Attached files
| file | filename |
|---|---|
| 8-K/A - 8-K/A - 6D Global Technologies, Inc | sixdglobal8ka060415.htm |
| EX-99.1 - EX-99.1 - 6D Global Technologies, Inc | ex99-1.htm |
Exhibit 99.2
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
The following unaudited pro forma condensed combined financial information presents the unaudited pro forma condensed combined statement of operations based upon the combined historical financial statements of 6D Global Technologies (“the Company” or “6D Global”), Topaz Interactive, LLC (“Storycode”) and SwellPath Inc., (“SwellPath”) after giving effect to the business combinations between 6D Global, Storycode and SwellPath and adjustments described in the accompanying notes.
The unaudited pro forma condensed combined statements of operations for the year ended December 31, 2014 reflects the transactions as if they had occurred on January 1, 2014, the beginning of the earliest period presented. In addition, the unaudited pro forma condensed combined statements of operations for the quarter ended March 31, 2015, reflects the transactions as if they had occurred on January 1, 2015, the beginning of the earliest period presented.
The unaudited pro forma condensed combined financial information should be read in conjunction with the audited and unaudited historical financial statements of each of 6D Global, Storycode and SwellPath and the notes thereto. Additional information about the basis of presentation of this information is provided in Note 1 hereto.
The unaudited pro forma condensed combined financial information was prepared in accordance with Article 11 of Regulation S-X. The unaudited pro forma adjustments reflecting the transaction have been prepared in accordance with business combination accounting guidance as provided in Accounting Standards Codification section 805, and reflect the preliminary allocation of the purchase price to the acquired assets and liabilities based upon the preliminary estimate of fair values, using the assumptions set forth in the notes to the unaudited pro forma condensed combined financial information.
The unaudited pro forma condensed combined financial information is provided for informational purposes only and is not necessarily indicative of the operating results or financial position that would have occurred if the transaction had been completed as of the dates set forth above, nor is it indicative of the future results or financial position of the combined company. In connection with the pro forma financial information, the Company allocated the purchase price using its best estimates of fair value. Accordingly, the pro forma acquisition price adjustments are preliminary and subject to further adjustments as additional information becomes available and as additional analyses are performed. The unaudited pro forma condensed combined financial information also does not give effect to the potential impact of current financial conditions, any anticipated synergies, operating efficiencies or cost savings that may result from the transaction or any integration costs. Furthermore, the unaudited pro forma condensed combined statements of operations do not include certain nonrecurring charges and the related tax effects which result directly from the transaction as described in the notes to the unaudited pro forma condensed combined financial information.
1
6D Global Technologies, Inc.
Unaudited Pro Forma Condensed Combined Statement of Operations
|
Historical 6D Global Twelve Months Ended December 31, 2014
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Historical Storycode Twelve Months Ended December 31, 2014
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Storycode Pro Forma Adjustments
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Historical SwellPath Twelve Months Ended December 31, 2014
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SwellPath Pro Forma Adjustments
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Pro Forma Combined
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|||||||||||||||||||
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Revenues
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$ | 11,797,813 | $ | 439,469 | $ | - | $ | 1,840,187 | $ | - | $ | 14,077,469 | ||||||||||||
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Cost of revenues
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7,425,857 | 40,195 | - | 882,077 | - | 8,348,129 | ||||||||||||||||||
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Gross margin
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4,371,956 | 399,274 | - | 958,110 | - | 5,729,340 | ||||||||||||||||||
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Operating expenses
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||||||||||||||||||||||||
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Selling, general and administrative
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3,878,075 | 35,201 | 76,944 |
(5b)
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836,813 | 360,000 | (5b) | 5,187,033 | ||||||||||||||||
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Total operating expenses
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3,878,075 | 35,201 | 76,944 | 838,746 | 360,000 | 5,187,033 | ||||||||||||||||||
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Income (loss) from operations
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493,881 | 364,073 | (76,944 | ) |
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121,297 | (360,000 | ) | 542,307 | |||||||||||||||
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Other income (expense)
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||||||||||||||||||||||||
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Interest expense, net
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(147,069 | ) | - | - | (1,933 | ) | - | (149,002 | ) | |||||||||||||||
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Loss on debt extinguishment
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(57,502 | ) | - | - | - | - | (57,502 | ) | ||||||||||||||||
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Other income
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20,000 | 600 | - | - | - | 20,600 | ||||||||||||||||||
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Other (expense) income, net
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(184,571 | ) | 600 | - | (1,933 | ) | - | (185,904 | ) | |||||||||||||||
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Income before income taxes expense
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309,310 | 364,673 | (76,944 | ) | 119,364 | (360,000 | ) | 356,403 | ||||||||||||||||
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Income tax benefit
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(161,255 | ) | - | - | - | - | (161,255 | ) | ||||||||||||||||
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Net income (loss)
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$ | 470,565 | $ | 364,673 | $ | (76,944 | ) | $ | 119,364 | $ | (360,000 | ) | $ | 517,658 | ||||||||||
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Net income per common share - basic
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$ | 0.01 | $ | - | $ | - | $ | - | $ | - | $ | 0.01 | ||||||||||||
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Weighted average common shares - basic
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48,500,156 | - | - | - | - | 48,500,156 | ||||||||||||||||||
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Net income per common share - diluted
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$ | 0.01 | $ | - | $ | - | $ | - | $ | - | $ | 0.01 | ||||||||||||
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Weighted average common shares - diluted
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48,668,720 | - | - | - | - | 48,668,720 | ||||||||||||||||||
See accompanying notes to the unaudited pro forma condensed combined financial statements.
