Attached files
| file | filename |
|---|---|
| EX-99.1 - EXHIBIT 99.1 - THESTREET, INC. | s110953_ex99-1.htm |
| EX-2.1 - EXHIBIT 2.1 - THESTREET, INC. | s110953_ex2-1.htm |
| 8-K - 8-K - THESTREET, INC. | s110953_8k.htm |
Exhibit 99.2
THESTREET, INC.
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEETS
| As of March 31, 2018 | ||||||||||||||||
| ASSETS | Historical | Disposition of Business (2a) | Other Adjustment | Pro forma | ||||||||||||
| Current Assets: | ||||||||||||||||
| Cash and cash equivalents | $ | 13,223,536 | $ | — | $ | 31,954,000 | 2(b) | $ | 45,177,536 | |||||||
| Accounts receivable, net of allowance for doubtful accounts | 5,095,663 | 178,313 | 4,917,350 | |||||||||||||
| Other receivables | 255,561 | 255,561 | ||||||||||||||
| Prepaid expenses and other current assets | 2,111,526 | 69,431 | 2,042,095 | |||||||||||||
| Total current assets | 20,686,286 | 247,744 | 31,954,000 | 52,392,542 | ||||||||||||
| Noncurrent Assets: | ||||||||||||||||
| Property and equipment, net of accumulated depreciation and amortization | 2,565,064 | 633,835 | 1,931,229 | |||||||||||||
| Marketable securities | 1,748,805 | 1,748,805 | ||||||||||||||
| Other assets | 1,156,049 | 1,156,049 | ||||||||||||||
| Goodwill | 29,478,161 | 5,851,050 | 23,627,111 | |||||||||||||
| Other intangibles, net of accumulated amortization | 14,085,490 | 1,010,315 | 13,075,175 | |||||||||||||
| Deferred tax asset | 1,888,339 | 1,888,339 | ||||||||||||||
| Restricted cash | 500,000 | 500,000 | ||||||||||||||
| Total assets | $ | 72,108,194 | $ | 7,742,944 | $ | 31,954,000 | $ | 96,319,250 | ||||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||||||||||
| Current Liabilities: | ||||||||||||||||
| Accounts payable | $ | 2,003,762 | $ | 3,122 | $ | 2,000,640 | ||||||||||
| Accrued expenses | 2,582,354 | 82,194 | 2,500,160 | |||||||||||||
| Deferred revenue | 26,066,008 | 4,354,957 | 21,711,051 | |||||||||||||
| Other current liabilities | 1,940,129 | 51,314 | 1,888,815 | |||||||||||||
| Total current liabilities | 32,592,253 | 4,491,587 | — | 28,100,666 | ||||||||||||
| Noncurrent Liabilities: | ||||||||||||||||
| Deferred tax liability | 1,115,723 | 221,350 | 894,373 | |||||||||||||
| Other liabilities | 2,599,936 | 557,375 | 166,093 | 2(c) | 2,208,654 | |||||||||||
| Total liabilities | 36,307,912 | 5,270,312 | 166,093 | 31,203,693 | ||||||||||||
| Stockholders’ Equity: | ||||||||||||||||
| Common stock; $0.01 par value; 100,000,000 shares authorized; 56,900,725 shares issued and 49,186,690 shares outstanding at March 31, 2018 | 569,007 | 569,007 | ||||||||||||||
| Additional paid-in capital | 259,910,012 | 259,910,012 | ||||||||||||||
| Accumulated other comprehensive loss | (4,419,337 | ) | (4,419,337 | ) | ||||||||||||
| Treasury stock at cost; 7,714,035 shares at March 31, 2018 | (13,490,213 | ) | (13,490,213 | ) | ||||||||||||
| Accumulated deficit | (206,769,187 | ) | 29,315,275 | 2(d) | (177,453,912 | ) | ||||||||||
| Total stockholders’ equity | 35,800,282 | — | 29,315,275 | 65,115,557 | ||||||||||||
| Total liabilities and stockholders’ equity | $ | 72,108,194 | $ | 5,270,312 | $ | 29,481,368 | $ | 96,319,250 | ||||||||
See the accompanying notes which are an integral part of these unaudited pro forma condensed consolidated financial statements.
THESTREET, INC.
UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
| For the Year Ended December 31, 2017 | ||||||||||||
| Historical | Disposition of Business (3) | Pro forma | ||||||||||
| Revenue: | ||||||||||||
| Business to business | $ | 31,450,697 | $ | 7,674,548 | $ | 23,776,149 | ||||||
| Business to consumer | 31,018,693 | 31,018,693 | ||||||||||
| Total revenue | 62,469,390 | 7,674,548 | 54,794,842 | |||||||||
| Operating expense: | ||||||||||||
| Cost of services | 27,115,500 | 1,808,448 | 25,307,052 | |||||||||
| Sales and marketing | 13,559,393 | 1,333,105 | 12,226,288 | |||||||||
| General and administrative | 15,494,219 | 663,136 | 14,831,083 | |||||||||
| Depreciation and amortization | 5,132,259 | 1,396,730 | 3,735,529 | |||||||||
| Restructuring and other charges | 470,299 | 31,035 | 439,264 | |||||||||
| Total operating expense | 61,771,670 | 5,232,454 | 56,539,216 | |||||||||
| Operating income (loss) | 697,720 | 2,442,094 | (1,744,374 | ) | ||||||||
| Net interest income | 46,807 | 9,514 | 37,293 | |||||||||
| Net income (loss) before income taxes | 744,527 | 2,451,608 | (1,707,081 | ) | ||||||||
| Recovery for income taxes | 2,808,162 | 79,836 | 2,728,326 | |||||||||
| Net income | 3,552,689 | 2,531,444 | 1,021,245 | |||||||||
| Capital contribution attributable to preferred stockholders | 22,367,520 | — | 22,367,520 | |||||||||
| Net income attributable to common stockholders | $ | 25,920,209 | $ | 2,531,444 | $ | 23,388,765 | ||||||
| Net income per share: | ||||||||||||
| Basic net income attributable to common stockholders | $ | 0.69 | $ | 0.62 | ||||||||
| Diluted net income attributable to common stockholders | $ | 0.68 | $ | 0.62 | ||||||||
| Weighted average basic shares outstanding | 37,624,103 | 37,624,103 | ||||||||||
| Weighted average diluted shares outstanding | 37,842,479 | 37,842,479 | ||||||||||
See the accompanying notes which are an integral part of these unaudited pro forma condensed consolidated financial statements.
THESTREET, INC.
UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
| For the Three Months Ended March 31, 2018 | ||||||||||||
| Historical | Disposition of Business (3) | Pro forma | ||||||||||
| Revenue: | ||||||||||||
| Business to business | $ | 8,037,624 | $ | 2,133,684 | $ | 5,903,940 | ||||||
| Business to consumer | 6,671,203 | 6,671,203 | ||||||||||
| Total revenue | 14,708,827 | 2,133,684 | 12,575,143 | |||||||||
| Operating expense: | ||||||||||||
| Cost of services | 5,916,804 | 455,731 | 5,461,073 | |||||||||
| Sales and marketing | 3,812,549 | 331,692 | 3,480,857 | |||||||||
| General and administrative | 4,330,146 | 161,855 | 4,168,291 | |||||||||
| Depreciation and amortization | 1,194,679 | 87,073 | 1,107,606 | |||||||||
| Restructuring and other charges | — | — | ||||||||||
| Total operating expense | 15,254,178 | 1,036,351 | 14,217,827 | |||||||||
| Operating (loss) income | (545,351 | ) | 1,097,333 | (1,642,684 | ) | |||||||
| Net interest income | 18,777 | 2,498 | 16,279 | |||||||||
| Net (loss) income before income taxes | (526,574 | ) | 1,099,831 | (1,626,405 | ) | |||||||
| Provision for income taxes | (155,136 | ) | (155,136 | ) | ||||||||
| Net (loss) income attributable to common stockholders | $ | (681,710 | ) | $ | 1,099,831 | $ | (1,781,541 | ) | ||||
| Net loss per share: | ||||||||||||
| Basic net loss attributable to common stockholders | $ | (0.01 | ) | $ | (0.04 | ) | ||||||
| Diluted net loss attributable to common stockholders | $ | (0.01 | ) | $ | (0.04 | ) | ||||||
| Weighted average basic shares outstanding | 49,184,692 | 49,184,692 | ||||||||||
| Weighted average diluted shares outstanding | 49,184,692 | 49,184,692 | ||||||||||
See the accompanying notes which are an integral part of these unaudited pro forma condensed consolidated financial statements.
Unaudited Pro Forma Condensed Consolidated Financial Statements
On June 20, 2018, The Street, Inc. (“TST” or “the Company”) and its subsidiary Bankers Fin. Corp (“RW”) completed the sale of certain assets and liabilities of the RateWatch business located in Wisconsin to S&P, Inc for a total purchase price of $33.5 million, subject to customary working capital adjustments (“Sale Transaction”). As a result, the RateWatch business’ historical results will be reported in TST’s consolidated financial statements as discontinued operations and in subsequent periods TST’s consolidated financial statements will no longer reflect the assets, liabilities, results of operations or cash flows attributable to the RateWatch business.
