Attached files
| file | filename |
|---|---|
| EX-99.2 - EX-99.2 - PRGX GLOBAL, INC. | d312220dex992.htm |
| EX-99.1 - EX-99.1 - PRGX GLOBAL, INC. | d312220dex991.htm |
| EX-23.1 - EX-23.1 - PRGX GLOBAL, INC. | d312220dex231.htm |
| 8-K/A - FORM 8-K/A - PRGX GLOBAL, INC. | d312220d8ka.htm |
Exhibit 99.3
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
On October 31, 2016, PRGX USA, Inc., a wholly owned subsidiary of PRGX Global, Inc. (PRGX Global, Inc. and PRGX USA, Inc. are collectively referred to as “PRGX” or “Company”), consummated the merger of Braveheart Merger Co., a wholly owned subsidiary of PRGX USA, Inc., with and into Lavante, Inc. (the “Merger”) pursuant to the terms of that certain Agreement and Plan of Merger (the “Merger Agreement”) dated as of October 25, 2016 by and among PRGX USA, Inc., Braveheart Merger Co., Lavante, Inc. (“Lavante”), PointGuard Ventures I, L.P. and Krish Panu, as Stockholder Representative. The Company used an advance under the existing revolving credit facility with SunTrust Bank to pay the aggregate purchase price of approximately $3.7 million to Lavante after adjustments for net working capital.
The unaudited pro forma condensed combined balance sheet as of September 30, 2016 gives effect to the acquisition of Lavante as if it had occurred as of September 30, 2016. The unaudited pro forma condensed combined statement of operations for the year ended December 31, 2015 and the unaudited pro forma condensed combined statement of operations for the nine months ended September 30, 2016 give effect to the acquisition of Lavante as if it had occurred as of January 1, 2015.
The pro forma adjustments reflected in the pro forma condensed combined financial statements are based on items that are (1) directly attributable to the Merger, (2) factually supportable, and (3) with respect to the pro forma condensed combined statements of operations, expected to have a continuing impact on the combined results. The pro forma condensed combined financial statements reflect certain adjustments and reclassifications to the historical financial statements of Lavante to conform to the Company’s accounting policies and financial statement presentation. The adjustments reflect the Company’s best estimates based upon the information currently available. The reclassifications were determined based upon the information currently available and additional reclassifications may be necessary once the accounting for the Merger is completed and additional information becomes available.
In accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”), the Merger will be accounted for under the acquisition method of accounting, which requires, among other things, the assets acquired and liabilities assumed to be recognized at their fair values as of the date of the Merger. At this time, the Company has not completed the detailed valuation analyses necessary to finalize the fair values of the assets and liabilities of Lavante. Accordingly, the pro forma financial statements reflect a preliminary allocation of the purchase price based on assumptions and estimates with respect to fair value that are subject to change once the detailed valuation analyses are completed. Any such changes may be material.
The pro forma condensed combined financial statements are presented for illustrative purposes only and are based on the estimates and assumptions set forth in the accompanying notes. The pro forma condensed combined financial statements are not necessarily indicative of what the operating results or financial position actually would have been had the Merger been completed as of the dates indicated. In addition, the pro forma condensed combined financial statements do not purport to project the future operating results or financial position of the Company. The pro forma condensed combined statements of operations do not include: (1) any revenue or cost saving synergies that may be achieved subsequent to the completion of the Merger; or (2) the impact of non-recurring items directly related to the Merger.
The unaudited pro forma condensed combined financial information presented is based on, and should be read in conjunction with, the historical financial statements and the related notes thereto for both the Company and Lavante.