2
6D Global Technologies, Inc.
Unaudited Pro Forma Condensed Combined Statement of Operations
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Historical 6D Global Three Months Ended March 31, 2015
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Historical Storycode from January 1, 2015 to March 3 2015
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Storycode Pro Forma Adjustments
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Historical SwellPath from January 1, 2015 to March 19, 2015
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SwellPath Pro Forma Adjustments
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Pro Forma Combined
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|||||||||||||||||||
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Revenues
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$ | 3,275,585 | $ | 145,712 | $ | - | $ | 472,442 | $ | - | $ | 3,893,739 | ||||||||||||
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Cost of revenues
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1,903,828 | - | - | 243,137 | - | 2,146,965 | ||||||||||||||||||
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Gross margin
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1,371,757 | 145,712 | - | 229,305 | - | 1,746,774 | ||||||||||||||||||
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Operating expenses
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||||||||||||||||||||||||
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Selling, general and administrative
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1,900,615 | 140,302 | (3,223 | ) |
(5a) (5b)
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228,316 | 29,776 |
(5a) (5b)
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2,295,686 | |||||||||||||||
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Total operating expenses
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1,900,615 | 140,302 | (3,223 | ) | 228,316 | 29,776 | 2,295,786 | |||||||||||||||||
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Income (loss) from operations
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(528,858 | ) | 5,410 | 3,223 | 989 | (29,776 | ) | (549,012 | ) | |||||||||||||||
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Other income (expense)
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||||||||||||||||||||||||
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Interest expense, net
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(33,388 | ) | - | - | - | - | (33,388 | ) | ||||||||||||||||
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Loss on debt extinguishment
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- | - | - | - | - | - | ||||||||||||||||||
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Other income (expense)
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384 | 632 | - | (84 | ) | - | 932 | |||||||||||||||||
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Other (expense) income, net
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(33,004 | ) | 632 | - | (84 | ) | - | (32,456 | ) | |||||||||||||||
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Income before income taxes expense
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(561,862 | ) | 6,042 | 3,223 | 905 | (29,776 | ) | (581,468 | ) | |||||||||||||||
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Income tax benefit
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(182,417 | ) | - | - | - | - | (182,417 | ) | ||||||||||||||||
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Net (loss) income
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$ | (379,445 | ) | 6,042 | 3,223 | $ | 905 | $ | (29,776 | ) | $ | (399,051 | ) | |||||||||||
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Net loss per common share - basic and diluted
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$ | (0.01 | ) | - | - | $ | - | $ | - | $ | (0.01 | ) | ||||||||||||
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Weighted average common shares - basic and diluted
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53,370,027 | - | - | - | - | 53,370,027 | ||||||||||||||||||
See accompanying notes to the unaudited pro forma condensed combined financial statements.
3
Notes to Unaudited Pro Forma Condensed Combined Financial Statements
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1.
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Description of Transactions
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Since January 1, 2015, the Company has completed the following acquisitions:
Topaz Interactive, LLC (“Storycode”)
On March 4, 2015, the Company acquired all of the issued and outstanding membership interests of the two co-founders (the “Interests”) of Topaz Interactive, LLC, an Oregon limited liability company doing business as “Storycode” pursuant to a Securities Purchase Agreement (the “Storycode SPA”) of that date.
