Attached files
file | filename |
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EX-23.1 - EXHIBIT 23.1 - Meet Group, Inc. | ex23-1.htm |
8-K/A - FORM 8-K/A - Meet Group, Inc. | meet20161209_8ka.htm |
EX-99.2 - EXHIBIT 99.2 - Meet Group, Inc. | ex99-2.htm |
EX-99.1 - EXHIBIT 99.1 - Meet Group, Inc. | ex99-1.htm |
Exhibit 99.3
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION
The following unaudited pro forma condensed combined financial information has been prepared to illustrate the effects of the acquisition of Skout, Inc. (“Skout”) which closed on October 3, 2016. The historical consolidated financial information has been adjusted in the unaudited pro forma condensed combined financial statements to give effect to pro forma events that are directly attributable to the acquisition, factually supportable and, with respect to the statements of operations, expected to have a continuing impact on the results of operations.
The unaudited pro forma condensed combined balance sheet is based on the individual historical balance sheet of MeetMe, Inc. (“MeetMe”) and Skout, as of September 30, 2016, and has been prepared to reflect the effects of the Skout acquisition as if it occurred on September 30, 2016. The unaudited pro forma condensed combined statements of operations for the year ended December 31, 2015 and the nine months ended September 30, 2016 combine the historical results and operations of MeetMe and Skout giving effect to the acquisition as if it had occurred on January 1, 2015.
The unaudited pro forma condensed combined statements of operations do not reflect future events that may occur after the completion of the acquisition, including, but not limited to, the anticipated realization of ongoing savings from operating synergies and certain one-time charges MeetMe expects to incur in connection with the acquisition, including, but not limited to, costs in connection with integrating the operations of Skout.
These unaudited pro forma condensed combined financial statements are for informational purposes only. They do not purport to indicate the results that would actually have been obtained had the acquisition been completed on the assumed date or for the periods presented, or which may be realized in the future.
To produce the pro forma financial information, Skout’s assets and liabilities were adjusted to their estimated fair values. As of the date of this filing, MeetMe has not completed the detailed valuation work necessary to arrive at the required estimate of the fair value of Skout’s assets acquired and liabilities assumed. Accordingly, the accompanying unaudited pro forma accounting for the business combination is preliminary and is subject to further adjustments as additional analyses are performed. The preliminary unaudited pro forma accounting for the business combination has been made solely for the purpose of preparing the accompanying unaudited pro forma condensed combined financial statements.
There can be no assurance that such finalization will not result in material changes from the preliminary accounting for the Skout acquisition included in the accompanying unaudited pro forma condensed combined financial statements. The unaudited pro forma condensed combined financial statements have been derived from and should be read in conjunction with:
● |
the accompanying notes to the unaudited pro forma condensed combined financial statements; |
● |
MeetMe’s audited financial statements and related notes contained within MeetMe’s Annual Report on Form 10-K for the year ended December 31, 2015; |
● |
MeetMe’s Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2016 and |
● |
Skout’s consolidated financial statements filed within this Current report on Form 8-K/A. |
MeetMe, Inc.
Unaudited Pro Forma Condensed Combined Balance Sheet
As of September 30, 2016
(Unaudited)
Historical MeetMe |
Historical Skout |
Accounting Policies and Reclassifications |
Pro Forma Adjustments (Note 4) |
Pro Forma MeetMe Combined |
|||||||||||||||||
Assets |
|||||||||||||||||||||
Current assets: |
|||||||||||||||||||||
Cash and cash equivalents |
$ | 45,971,169 | $ | 2,857,438 | $ | - | $ | (30,137,532 | ) |
4a |
$ | 18,691,075 | |||||||||
Accounts receivable, net |
13,526,976 | 4,031,219 | - | - | 17,558,195 | ||||||||||||||||
Prepaid expenses and other current assets |
809,824 | 404,557 | - | - | 1,214,381 | ||||||||||||||||
Total current assets |
60,307,969 | 7,293,214 | - | (30,137,532 | ) | 37,463,651 | |||||||||||||||
Restricted cash |
- | 393,261 | - | - | 393,261 | ||||||||||||||||
Goodwill |
70,646,036 | - | - | 33,913,275 |
