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EX-99.2 - UNAUDITED FINANCIAL STATEMENTS OF DAILY ENGAGE MEDIA - Bright Mountain Media, Inc.bmtm_ex99z2.htm
8-K/A - CURRENT REPORT - Bright Mountain Media, Inc.bmtm_8k.htm

 


EXHIBIT 99.3

 

UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION

 

The following unaudited pro forma condensed combined financial information and related notes present the historical condensed combined financial information of Bright Mountain Media, Inc. (herein referred to as the “Company”, “we”, “our”, “us” and similar terms unless the context indicates otherwise) and Daily Engage Media Group, LLC, (“Daily Engage”), after giving effect to the acquisition of Daily Engage that was completed on September 19, 2017, (the “Acquisition”), pursuant to which, the Company entered into a membership interest purchase agreement. The Acquisition was accounted for as a business combination in accordance with the guidance contained in the Financial Accounting Standards Board’s Accounting Standards Codification Topic 805, Business Combinations (“ASC 805”). The unaudited pro forma condensed combined financial information gives effect to the acquisition of Daily Engage based on the assumptions and adjustments described in the accompanying notes to the unaudited pro forma condensed combined financial information.

 

The unaudited pro forma condensed combined balance sheet as of June 30, 2017 is presented as if the Acquisition had occurred on June 30, 2017. The unaudited condensed combined statements of operations for the six months ended June 30, 2017 and for the year ended December 31, 2016 are presented as if the Acquisition had occurred on January 1, 2016.

 

The unaudited pro forma condensed combined financial information was prepared in accordance with Article 11 of the U.S. Securities and Exchange Commission’s Regulation S-X. The unaudited pro forma adjustments reflecting the transaction have been prepared in accordance with the guidance for business combinations presented in ASC 805, and reflect the allocation of our preliminary purchase price to the assets acquired and liabilities assumed in the Acquisition based on their estimated fair values. The historical financial information has been adjusted in the unaudited pro forma condensed combined financial information to give effect to pro forma events that are: (i) directly attributable to the Acquisition; (ii) factually supportable; and (iii) with respect to the condensed combined statements of operations, expected to have a continuing impact on our combined results of operations.

 

The unaudited pro forma condensed combined financial information is presented for informational purposes only and is not necessarily indicative of the operating results or financial position that would have occurred if the Acquisition had been affected on the dates previously set forth, nor is it indicative of the future operating results or financial position in combination. Our preliminary purchase price allocation was made using our best estimates of fair value, which are dependent upon certain valuation and other analyses that are not yet final. As a result, the unaudited pro forma purchase price adjustments related to the Acquisition are preliminary and subject to further adjustments as additional information becomes available and as additional analyses are performed during the applicable measurement period under ASC 805 (up to one year from the Acquisition date). There can be no assurances that any final valuations will not result in material adjustments to our preliminary estimated purchase price allocation. Further, the unaudited pro forma condensed combined financial information does not give effect to the potential impact of anticipated synergies, operating efficiencies, cost savings or transaction and integration costs that may result from the Acquisition.

 

The unaudited pro forma condensed combined financial information should be read in conjunction with our historical consolidated financial statements and their accompanying notes presented in our Annual Report on Form 10-K for the year ended December 31, 2016 and our Quarterly Report on Form 10-Q for the six months ended June 30, 2017, as well as the historical financial statements of Daily Engage for the year ended December 31, 2016 and unaudited financial statements for the six month period ended June 30, 2017.

 

 



1



 


UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET

AS OF JUNE 30, 2017

 

 

 

Historical Information

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Bright

 

 

Daily

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Mountain

 

 

Engage Media

 

 

 

 

 

Pro Forma

 

 

Proforma

 

 

 

 

 

 

Media, Inc.