PRGX Global, Inc. and Subsidiaries
Pro Forma Condensed Combined Statement of Operations
Year Ended December 31, 2015
(Amounts in thousands, except per share data)
(Unaudited)
| Pro forma | Pro forma | |||||||||||||||
| PRGX | Lavante | Entries | Combined | |||||||||||||
| Revenue |
$ | 138,302 | $ | 2,692 | $ | — | $ | 140,994 | ||||||||
| Operating expenses: |
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| Cost of revenue |
93,169 | 1,549 | (31 | )(a) | 94,687 | |||||||||||
| Selling, general and administrative expenses |
32,284 | 4,495 | (40 | )(a) | 36,739 | |||||||||||
| Research and development |
— | 1,990 | (11 | )(a) | 1,979 | |||||||||||
| Depreciation of property and equipment |
5,317 | — | 82 | (a) | 5,399 | |||||||||||
| Amortization of intangible assets |
2,458 | — | — | 2,458 | ||||||||||||
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| Total operating expenses |
133,228 | 8,034 | — | 141,262 | ||||||||||||
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| Operating income (loss) |
5,074 | (5,342 | ) | — | (268 | ) | ||||||||||
| Foreign currency transaction (gains) losses on short-term intercompany balances |
2,165 | — | — | 2,165 | ||||||||||||
| Interest expense (income), net |
(190 | ) | 185 | (103 | )(c),(d) | (108 | ) | |||||||||
| Other (income) loss |
1,191 | (16 | ) | 16 | (b) | 1,191 | ||||||||||
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| Income (loss) from continuing operations before income taxes |
1,908 | (5,511 | ) | 87 | (3,516 | ) | ||||||||||
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| Income tax expense (benefit) |
369 | (1 | ) | — | 368 | |||||||||||
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| Net income (loss) from continuing operations |
$ | 1,539 | $ | (5,510 | ) | $ | 87 | $ | (3,884 | ) | ||||||
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| Basic earnings (loss) per common share from continuing operations |
$ | 0.06 | $ | (0.15 | ) | |||||||||||
| Diluted earnings (loss) per common share from continuing operations |
$ | 0.06 | $ | (0.15 | ) | |||||||||||
| Weighted average common shares outstanding: |
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| Basic |
25,868 | 25,868 | ||||||||||||||
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| Diluted |
25,904 | 25,904 | ||||||||||||||
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PRGX Global, Inc. and Subsidiaries
Pro Forma Condensed Combined Statement of Operations
For the Nine Months Ended September 30, 2016
(Amounts in thousands, except per share data)
(Unaudited)
| Pro forma | Pro forma | |||||||||||||||
| PRGX | Lavante | Entries | Combined | |||||||||||||
| Revenue |
$ | 101,661 | $ | 2,119 | $ | — | $ | 103,780 | ||||||||
| Operating expenses: |
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| Cost of revenue |
67,444 | 987 | (18 | )(a) | 68,413 | |||||||||||
| Selling, general and administrative expenses |
28,351 | 3,078 | (28 | )(a) | 31,401 | |||||||||||
| Research and development |
— | 1,821 | (11 | )(a) | 1,810 | |||||||||||
| Depreciation of property and equipment |
3,824 | — | 57 | (a) | 3,881 | |||||||||||
| Amortization of intangible assets |
1,182 | — | — | 1,182 | ||||||||||||
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| Total operating expenses |
100,801 | 5,886 | — | 106,687 | ||||||||||||
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| Operating income (loss) |
860 | (3,767 | ) | — | (2,907 | ) | ||||||||||
| Foreign currency transaction (gains) losses on short-term intercompany balances |
(976 | ) | — | — | (976 | ) | ||||||||||
| Interest expense (income), net |
(55 | ) | 433 | (372 | )(c),(d) | 6 | ||||||||||
| Other (income) loss |
(140 | ) | 25 | — | (115 | ) | ||||||||||
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| Income (loss) from continuing operations before income taxes |
2,031 | (4,225 | ) | 372 | (1,822 | ) | ||||||||||
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| Income tax expense (benefit) |
(21 | ) | 5 | — | (16 | ) | ||||||||||
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| Net income (loss) from continuing operations |
$ | 2,052 | $ | (4,230 | ) | $ | 372 | $ | (1,806 | ) | ||||||
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| Basic earnings (loss) per common share from continuing operations |
$ | 0.09 | $ | (0.08 | ) | |||||||||||
| Diluted earnings (loss) per common share from continuing operations |
$ | 0.09 | $ | (0.08 | ) | |||||||||||
| Weighted average common shares outstanding: |