SwellPath, Inc. (“SwellPath”)
On March 20, 2015, the Company entered into and consummated a Securities Purchase Agreement (the “SwellPath SPA”) to acquire all of the issued and outstanding shares (the “SwellPath Shares”) of SwellPath, Inc., (“SwellPath”) an Oregon corporation.
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2.
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Basis of Presentation
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The historical financial information has been adjusted to give pro forma effect to events that are (i) directly attributable to the transactions, (ii) factually supportable, and (iii) with respect to the unaudited pro forma condensed combined statements of operations, expected to have a continuing impact on the combined results. The pro forma adjustments are preliminary and based on estimates of the fair value and useful lives of the assets acquired and liabilities assumed and have been prepared to illustrate the estimated effect of the transaction and certain other adjustments. The final determination of the purchase price allocations will be based on the fair values of assets acquired and liabilities assumed as of the dates the transactions closed and will be reflected in the Company's annual report on Form 10-K for the period ended December 31, 2015. Accordingly, once the necessary valuation analyses have been performed and the final purchase price allocations have been completed, actual results may differ materially from the information presented in this unaudited pro forma condensed consolidated financial information.
The unaudited pro forma condensed consolidated financial information contained within should be read in conjunction with the Company’s Form 8-K/A filed on May 20, 2015 that provides details of the Company’s acquisition of Storycode on March 04, 2015.
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3.
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Consideration Transferred
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Storycode
In consideration for the Interests, the Company paid the two members of Storycode: cash in the amount $300,000; an additional $300,000 paid in escrow to be earned by the members upon the one year anniversary of their employment which will be treated as compensation expense; an aggregate of 300,000 shares of the Company’s common stock, par value $0.00001 per share (the “Common Stock”); and additional, potential earn out shares of Common Stock based on Storycode’s financial performance for the three years following the closing of the acquisition. The Company also agreed to employment agreements with Storycode’s founders, Ms. Topaz and Mr. Porath. The purchase price in excess of the fair value of the net book values of the assets acquired and liabilities assumed was allocated to intangible assets based on management’s best estimate of fair values, taking into account all relevant information available at the time of acquisition, and the excess was allocated to goodwill. The goodwill will be deductible for tax purposes. The intangible assets are being amortized over their expected period of benefit.
The purchase price is calculated as follows:
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Cash
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$
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300,000
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||
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Stock consideration
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1,953,000
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|||
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Contingent consideration
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2,050,000
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|||
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Total consideration
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$
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4,303,000
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4
Notes to Unaudited Pro Forma Condensed Combined Financial Statements (continued)
SwellPath
The purchase price for the SwellPath Shares was comprised of: (i) cash in the amount of $300,000; (ii) 300,000 shares of the Company’s Common Stock; and (iii) up to an additional 300,000 shares of Common Stock and $650,000, based upon the achievement by SwellPath of certain performance milestones within the first and second anniversaries of the closing of the transaction. In addition, the Company acquired all of the goodwill associated with SwellPath from its founder, Adam Ware, for cash in the amount $300,000. Also, the Company agreed to an employment agreement with Mr. Ware to serve as Vice-President, containing customary terms, conditions and covenants for such an agreement. The purchase price in excess of the fair value of the net book values of the identifiable assets acquired and liabilities assumed was allocated to intangible assets based on management’s best estimate of fair values, taking into account all relevant information available at the time of acquisition and the excess was allocated to goodwill. The goodwill and identifiable intangible assets are not deductible for tax purposes. The intangible assets are being amortized over their expected period of benefit.
The purchase price is calculated as follows:
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Cash
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$
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600,000
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||
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Stock consideration
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1,743,750
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|||
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Contingent consideration
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1,750,000
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|||
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Total consideration
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$
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4,093,750
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4.
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Preliminary Purchase Price Allocation
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Storycode
For the Storycode acquisition, a summary of the preliminary purchase price allocation is as follows:
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Description
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Fair Value
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Weighted Average
Useful Life
(in years)
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||||||
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Cash
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$
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100,000
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||||||
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Deferred revenue
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(59,384
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)
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||||||
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Trade name
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330,000
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7
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||||||
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Customer relationship
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880,000
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5
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||||||
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Non-compete agreement
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61,000
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1.5
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||||||
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Goodwill
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2,991,384
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|||||||
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Total consideration
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$
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4,303,000
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||||||
The following are the criteria contained in the Storycode SPA related to the contingent payments to Storycode:
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1.