 

 

Group, LLC

 

 

Combined

 

 

Adjustments

 

 

Combined

 

 

Notes

 

 

  

                        

  

  

                        

  

  

                        

  

  

                        

  

  

                        

  

  

           

 

Assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Current Assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash

 

$

101,029

 

 

$

27,385

 

 

$

128,414

 

 

$

---

 

 

$

128,414

 

 

 

 

 

Accounts Receivable

 

 

123,514

 

 

 

284,988

 

 

 

408,502

 

 

 

 

 

 

 

408,502

 

 

 

 

 

Prepaid Expenses and Other Current Assets

 

 

104,102

 

 

 

---

 

 

 

104,102

 

 

 

 

 

 

 

104,102

 

 

 

 

 

Inventories

 

 

1,066,575

 

 

 

---

 

 

 

1,066,575

 

 

 

 

 

 

 

1,066,575

 

 

 

 

 

Total current assets

 

 

1,395,220

 

 

 

312,373

 

 

 

1,707,593

 

 

 

---

 

 

 

1,707,593

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fixed Assets, net

 

 

101,158

 

 

 

---

 

 

 

101,158

 

 

 

 

 

 

 

101,158

 

 

 

 

 

Intangible Assets, net

 

 

815,572

 

 

 

---

 

 

 

815,572

 

 

 

447,000

 

 

 

1,262,572

 

 

a

 

Tradenames

 

 

150,000

 

 

 

---

 

 

 

150,000

 

 

 

150,000

 

 

 

300,000

 

 

a

 

Goodwill

 

 

---

 

 

 

---

 

 

 

---

 

 

 

405,251

 

 

 

405,251

 

 

a

 

Other Assets

 

 

51,497

 

 

 

---

 

 

 

51,497

 

 

 

 

 

 

 

51,497

 

 

 

 

 

Total Assets

 

$

2,513,447

 

 

$

312,373

 

 

2,825,820

 

 

$

1,002,251

 

 

$

3,828,071

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Liabilities and Shareholders' Equity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Current Liabilities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accounts Payable

 

$

590,724

 

 

$

64,782

 

 

 $

655,506

 

 

$

80,000

 

 

$

735,506

 

 

 

 

 

Accrued Interest

 

 

73,958

 

 

 

---

 

 

 

73,958

 

 

 

 

 

 

 

73,958

 

 

 

 

 

Accrued Interest - Related Party

 

 

12,450

 

 

 

---

 

 

 

12,450

 

 

 

 

 

 

 

12,450

 

 

 

 

 

Premium Finance Loan Payable

 

 

4,694

 

 

 

---

 

 

 

4,694

 

 

 

 

 

 

 

4,694

 

 

 

 

 

Deferred Rent

 

 

15,976

 

 

 

---

 

 

 

15,976

 

 

 

 

 

 

 

15,976

 

 

 

 

 

Note Payable - Current Portion

 

 

500,000

 

 

 

---

 

 

 

500,000

 

 

 

380,000

 

 

 

880,000

 

 

b

 

Loans Payable, net

 

 

---

 

 

 

222,359

 

 

 

222,359

 

 

 

 

 

 

 

222,359

 

 

 

 

 

Factor advances

 

 

---

 

 

 

92,065

 

 

 

92,065

 

 

 

 

 

 

 

92,065

 

 

 

 

 

Total Current Liabilities

 

 

1,197,802

 

 

 

379,206

 

 

 

1,577,008

 

 

 

460,000

 

 

 

2,037,008

 

 

 

 

 

Long Term Debt to Related Parties, net

 

 

680,673

 

 

 

---

 

 

 

680,673

 

 

 

 

 

 

 

680,673

 

 

 

 

 

Total Liabilities

 

 

1,878,475

 

 

 

379,206

 

 

 

2,257,681

 

 

 

460,000

 

 

 

2,717,681

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commitments and contingencies

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(continued)



2



 


UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET (CONTINUED)

AS OF JUNE 30, 2017

 

 

 

Historical Information

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Bright

 

 

Daily

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Mountain

 

 

Engage Media

 

 

 

 

 

Pro Forma

 

 

Proforma

 

 

 

 

 

 

 

Media, Inc.