4b |
104,559,311 | |||||||||||||||
Property and equipment, net |
2,112,352 | 398,954 | - | - | 2,511,306 | ||||||||||||||||
Intangible assets, net |
145,415 | - | - | 21,755,000 |
4c |
21,900,415 | |||||||||||||||
Deferred tax asset |
27,269,800 | 18,757 | (18,757 | ) |
4d |
27,269,800 | |||||||||||||||
Other assets |
122,441 | - | - | - | 122,441 | ||||||||||||||||
Total assets |
$ | 160,604,013 | $ | 8,104,186 | $ | - | $ | 25,511,986 | $ | 194,220,185 | |||||||||||
LIABILITIES AND STOCKHOLDERS' EQUITY |
|||||||||||||||||||||
Current liabilities: |
|||||||||||||||||||||
Accounts payable |
$ | 1,756,662 | $ | 1,077,037 | $ | - | $ | - | $ | 2,833,699 | |||||||||||
Accrued liabilities |
3,518,135 | 66,320 | - | - | 3,584,455 | ||||||||||||||||
Current portion of capital lease obligations |
271,389 | - | - | - | 271,389 | ||||||||||||||||
Deferred rent |
- | 55,740 | - | (55,740 | ) |
4e |
- | ||||||||||||||
Deferred revenue |
296,080 | 96,310 | - | - | 392,390 | ||||||||||||||||
Total current liabilities |
5,842,266 | 1,295,407 | - | (55,740 | ) | 7,081,933 | |||||||||||||||
Long-term capital lease obligations, less current portion, net |
18,901 | - | - | - | 18,901 | ||||||||||||||||
Total liabilities |
5,861,167 | 1,295,407 | - | (55,740 | ) | 7,100,834 | |||||||||||||||
Stockholders' Equity: |
|||||||||||||||||||||
Preferred Stock |
- | 25,391,824 | (25,391,824 | ) |
4f |
$ | - | ||||||||||||||
Common stock |
54,225 | 1,608,098 | (1,608,098 | ) | 5,222 |
4f |
59,447 | ||||||||||||||
Stockholders' loans receivable |
- | (2,924,997 | ) | - | 2,924,997 |
4f |
- | ||||||||||||||
Additional paid-in capital |
318,465,808 | 2,119,682 | 1,608,098 | 28,643,503 |
4f |
350,837,091 | |||||||||||||||
Accumulated deficit |
(163,777,187 | ) | (19,386,159 | ) | - | 19,386,159 |
4f |
(163,777,187 | ) | ||||||||||||
Accumulated other comprehensive income |
- | 331 | - | (331 | ) |
4f |
- | ||||||||||||||
Total stockholders' equity |
154,742,846 | 6,808,779 | - | 25,567,726 | 187,119,351 | ||||||||||||||||
Total liabilities and stockholders' equity |
$ | 160,604,013 | $ | 8,104,186 | $ | - | $ | 25,511,986 | $ | 194,220,185 |
See accompanying notes to the unaudited pro forma condensed combined financial statement
MeetMe, Inc.
Unaudited Pro Forma Condensed Combined Statement of Operations
For the nine months ended September 30, 2016
(Unaudited)
Historical MeetMe |
Historical Skout |
Pro Forma Adjustments (Note 4) |
Pro Forma MeetMe Combined |
||||||||||||||
Revenues |
$ | 46,901,923 | $ | 19,519,838 | $ | - | $ | 66,421,761 | |||||||||
Operating Costs and Expenses: |
|||||||||||||||||
Sales and marketing |
8,776,029 | 6,568,688 | - | 15,344,717 | |||||||||||||
Product development and content |
17,730,610 | 1,869,926 | - | 19,600,536 | |||||||||||||
General and administrative |
6,431,486 | 6,968,083 | - | 13,399,569 | |||||||||||||
Depreciation and amortization |
2,266,642 | 386,249 | 3,994,807 |
4g |
6,597,698 | ||||||||||||
Acquisition and restructuring costs |
1,628,126 | 4,746,932 | (6,375,058 | ) |
4h |
- | |||||||||||
Total Operating Costs and Expenses |
36,832,893 | 20,539,878 | (2,430,251 | ) | 54,942,520 | ||||||||||||
Income (Loss) from Operations |
10,069,030 | (1,020,040 | ) | 2,430,251 | 11,479,241 | ||||||||||||
Other Income (Expense): |
|||||||||||||||||
Interest income |
18,697 | 25,663 | - | 44,360 | |||||||||||||
Interest expense |
(16,228 | ) | - | - | (16,228 | ) | |||||||||||
Change in warrant liability |
(864,596 | ) | - | - | (864,596 | ) | |||||||||||
Gain on cumulative foreign currency translation adjustment |
33,347 | - | - | 33,347 | |||||||||||||
Foreign exchange loss |
- | 8,117 | - | 8,117 | |||||||||||||
Other, net |
- | 83,141 | - | 83,141 | |||||||||||||
Total Other (Expense) Income |
(828,780 | ) | 116,921 | - | (711,859 | ) | |||||||||||
Income (Loss) before Benefit (Provision) for Income Taxes |
9,240,250 | (903,119 | ) | 2,430,251 | 10,767,382 | ||||||||||||
Benefit (provision) for income taxes |
27,125,446 | (25,681 | ) | (826,285 | ) |
4i |
26,273,480 | ||||||||||
Net Income (Loss) |
$ | 36,365,696 | $ | (928,800 | ) | $ | 1,603,966 | $ | 37,040,862 | ||||||||
Basic net income per share |
$ | 0.73 | $ | 0.68 | |||||||||||||
Shares used in computing basic net income per share |
49,649,221 | 4,685,340 |
4j |
54,334,561 | |||||||||||||
Diluted net income per share |
$ | 0.65 | $ | 0.61 | |||||||||||||
Shares used in computing diluted net income per share |
55,604,866 | 4,685,340 |
4j |
60,290,206 |
See the accompanying notes to the unaudited pro forma condensed combined financial information
MeetMe, Inc.