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| Basic |
22,084 | 22,084 | ||||||||||||||
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| Diluted |
22,114 | 22,114 | ||||||||||||||
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PRGX Global, Inc. and Subsidiaries
Pro Forma Condensed Combined Balance Sheet
As of September 30, 2016
(Amounts in thousands)
(Unaudited)
| PRGX | Lavante | Pro forma Entries |
Pro forma Combined |
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| ASSETS | ||||||||||||||||
| Current Assets: |
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| Cash and Cash Equivalents |
$ | 13,170 | $ | 118 | $ | (69 | ) (j) | $ | 13,219 | |||||||
| Restricted Cash |
99 | — | — | 99 | ||||||||||||
| Receivables: |
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| Contract receivables, net |
28,473 | 149 | 110 | (i) | 28,732 | |||||||||||
| Employee advances and miscellaneous receivables, net |
1,710 | — | — | 1,710 | ||||||||||||
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| Total receivables |
30,183 | 149 | 110 | 30,442 | ||||||||||||
| Prepaid expenses and other current assets |
3,657 | 98 | — | 3,755 | ||||||||||||
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| Total current assets |
47,109 | 365 | 41 | 47,515 | ||||||||||||
| Property and equipment, net |
12,231 | 97 | 12,328 | |||||||||||||
| Goodwill |
11,712 | — | 5,094 | (h) | 16,806 | |||||||||||
| Intangible assets, net |
5,477 | — | — | 5,477 | ||||||||||||
| Deferred income taxes |
2,864 | — | — | 2,864 | ||||||||||||
| Other assets |
1,327 | 29 | — | 1,356 | ||||||||||||
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| Total assets |
$ | 80,720 | $ | 491 | $ | 5,135 | $ | 86,346 | ||||||||
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| LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||||||||||
| Current liabilities: |
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| Accounts payable and accrued expenses |
$ | 6,968 | $ | 967 | $ | — | $ | 7,935 | ||||||||
| Accrued payroll and related expenses |
11,049 | 476 | — | 11,525 | ||||||||||||
| Refund liabilities and deferred revenue |
8,735 | 473 | 110 | (i) | 9,318 | |||||||||||
| Warrant derivative liability |
— | 225 | (225 | ) (h) | — | |||||||||||
| Current portion of debt |
— | 6,940 | (3,340 | ) (f),(g) | 3,600 | |||||||||||
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| Total current liabilities |
26,752 | 9,081 | (3,455 | ) | 32,378 | |||||||||||
| Refund liabilities |
791 | — | — | 791 | ||||||||||||
| Other long-term liabilities |
1,866 | — | — | 1,866 | ||||||||||||
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| Total liabilities |
29,409 | 9,081 | (3,566 | ) | 35,035 | |||||||||||
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| Shareholders’ equity |
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| Common stock |
218 | 23 | (23 | ) (e) | 218 | |||||||||||
| Convertible preferred stock |
— | 40 | (40 | ) (e) | — | |||||||||||
| Additional paid-in-capital |
574,028 | 29,466 | (29,466 | ) (e) | 574,028 | |||||||||||
| Accumulated deficit |
(523,000 | ) | (38,119 | ) | 38,119 | (e) | (523,000 | ) | ||||||||
| Accumulated other comprehensive income |
65 | — | — | 65 | ||||||||||||
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| Total shareholders’ equity |
51,311 | (8,590 | ) | 8,590 | 51,311 | |||||||||||
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| Total liabilities and shareholders’ equity |
$ | 80,720 | $ | 491 | $ | 5,135 | $ | 86,346 | ||||||||
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NOTES TO THE PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
(Unaudited, in thousands)
Note 1. Description of the Transaction
On October 31, 2016, PRGX USA, Inc., a wholly owned subsidiary of PRGX Global, Inc. (PRGX Global, Inc. and PRGX USA, Inc. are collectively referred to as “PRGX” or “Company”), consummated the merger of Braveheart Merger Co., a wholly owned subsidiary of PRGX USA, Inc., with and into Lavante, Inc. (the “Merger”) pursuant to the terms of that certain Agreement and Plan of Merger (the “Merger Agreement”) dated as of October 25, 2016 by and among PRGX USA, Inc., Braveheart Merger Co., Lavante, Inc. (“Lavante”), PointGuard Ventures I, L.P. and Krish Panu, as Stockholder Representative. The Company used an advance under the existing revolving credit facility with SunTrust Bank to pay the aggregate purchase price of approximately $3.7 million to Lavante after adjustments for net working capital.