 

 

Group, LLC

 

 

Combined

 

 

Adjustments

 

 

Combined

 

 

Notes

 

 

 

  

                        

  

  

                        

  

  

                        

  

  

                        

  

  

                        

  

  

           

 

 

Shareholders’ Equity (deficit)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Member’s Equity

 

 

---

 

 

 

128,818

 

 

 

128,818

 

 

 

(128,818

)

 

 

---

 

 

 

 

 

Preferred stock, par value $0.01, 20,000,000 shares authorized, 100,000 issued and outstanding

 

 

---

 

 

 

---

 

 

 

---

 

 

 

---

 

 

 

---

 

 

 

 

 

Series A, 2,000,000 shares designated, 100,000 shares issued and outstanding

 

 

1,000

 

 

 

---

 

 

 

1,000

 

 

 

---

 

 

 

1,000

 

 

 

 

 

Series B, 1,000,000 shares designated, 0 shares issued and outstanding

 

 

---

 

 

 

---

 

 

 

---

 

 

 

---

 

 

 

---

 

 

 

 

 

Series C, 2,000,000 shares designated, and 0 shares issued and outstanding

 

 

---

 

 

 

---

 

 

 

---

 

 

 

---

 

 

 

---

 

 

 

 

 

Series D, 2,000,000 shares designated, 0 shares issued and outstanding

 

 

---

 

 

 

---

 

 

 

---

 

 

 

---

 

 

 

---

 

 

 

 

 

Common stock, par value $0.01, 324,000,000 shares authorized, 44,943,631 issued and outstanding

 

 

449,437

 

 

 

---

 

 

 

449,437

 

 

 

11,002

 

 

 

460,439

 

 

c

 

Additional paid-in capital

 

 

10,566,521

 

 

 

---

 

 

 

10,566,521

 

 

 

785,067

 

 

 

11,351,588

 

 

c

 

Accumulated Deficit

 

 

(10,381,986

)

 

 

(195,651

)

 

 

(10,577,637

)

 

 

(125,000

)

 

 

(10,702,637

)

 

 

 

 

Total shareholders’ equity

 

 

634,972

 

 

 

(66,833

)

 

 

568,139

 

 

 

542,251

 

 

 

1,110,390

 

 

 

 

 

Total Liabilities and shareholders’ equity

 

$

2,513,447

 

 

$

312,373

 

 

$

2,825,820

 

 

$

1,002,251

 

 

$

3,828,071

 

 

 

 

 



3



 


UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS

FOR THE SIX MONTHS ENDED JUNE 30, 2017

 

 

 

Historical Information

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Bright

 

 

Daily

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Mountain

 

 

Engage Media

 

 

 

 

 

Pro Forma

 

 

Proforma

 

 

 

 

 

 

Media, Inc.

 

 

Group, LLC

 

 

Combined

 

 

Adjustments

 

 

Combined

 

 

Notes

 

 

  

                        

  

  

                        

  

  

                        

  

  

                        

  

  

                        

  

  

           

 

Revenues from product sales

 

$

1,124,286

 

 

$

---

 

 

$

1,124,286

 

 

$

---

 

 

$

1,124,286

 

 

 

 

 

Revenues from services

 

 

203,633

 

 

 

1,038,240

 

 

 

1,241,873

 

 

 

 

 

 

 

1,241,873

 

 

 

 

 

Total revenue

 

 

1,327,919

 

 

 

1,038,240

 

 

 

2,366,159

 

 

 

---

 

 

 

2,366,159

 

 

 

 

 

Cost of sales – products

 

 

741,467

 

 

 

 

 

 

 

741,467

 

 

 

 

 

 

 

741,467

 

 

 

 

 

Cost of sales – services

 

 

---

 

 

 

879,480

 

 

 

879,480

 

 

 

---

 

 

 

879,480

 

 

 

 

 