Unaudited Pro Forma Condensed Combined Statement of Operations
For the year ended December 31, 2015
(Unaudtied)
Historical MeetMe |
Historical Skout |
Pro Forma Adjustments (Note 4) |
Pro Forma MeetMe Combined |
||||||||||||||
Revenues |
$ | 56,903,773 | $ | 23,785,739 | $ | - | $ | 80,689,512 | |||||||||
Operating Costs and Expenses: |
|||||||||||||||||
Sales and marketing |
6,618,837 | 11,734,479 | - | 18,353,316 | |||||||||||||
Product development and content |
24,615,304 | 7,346,121 | - | 31,961,425 | |||||||||||||
General and administrative |
14,534,861 | 6,728,634 | - | 21,263,495 | |||||||||||||
Depreciation and amortization |
3,140,205 | 502,997 | 5,496,550 |
4g |
9,139,752 | ||||||||||||
Total Operating Costs and Expenses |
48,909,207 | 26,312,231 | 5,496,550 | 80,717,988 | |||||||||||||
Income (Loss) from Operations |
7,994,566 | (2,526,492 | ) | (5,496,550 | ) | (28,476 | ) | ||||||||||
Other Income (Expense): |
|||||||||||||||||
Interest income |
21,037 | 31,989 | - | 53,026 | |||||||||||||
Interest expense |
(459,962 | ) | - | - | (459,962 | ) | |||||||||||
Change in warrant liability |
(616,607 | ) | - | - | (616,607 | ) | |||||||||||
Loss on cumulative foreign currency translation adjustment |
(856,438 | ) | - | - | (856,438 | ) | |||||||||||
Foreign exchange loss |
- | (16,492 | ) | - | (16,492 | ) | |||||||||||
Gain on sale of asset |
163,333 | - | - | 163,333 | |||||||||||||
Other, net |
- | 21,045 | - | 21,045 | |||||||||||||
Total Other (Expense) Income |
(1,748,637 | ) | 36,542 | - | (1,712,095 | ) | |||||||||||
Income (Loss) before Benefit (Provision) for Income Taxes |
6,245,929 | (2,489,950 | ) | (5,496,550 | ) | (1,740,571 | ) | ||||||||||
Benefit (provision) for income taxes |
(276,301 | ) | (4,648 | ) | 1,868,827 |
4i |
1,587,878 | ||||||||||
Net Income (Loss) |
$ | 5,969,628 | $ | (2,494,598 | ) | $ | (3,627,723 | ) | $ | (152,693 | ) | ||||||
Basic net income per share |
$ | 0.13 | $ | 0.00 | |||||||||||||
Shares used in computing basic net income per share |
45,419,175 | 4,685,340 |
4j |
50,104,515 | |||||||||||||
Diluted net income per share |
$ | 0.12 | $ | 0.00 | |||||||||||||
Shares used in computing diluted net income per share |
49,535,826 | 4,685,340 |
4j |
54,221,166 |
See the accompanying notes to the unaudited pro forma condensed combined financial information
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION
1. BACKGROUND
On June 27, 2016, MeetMe, Inc., and its wholly-owned subsidiaries, MeetMe Sub I, Inc., a Delaware corporation, and MeetMe Sub II, LLC, a Delaware limited Liability Corporation, (together, “MeetMe”) entered into a Merger agreement with Skout, Inc. (“Skout”), a California corporation, pursuant to which MeetMe agreed to acquire 100% of the issued and outstanding shares of common stock of Skout for total consideration of $30.1 million in cash and 5,222,017 shares of MeetMe common stock. The transaction closed October 3, 2016.