Note 2. Basis of Pro Forma Presentation
The unaudited pro forma condensed combined balance sheet as of September 30, 2016 gives effect to the acquisition of Lavante as if it had occurred as of September 30, 2016. The unaudited pro forma condensed combined statement of operations for the year ended December 31, 2015 and the unaudited pro forma condensed combined statement of operations for the nine months ended September 30, 2016 give effect to the acquisition of Lavante as if it had occurred as of January 1, 2015. The pro forma condensed combined financial statements are not necessarily indicative of what the operating results or financial position actually would have been had the Merger been completed as of the dates indicated. In addition, the pro forma condensed combined financial statements do not purport to project the future operating results or financial position of the Company. The pro forma condensed combined statements of operations do not include: (1) any revenue or cost saving synergies that may be achieved subsequent to the completion of the Merger; or (2) the impact of non-recurring items directly related to the Merger.
The pro forma condensed combined financial statements have been derived from the historical consolidated financial statements of the PRGX and Lavante after giving effect to the Merger. The pro forma condensed combined financial statements reflect certain adjustments and reclassifications to the historical financial statements of Lavante to conform to the Company’s accounting policies and financial statement presentation. The adjustments reflect the Company’s best estimates based upon the information currently available. The reclassifications were determined based on the information currently available and additional reclassifications may be necessary as additional information becomes available.
In accordance with U.S. GAAP, the Merger will be accounted for under the acquisition method of accounting, which requires, among other things, the assets acquired and liabilities assumed to be recognized at their fair values as of the date of the Merger. At this time, the Company has not completed the detailed valuation analyses necessary to finalize the fair values of the assets and liabilities of Lavante. Accordingly, the pro forma condensed combined financial statements reflect a preliminary allocation of the purchase price based on assumptions and estimates with respect to fair value that are subject to change once the detailed valuation analyses are completed. Any such changes may be material.
Note 3. Preliminary Purchase Price and Allocation
The preliminary allocation of the purchase price to the estimated fair values of assets acquired and liabilities assumed is as follows:
| Current Assets |
$ | 475 | ||
| Property, Plant and equipment, net |
97 | |||
| Goodwill |
4,983 | |||
| Other Assets |
29 | |||
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| Total Assets |
5,584 | |||
| Current Liabilities |
(1,915 | ) | ||
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| Total Purchase Price |
$ | 3,669 | ||
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Note 4. Adjustments to Pro Forma Financial Statements
Adjustments to Pro Forma Statements of Operations
| (a) | The Company classifies depreciation separately from operating expenses, whereas Lavante allocates depreciation within its expense classifications. This adjustment reclassifies the Lavante depreciation in order to adhere to the Company’s financial statement presentation. |
| (b) | Adjustment to remove valuation adjustments related to a Lavante stock warrant that was cancelled as a part of the Merger. |
| (c) | Adjustment to remove interest expense for Lavante debt that was paid off as a part of the Merger. |
| (d) | The Company borrowed $3.6 million in order to fund the Merger with Lavante. This adjustment records additional interest expense of $82,000 for the year ended December 31, 2015 and $61,000 for the nine month period ended September 30, 2016. For every 0.125% change in the interest rates on the debt, the effect on interest expense of the combined entities is approximately $4,500. |
Adjustments to Pro Forma Balance Sheet
| (e) | Adjustment to record the elimination of Lavante historical equity balances. |
| (f) | Adjustment to record the elimination of Lavante debt of $7.3 million that was paid off as part of the Merger. |
| (g) | Adjustment to record the $3.6 million that was borrowed by the Company in order to fund the Merger with Lavante. |
| (h) | Adjustment represents the addition of the estimated fair value of goodwill recognized with the Merger. |
| (i) | Adjustment represents the reclassification of an allowance for estimated recoveries in order to adhere to the Company’s financial statement presentation. |
| (j) | Represents cash transactions as follows: |
| Borrowing from Line of Credit |
$ | 3,600 | ||
| Payoff of Lavante shareholders and satisfaction of debt obligations |
(2,208 | ) | ||
| Transaction costs |
(742 | ) | ||
| Working Capital Adjustments |
(581 | ) | ||
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| Net Cash Adjustment |
$ | (69 | ) | |
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| (h) | Adjustment to record the elimination of Lavante warrant liability. |