

 

 

152,800

 

Long term debt, net of current portion

 

-  

 

 

 

2,397

 

 

 

(2,397

)

 

 

(I)

 

 

 

-  

 

Other non-current liabilities

 

4,006

 

 

 

260 

 

 

 

(260

)

 

 

(J)

 

 

 

4,006

 

Total liabilities

 

156,333

 

 

 

3,733

 

 

 

 

 

 

 

 

 

 

 

156,806

 

Commitments and contingencies

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common stock, $0.001 par value

 

90

 

 

 

2

 

 

 

(2

)

 

 

(K)

 

 

 

90

 

Preferred stock, $0.001 par value

 

-  

 

 

 

16

 

 

 

(16

)

 

 

(K)

 

 

 

-  

 

Additional paid-in capital

 

462,330

 

 

 

36,856

 

 

 

(36,856

)

 

 

(K)

 

 

 

462,330

 

Accumulated other comprehensive loss

 

(43

)

 

 

-  

 

 

 

 

 

 

 

 

 

 

 

(43

)

Accumulated deficit

 

(220,758

)

 

 

(35,654

)

 

 

34,586

 

 

 

(K)

 

 

 

(221,826

)

Total stockholders’ equity

 

241,619

 

 

 

1,220

 

 

 

 

 

 

 

 

 

 

 

240,551

 

Total liabilities and stockholders’ equity

$

397,952

 

 

$

4,953

 

 

 

 

 

 

 

 

 

 

$

397,357

 

 

 

 

 


 

Notes to Unaudited Pro Forma Condensed Combined Financial Statements

 

Note 1 – Basis of Pro Forma Presentation

On December 11, 2013, LifeLock acquired Lemon for an agregate purchase price of $42.4 million of cash paid at closing, net of cash acquired.

The pro forma statements of operations for the nine months ended September 30, 2013 and for the year ended December 31, 2012 give effect to the acquisition as if it were completed on January 1, 2012. The pro forma balance sheet as of September 30, 2013 gives effect to the acquisition as if it were completed on September 30, 2013.

The pro forma financial statements have been derived from the historical consolidated financial statements of LifeLock and historical financial statements of Lemon. Assumptions and estimates underlying the pro forma adjustments are described in the accompanying notes, which should be read in conjunction with the pro forma financial statements. Since the pro forma financial statements have been prepared based upon preliminary estimates, the final amounts recorded at the date of the acquisition may differ materially from the information presented. These estimates are subject to change pending further review of the assets acquired and liabilities assumed.

The acquisition is reflected in the pro forma financial statements as being accounted for based on the guidance provided by accounting standards for business combinations. Under the purchase method of accounting, the total estimated purchase price is allocated as described in Note 2. In accordance with accounting guidance for business combinations, the assets acquired and the liabilities assumed have been measured at fair value. The fair value measurements utilize estimates based on key assumptions of the acquisition, and historical and current market data. The pro forma adjustments included herein may be revised as additional information becomes available and as additional analyses are performed. The final purchase price allocation will be determined after the acquisition is completed and the final amounts recorded may differ materially from the information presented. The pro forma financial statements do not reflect the effect of any regulatory actions that may impact the pro forma financial statements when the acquisition is completed.

The pro forma financial statements include adjustments to repay indebtedness owed by Lemon, as of September 30, 2013 that approximated $3 million. The amounts utilized in determining the pro forma adjustments are also set forth in Note 3.

For the purpose of measuring the estimated fair value of the assets acquired and liabilities assumed, LifeLock has applied the accounting guidance for fair value measurements. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

 

Note 2. Preliminary Purchase Price Allocation; Funding Sources and Uses

Preliminary Purchase Price Allocation

The preliminary allocation of the purchase price to the fair value of assets acquired and liabilities assumed includes the fair value of intangible assets, goodwill, and related deferred income taxes. The preliminary allocation of the purchase price is as follows (in thousands):

 

Cash

$

3,307

  

Other current assets

 

1,391

 

Property, plant and equipment

 

6

  

Deferred tax assets

 

11,929

  

Intangible Assets

 

3,880

  

Goodwill

 

25,626

  

Other noncurrent assets

 

10

  

Current liabilities

 

(473

 

$

45,676

  

 


 

Funding Sources and Uses

The acquisition was funded out of our cash reserves.

 

Note 3 – Pro Forma Adjustments

(A) This pro forma adjustment represents the increase in amortization expense associated with acquired intangible assets, based on the preliminary fair value of approximately $3.9 million. The assets have estimated useful lives between 1 and 7 years.

(B) This pro forma adjustment represents the decrease in interest expense on the long term debt of Lemon which was repaid on acquisition.

(C) This pro forma adjustment reduces the net income allocable to convertible redeemable preferred stockholders. As the combined company has lower net income, the allocation to preferred stockholders under the two class method is reduced.

(D) This pro forma adjustment represents the cash paid to acquire Lemon of $42.4 million, net of cash acquired, and acquisition related expenses of $1.1 million.

(E) This pro forma adjustment reflects the increase in deferred tax assets acquired as part of the acquisition. Lemon has approximately $ 32.8 million NOLs which will transfer and become tax attributable carryforwards of LifeLock. These tax attributes are subject to limitations on the timing of their use as a result of the ownership change caused by the transaction. LifeLock anticipates that these will be fully realized within their respective carryforward periods and has recorded these deferred tax assets at full value in the pro forma balance sheet.

(F) This pro forma adjustment reflects the preliminary estimate of the excess of the purchase price paid over the fair value of Lemon assets acquired and liabilities assumed.

(G) This pro forma adjustment reflects the preliminary estimate of intangibles acquired from Lemon. The assets include trademarks and trade names, customers and technology assets with useful lives between 1 and 7 years.

(H) This pro forma adjustment reflects the decrease in debt issuance costs related to the long term debt of Lemon, which was repaid on acquisition.

(I) These pro forma adjustment reflects the decrease in long term debt of Lemon which was repaid on acquisition.

(J) This pro forma adjustment reflects the decrease in convertible preferred stock warrant liabilities, the warrants were exercised as part of the acquisition.

(K) These pro forma adjustments reflect the elimination of $1.2 million of Lemon’s historical equity balances, it also represents an adjustment to retained earnings of $1.1 million in transaction costs to reflect the impact of accounting guidance to business combinations, which requires these costs be expensed as incurred.