Gross profit

 

 

586,452

 

 

 

158,760

 

 

 

745,212

 

 

 

---

 

 

 

745,212

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Selling General and administrative expenses

 

 

1,948,968

 

 

 

297,385

 

 

 

2,246,353

 

 

 

125,000

 

 

 

2,371,353

 

 

d,e,f

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loss from operations

 

 

(1,362,516

)

 

 

(138,625)

 

 

 

(1,501,141

)

 

 

(125,000

)

 

 

(1,626,141

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other income (expense)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest income

 

 

219

 

 

 

---

 

 

 

219

 

 

 

 

 

 

 

219

 

 

 

 

 

Interest expense

 

 

(69,751

)

 

 

(31,695

)

 

 

(101,446

)

 

 

 

 

 

 

(101,446

)

 

 

 

 

Interest expense – related part

 

 

(125,132

)

 

 

 

 

 

 

(125,132

)

 

 

 

 

 

 

(125,132

)

 

 

 

 

Total other expense

 

 

(194,664

)

 

 

(31,695

)

 

 

(226,359

)

 

 

---

 

 

 

(226,359

)

 

 

 

 

Net loss before taxes

 

 

(1,557,180

)

 

 

(170,320

)

 

 

(1,727,500

)

 

 

(125,000

)

 

 

(1,852,500

)

 

 

 

 

Income taxes

 

 

---

 

 

 

---

 

 

 

---

 

 

 

---

 

 

 

---

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

$

(1,557,180

)

 

$

(170,320

)

 

$

(1,727,500

)

 

 

(125,000

)

 

 

(1,852,500

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Preferred stock dividends

 

 

2,727

 

 

 

 

 

 

 

2,727

 

 

 

 

 

 

 

2,727

 

 

 

 

 

Total preferred stock dividends

 

 

2,727

 

 

 

 

 

 

 

2,727

 

 

 

 

 

 

 

2,727

 

 

 

 

 

Net loss attributable to common shareholders

 

$

(1,559,907

)

 

$

(170,320

)

 

$

(1,730,227

)

 

$

(125,000

)

 

$

(1,855,227

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic and diluted net loss per share

 

$

(0.03

)

 

 

 

 

 

 

 

 

 

 

 

 

 

$

(0.04

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average shares outstanding -

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic and diluted

 

 

44,925,043

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

46,018,807

 

 

 

 

 







4



 


UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS

FOR THE YEAR ENDED DECEMBER 31, 2016

 

 

 

Historical Information

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Bright

 

 

Daily

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Mountain

 

 

Engage Media

 

 

 

 

 

Pro Forma

 

 

Proforma

 

 

 

 

 

 

Media, Inc.

 

 

Group, LLC

 

 

Combined

 

 

Adjustments

 

 

Combined

 

 

Notes

 

 

  

                        

  

  

                        

  

  

                        

  

  

                        

  

  

                        

  

  

           

 

Revenues from product sales

 

$

1,499,010

 

 

 

1,647,596

 

 

 

3,146,606

 

 

$

---

 

 

$

3,146,606

 

 

 

 

 

Revenues from services

 

 

434,775

 

 

 

 

 

 

 

434,775

 

 

 

 

 

 

 

434,775

 

 

 

 

 

Total revenue

 

 

1,933,785

 

 

 

1,647,596

 

 

 

3,581,381

 

 

 

---

 

 

 

3,581,381

 

 

 

 

 

Cost of sales - products

 

 

1,133,872

 

 

 

 

 

 

 

1,133,872

 

 

 

 

 

 

 

1,133,872

 

 

 

 

 

 

 

 

 

 

 

 

1,449,136

 

 

 

1,449,136

 

 

 

 

 

 

 

1,449,136

 

 

 

 

 

Gross profit

 

 

799,913

 

 

 

198,460

 

 

 

998,373

 

 

 

---

 

 

 

998,373

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Selling General and administrative expenses

 

 