On October 3, 2016, in connection with the closing of the Skout acquisition, the Company’s Board of Directors adopted the 2016 Inducement Omnibus Incentive Plan in accordance with NASDAQ Listing Rule 5635(c)(4). At the closing of the Skout acquisition, the Company granted stock options to purchase an aggregate of up to 340,000 shares of its common stock to 24 former Skout employees as an inducement material to becoming non-executive employees of the Company.
2. BASIS OF PRESENTATION
The unaudited pro forma condensed combined financial statements were prepared in accordance with generally accepted accounting principles in the United States ("U.S. GAAP") and pursuant to U.S. Securities and Exchange Commission Regulation S-X Article 11, and present the pro forma financial position and results of operations of the combined companies based upon the historical information after giving effect to the acquisition and adjustments described in these footnotes. The unaudited pro forma condensed combined balance sheet is presented as if the acquisition had occurred on September 30, 2016, and the unaudited pro forma condensed combined statements of operations for the year ended December 31, 2015 and the nine months ended September 30, 2016 are presented as if the acquisition had occurred on January 1, 2015.
The historical results of MeetMe and Skout have been derived from their respective audited financial statements for the year ended December 31, 2015. The historical results of MeetMe and Skout as of and for the nine months ended September 30, 2016 have been derived from unaudited financial information.
The unaudited pro forma condensed combined financial information does not reflect pro forma adjustments for ongoing cost savings that MeetMe expects to and/or have achieved as a result of the acquisition or the costs necessary to achieve these costs savings or synergies.
3. PRELIMINARY CONSIDERATION TRANSFERRED AND PRELIMINARY FAIR VALUE OF ASSETS ACQUIRED AND LIABILITIES ASSUMED
The acquisition has been reflected in the unaudited pro forma condensed combined financial statements as being accounted for under the acquisition method in accordance with ASC 805, Business Combinations (“ASC 805”) with MeetMe treated as the accounting acquirer. In accordance with ASC 805, the assets acquired and the liabilities assumed have been measured at fair value based on various preliminary estimates. Due to the fact that the unaudited pro forma condensed combined financial information has been prepared based on preliminary estimates, the final amounts recorded for the acquisition may differ materially from the information presented herein. These estimates are subject to change pending further review of the fair value of assets acquired and liabilities assumed. In addition, ASC 805 establishes that the common stock issued to effect the acquisition be measured at the close of the transaction at the then-current market price.
For purposes of measuring the estimated fair value, where applicable, of the assets acquired and the liabilities assumed as reflected in the unaudited pro forma condensed combined financial information, the guidance in ASC 820, Fair Value Measurements and Disclosures (“ASC 820”) has been applied, which establishes a framework for measuring fair value. In accordance with ASC 820, fair value is an exit price and 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.” Under ASC 805, acquisition-related transaction costs and acquisition-related restructuring charges are not included as components of consideration transferred but are accounted for as expenses in the period in which the costs are incurred.
The following is a summary of the preliminary estimate of consideration transferred:
Cash consideration |
$ | 30,137,532 | ||
Fair value of MeetMe Stock issued |
32,376,505 | |||
Total consideration |
$ | 62,514,037 |
Management has made preliminary allocation estimates based on currently available information. The final determination of the accounting for the business combination is anticipated to be completed as soon as practicable. Management anticipates that the valuations of the acquired assets and liabilities will be determined using discounted cash flow analyses and other appropriate valuation techniques to determine the fair value of the assets acquired and liabilities assumed. In addition, management is still completing its analysis of deferred income taxes to be recorded in the transaction. The amounts allocated to the assets acquired and liabilities assumed could differ materially from the preliminary amounts presented in these unaudited pro forma condensed combined financial statements.
The following is a preliminary purchase price allocation as of the October 3, 2016 acquisition date:
Total estimated consideration transferred |
$ | 62,514,037 | ||
Working capital |
6,636,893 | |||
Property and equipment |
398,954 | |||
Intangible assets |
21,755,000 | |||
Deferred revenue |
(96,310 | ) | ||
Net assets acquired |
$ | 28,694,537 | ||
Goodwill |
$ | 33,819,500 |
4. PRO FORMA ADJUSTMENTS
The preliminary pro forma adjustments included in the unaudited pro forma condensed combined financial statements related to the acquisition are as follows:
(a)Cash and cash equivalents—Adjustment reflects the preliminary net adjustment to cash in connection with the acquisition.