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After one year of employment with the Company, the Storycode Members will receive $300,000 cash, which was placed in escrow at the closing of the transaction and will be recorded as compensation expense in the condensed statement of operations.
|
|
2.
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From April 1, 2015 through March 31, 2018, and based on performance milestones and other terms set forth in the Storycode SPA, the Storycode members may receive up to 400,000 restricted shares of 6D Global’s Common Stock which is accounted for as contingent consideration.
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The Company determined the fair value of the contingent consideration to be $2,050,000. The potential range of contingent consideration can range from no issuance of Common Stock, in the event that the performance milestones are not reached, to 400,000 restricted shares of the Buyer Common Stock. The Company recorded contingent consideration in the amount of $2,050,000 as a liability on its consolidated balance sheets. The Company determined that, based on the terms of the Storycode SPA and results of Storycode since the date of acquisition, no adjustment to contingent consideration was required, and the fair value of the contingent consideration remained at $2,050,000. The Company recorded the potential earn out of 400,000 restricted shares as part of the purchase price. Since the contingent cash consideration is contingent upon the Storycode Members remaining employees of the Company for a one year period, the Company will record this as compensation expense in the Consolidated Statements of Operations. The Company will assess the earn out calculation in future periods and any future adjustments will affect operating income.
5
Notes to Unaudited Pro Forma Condensed Combined Financial Statements (continued)
SwellPath
For the SwellPath acquisition, a summary of the preliminary purchase price allocation is as follows:
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Description
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Fair Value
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Weighted Average Useful Life (in years)
|
|||
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Cash
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$
|
257,601
|
|||
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Deferred revenue
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(67,950
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)
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|||
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Accrued liability
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(77,601
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)
|
|||
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Deferred tax liability
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(620,767
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)
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|||
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Trade name
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10,000
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3
|
|||
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Customer relationship
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1,560,000
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5
|
|||
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Non-compete agreement
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67,000
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1.5
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|||
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Goodwill
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2,965,467
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||||
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Total consideration
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$
|
4,093,750
|
|||
The following are the criteria contained in the SwellPath SPA related to the contingent consideration payable to SwellPath:
|
1.
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If SwellPath’s revenue for the period from April 1, 2015 to March 31, 2016 exceeds certain performance milestones and other terms set forth in the SwellPath SPA, the Company is may be required to pay SwellPath up to $650,000 in cash.
|
|
2.
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If SwellPath’s revenue for the period from April 1, 2016 to March 31, 2017 and based on performance milestones and other terms set forth in the SwellPath SPA, the SwellPath may receive up to 300,000 restricted shares of 6D Global’s Common Stock.
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For the SwellPath acquisition, the Company determined the fair value of the contingent consideration to be $1,750,000. The potential range of contingent consideration can ranged from no issuance of Common Stock, in the event that the performance milestones are not reached, to $650,000 in cash and 300,000 shares of the Buyer Common Stock. The Company determined that, based on the results of SwellPath since the date of acquisition, no adjustment to contingent consideration was required, and the fair value of the contingent consideration remained at $1,750,000. The Company recorded the potential earn out of 300,000 restricted shares as part of the purchase price. The Company will assess the earn out calculation in future periods and any future adjustments will affect operating income.
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5.
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Notes to Unaudited Pro Forma Condensed Combined Statements of Operations
|
|
(a)
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Reflects the acquisitions costs for Storycode of $47,191 and for SwellPath of $45,224 recorded for these transactions from January 1, 2015 through March 3, 2015 (date of acquisition for Storycode) and January 1, 2015 through March 19, 2015 (date of acquisition for SwellPath).
|
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(b)
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Reflects the amortization of the fair value of the identifiable intangible assets acquired from these transactions from January 1, 2014 through December 31, 2014 for Storycode of $76,944 and for SwellPath of $360,000. Reflects the amortization of the fair value of the identifiable intangible assets acquired from these transactions of $43,968 for Storycode from January 1, 2015 through March 3, 2015 (date of acquisition for Storycode) and $75,000 for SwellPath from January 1, 2015 through March 19, 2015 (date of acquisition for SwellPath).
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6