3,093,295

 

 

 

214,478

 

 

 

3,307,773

 

 

 

(270,000

)

 

 

3,577,773

 

 

d,e,f

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(Loss) from operations

 

 

(2,293,382

)

 

 

(16,018

)

 

 

(2,309,400

)

 

 

(270,000

)

 

 

(2,579,400

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other income (expense)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest income

 

 

69

 

 

 

 

 

 

 

69

 

 

 

 

 

 

 

69

 

 

 

 

 

Interest expense

 

 

(373,738

)

 

 

(17,589

)

 

 

(391,327

)

 

 

 

 

 

 

(391,327

)

 

 

 

 

Total other (expense)

 

 

(373,669

)

 

 

(17,589

)

 

 

(391,258

)

 

 

0

 

 

 

(391,258

)

 

 

 

 

Net loss before taxes

 

 

(2,667,051

)

 

 

(33,607

)

 

 

(2,700,658

)

 

 

(270,000

)

 

 

(2,970,658

)

 

 

 

 

Income taxes

 

 

---

 

 

 

---

 

 

 

---

 

 

 

---

 

 

 

---

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

 $

(2,667,051

)

 

$

(33,607

)

 

$

(2,700,658

)

 

$

(270,000

)

 

$

(2,970,658

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Preferred stock dividends

 

 

280,682

 

 

 

 

 

 

 

280,682

 

 

 

 

 

 

 

280,682

 

 

 

 

 

Total preferred stock dividends

 

 

280,682

 

 

 

 

 

 

 

280,682

 

 

 

 

 

 

 

280,682

 

 

 

 

 

Net loss attributable to common shareholders

 

$

(2,947,733

)

 

$

(33,607

)

 

$

(2,981,340

)

 

$

(270,000

)

 

$

(3,251,340

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic and diluted net loss per share

 

$

(0.07

)

 

 

 

 

 

 

 

 

 

 

 

 

 

$

(0.08

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average shares outstanding -

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic and diluted

 

 

39,867,371

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

40,938,750

 

 

 

 

 





 



5



 


1.

Basis of Pro Forma Presentation

 

On September 19, 2017, we entered into a Membership Interest Purchase Agreement (the “Agreement”) with Daily Engage Media Group, LLC. (“Daily Engage”) pursuant to which the Company acquired 100% of membership interests of Daily Engage\. The unaudited pro forma condensed combined balance sheet at June 30, 2016 combines our historical condensed consolidated balance sheet with the historical condensed balance sheet of Daily Engage as if the Acquisition had occurred on that date. The unaudited pro forma condensed combined statements of operations for the six months ended June 30, 2017 and for the year ended December 31, 2016 combine our historical condensed consolidated statements of operations with the condensed consolidated statements of operations of Daily Engage as if the Acquisition had occurred on January 1, 2016. The historical financial information is adjusted in the unaudited pro forma condensed combined financial information to give effect to pro forma events that are: (i) directly attributable to the Acquisition; (ii) factually supportable; and (iii) with respect to the condensed combined statements of operations, expected to have a continuing impact on our combined results.

 

2.

Preliminary Consideration Transferred

 

Pursuant to the terms of the Purchase Agreement, which was effective September 19, 2017, we paid $1,013,502 in consideration including $380,000 paid through the delivery of unsecured, interest free, one year promissory notes (the "Closing Notes"), the forgiveness of $204,411 in working capital we had previously advanced Daily Engage Media, and issuance of 1,100,233 shares of our common stock with a fair value on the date of issuance of $429,091.

 

3.

Preliminary Purchase Price Allocation

 

Under the acquisition method of accounting outlined in ASC 805, the identifiable assets acquired and liabilities assumed in the Acquisition are recorded at their Acquisition-date fair values and are included in the Company’s consolidated financial position. Our unaudited pro forma adjustments are preliminary in nature and based on the estimates of fair value for all assets acquired and liabilities assumed to illustrate the estimated effect of the Acquisition on our condensed consolidated balance sheet at June 30, 2017. Accordingly, the unaudited pro forma purchase price allocation is subject to further adjustments as additional information becomes available and as additional analyses are performed. The primary areas that are not yet finalized relate to our estimated fair values for inventory and identifiable intangible assets. There can be no assurances that any final valuations will not result in material adjustments to our preliminary estimated purchase price allocation.