(b)Goodwill—Adjustment reflects the preliminary estimated adjustment to goodwill as a result of the acquisition. Goodwill represents the excess of the consideration transferred over the preliminary fair value of the assets acquired and liabilities assumed described in Note 3. The goodwill will not be amortized, but instead will be tested for impairment at least annually and whenever events or circumstances have occurred that may indicate a possible impairment exists. In the event management determines that the value of goodwill has become impaired, MeetMe will incur an accounting charge for the amount of the impairment during the period in which the determination is made. The goodwill is attributable primarily to strategic and synergistic opportunities and is not deductible for tax purposes.
The preliminary pro forma adjustment to goodwill is calculated as follows:
Consideration transferred |
$ | 62,514,037 | ||
Less: Fair value of net assets to be acquired |
28,600,762 | |||
Pro forma adjustment - goodwill |
$ | 33,913,275 |
(c)Intangible assets, net—Adjustment reflects the preliminary fair value related to the identifiable intangible assets acquired in the acquisition. The preliminary fair value of the Skout trademark was determined using an income approach, the preliminary fair value of software acquired, which represents the primary platform on which the Skout Apps operate, was determined using a cost approach and the preliminary fair value of customer relationships was determined using an excess earnings approach. The preliminary amounts assigned to the identifiable intangible assets are as follows:
Intangible assets |
Preliminary fair value |
|||
Skout Trademark |
$ | 10,870,000 | ||
Software |
$ | 2,500,000 | ||
Customer Relationships |
$ | 8,385,000 | ||
Pro forma adjustment - intangibles |
$ | 21,755,000 |
(d)Deferred tax asset—Adjustment reflects the write-off of Skout’s deferred tax asset for its foreign operation. Adjustments related to deferred tax assets and/or liabilites to be recorded in purchase accounting, tax uncertainties, valuation allowances and other matters are not included in these pro forma financial statements, as management is still completing its analysis of such amounts. These adjustments will be reflected as necessary in the Company's purchase price allocation, to be completed in connection with the preparation of the Company's December 31, 2016 financial statements.
(e)Deferred rent—Adjustment reflects the write-off of Skout’s deferred rent balance.
(f) The adjustments to equity consist of the following components:
Additional paid-in capital and common stock related to the issuance of common stock of MeetMe to Skout stockholders as merger consideration |
$ | 32,376,505 | ||
Less: Skout historical equity amounts |
(6,808,779 | ) | ||
Pro forma adjustment - equity |
$ | 25,567,726 |
(g)Depreciation and amortization—Reflects the preliminary adjustment to the amortization expense associated with the fair value of the identifiable intangible asset acquired in the acquisition. The preliminary pro forma adjustment for amortization expense for the intangible assets acquired is as follows:
Intangible assets |
Estimated useful life (months) |
Preliminary fair value |
Amortization expense for the year ended December 31, 2015 |
Amortization expense for the nine months ended September 30, 2016 |
|||||||||
Skout Trademark |
84 months |
$ | 10,870,000 | $ | 1,810,608 | $ | 2,085,745 | ||||||
Software |
12 months |
2,500,000 | 2,500,000 | - | |||||||||
Customer Relationships |
84 months |
8,385,000 | 1,185,942 | 1,859,062 | |||||||||
Pro forma adjustment - amortization expense |
$ | 21,755,000 | $ | 5,496,550 | $ | 3,944,807 |
The estimated fair value of the software amortizable intangible asset is expected to be amortized on a straight-line basis over the estimated useful life of the intangible asset, which is one year, and the estimated fair value of the customer relationship intangible asset and the Skout trademark are expected to be amortized using an accelerated method over the estimated period of material economic benefit of the customer relationship intangible asset and Skout trademark.
(h) Acquisition and restructuring costs—An adjustment of $6.4 million for the nine months ended September 30, 2016 reflects the removal of transaction costs incurred by MeetMe and Skout related to the acquisition. Of this amount, MeetMe incurred $1.6 million and Skout incurred $4.7 million related to the acquisition. These expenses are directly attributable to the acquisition and not expected to have a continuing impact on the Company, and therefore have been removed for the purposes of the pro forma statements of operations. No adjustment for transaction costs was made for the year ended December 31, 2015.
(i)Income tax expense (benefit)—Adjustment reflects the income tax impacts of the pro forma adjustments made to the pro forma statement of operations using the U.S. statutory rate of 34%.
(j)Basic and diluted net income per share—The unaudited pro forma adjustment to shares outstanding used in the calculation of basic and diluted net income per share has been adjusted to include those shares issued in the transaction, less shares held in escrow.
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