 

The following table summarizes the preliminary purchase price allocation for the assets acquired and liabilities assumed in connection with the Acquisition:


 

 

Amount

 

 

Weighted

Average Life

(Years)

 

 

 

 

 

 

 

 

Tangible assets acquired

 

$

91,670

 

 

 

 

Liabilities assumed

 

 

(125,419

)

 

 

 

Exchange platform

 

 

50,000

 

 

3

 

Tradename

 

 

150,000

 

 

Indefinite

 

Customer relationships

 

 

250,000

 

 

5

 

Non-compete agreements

 

 

192,000

 

 

3

 

Goodwill

 

 

405,251

 

 

 

 

 

Total purchase price

 

$

1,013,502

 

 

 

 

 

 

Our unaudited pro forma purchase price allocation includes certain identifiable intangible assets with an estimated fair value of approximately $642,000. The fair value of the identifiable intangible assets acquired was estimated using a combination of asset-based and income-based valuation methodologies. The asset-based valuation methodology established a fair value estimate based on the cost of replacing the asset, less amortization from functional use and economic obsolescence, if present and measureable. The income-based valuation methodology utilizes a discounted cash flow technique where the expected future economic benefits of ownership of an asset are discounted back to present value. This valuation technique requires us to make certain assumptions about, including, but not limited to, future operating performance and cash flow, and other such variables which are discounted to present value using a discount rate that reflects the risk factors associated with future cash flow, the characteristics of the assets acquired, and the experience of the acquired business. Such estimates are subject to change, possibly materially, as additional information becomes available and as additional analyses are performed.



6



 


4.

Pro Forma Adjustments

 

The pro forma adjustments included in the unaudited pro forma condensed combined financial information are as follows:

 

(a) Adjustment to reflect the fair value of the total consideration.

(b)  Adjustment to reflect $380,000 paid through the delivery of unsecured, interest free, one year promissory note.

(c)  Adjustment to reflect 1,100,223 shares of our Common Stock valued at $429,091.


The following table summarizes the impact of pro forma adjustments to revenues and operating expense classifications presented in the unaudited pro forma condensed combined statements of operations for the six months ended June 30, 2017 and the year ended December 31, 2016:


 

 

 

 

General and

 

 

 

 

 

 

 

 

 

 

Administrative

 

 

 

 

 

 

 

 

 

 

Expenses

 

 

 

 

Total

 

 

 

 

 

                        

 

 

 

 

                        

 

For the Six Months Ended June 30, 2017

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(d)

Amortization

 

 

 

$

45,000

 

 

 

 

$

45,000

 

(e)

Service agreements

 

 

 

 

55,000

 

 

 

 

 

55,000

 

(f)

Other general and administrative expenses

 

 

 

 

25,000

 

 

 

 

 

25,000

 

 

  

 

 

 

$

125,000

 

 

 

 

$

125,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For the Year Ended December 31, 2016

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(d)

Amortization

 

 

 

$

90,000

 

 

 

 

$

90,000

 

(e)

Service agreements

 

 

 

 

130,000

 

 

 

 

 

130,000

 

(f)

Other general and administrative expenses

 

 

 

 

50,000

 

 

 

 

 

50,000

 

 

  

 

 

 

$

270,000

 

 

 

 

$

270,000

 


(d)

Adjustment to recognize amortization expense on acquired definite-lived intangible assets.


(e)

Adjustment to recognize cost of two executive employment agreements entered into in connection with Daily Engage acquisition.


(f)

Adjustment to recognize one additional administrative employee (staff accountant).












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