The following unaudited pro forma condensed consolidated financial statements (“unaudited pro forma statements”) and explanatory notes are based on TST’s historical consolidated financial statements adjusted to give effect to the Sale Transaction. The Unaudited Pro Forma Condensed Consolidated Statements of Operations for the three months ended March 31, 2018 and year ended December 31, 2017 have been prepared with the assumption that the sale transaction occurred as of the beginning of the statement period. The Unaudited Pro Forma Condensed Consolidated Balance Sheet as of March 31, 2018 has been prepared with the assumption that the Sale Transaction was completed as of the balance sheet date.
The unaudited pro forma statements do not necessarily reflect what TST’s financial condition or results of operations would have been had the Sale Transaction occurred on the date indicated, or which may result in the future. The actual financial position and results of operations may differ significantly from the pro forma amounts reflected herein due to a variety of factors. The unaudited pro forma statements have been prepared by TST based upon assumptions deemed appropriate by TST’s management. An explanation of certain assumptions is set forth under the Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements.
The unaudited pro forma statements should be read in conjunction with the audited financial statements and the notes thereto included in TST’s Annual Report on Form 10-K for the year ended December 31, 2017 as well as the Company’s unaudited condensed consolidated financial statements and notes thereto included in the Company’s Quarterly report on Form 10Q for the three months ended March 31, 2018.
Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements
| 1. | Sale Transaction |
On June 20, 2018 TST completed the sale of certain assets and liabilities of the RateWatch business. The sales price was $33.5 million, subject to customary working capital adjustments.
| 2. | Unaudited Pro Forma Adjustments |
The following notes describe the basis for and/or assumptions regarding the pro forma adjustments included in the Company’s unaudited pro forma statements:
| (a) | Recording of the disposition of the Business. The amounts include the assets and liabilities attributable to the business being sold. |
| (b) | Recording of the sale proceeds, net of estimated transaction related expenses: |
| Pro Forma Adjustment | ||||
| Cash proceeds of the sale | $ | 33,500,000 | ||
| Less: Estimated Transaction costs | 1,546,000 | |||
| Total Cash Proceeds less transaction costs | $ | 31,954,000 | ||
| (c) | The table below represents the tax expense and related taxes payable associated with sale of TST’s RateWatch business. |
| Income tax expense at statutory rates | $ | 9,062,573 | ||
| Book tax difference | 1,766,212 | |||
| Benefit from net operating loss utilization | (10,662,692 | ) | ||
| Total income tax payable | $ | 166,093 |
We have applied an effective tax rate of 30.74% which represents the stand-alone tax associated with the RateWatch business adjusted for the impact of the book tax differences and utilization of net operating loss carryforwards.
The Company estimates the taxable income of $35.2 million with respect to the gain on sale of certain assets and liabilities of RateWatch to be fully offset by federal net operating losses on hand of approximately $175 million as of the transaction date. The Company estimates that after utilizing state and local net operating losses they will incur state and local income, capital and minimum taxes of $166 thousand. The Company has historically provided for a full valuation allowance against the aforementioned tax attributes. The corresponding release of the valuation allowance as a result of the utilization of such tax attributes will result in an estimated federal and state and local deferred income tax effect of zero.
| (d) | The estimated gain on the sale of the business if we had completed the sale as of March 31, 2018 is as follows: |
| Net cash proceeds (Note (b)) | $ | 31,954,000 | ||
| Net assets sold | (2,472,632 | ) | ||
| Pre-tax gain on sale | 29,481,368 | |||
| Tax expense | 166,093 | |||
| After-tax gain on sale | $ | 29,315,275 |
This estimated gain has not been reflected in the pro forma condensed consolidated statement of operations as it is considered to be nonrecurring in nature and is reflected within equity on the Balance Sheet for the period ended March 31, 2018. No adjustment has been made to the sale proceeds to give effect to any potential post-closing adjustments under the terms of the Sale Transaction.
| 3. | Discontinued Operations |
The Financial results of the RateWatch business, net of income taxes, have been removed to reflect the effects of the disposition and the retrospective presentation as discontinued operations in future filings. The following table presents the financial results for the RateWatch business for the periods ended March 31, 2018 and December 31, 2017:
| For the Year Ended December 31, 2017 | For the Three Months Ended March 31, 2018 | |||||||
| Revenue | $ | 7,674,548 | $ | 2,133,684 | ||||
| Operating expense: | ||||||||
| Cost of services | 1,808,448 | 455,731 | ||||||
| Sales and marketing | 1,333,105 | 331,692 | ||||||
| General and administrative | 663,136 | 161,855 | ||||||
| Depreciation and amortization | 1,396,730 | 87,073 | ||||||
| Restructuring and other charges | 31,035 | — | ||||||
| Total operating expense | 5,232,454 | 1,036,351 | ||||||
| Operating income | 2,442,094 | 1,097,333 | ||||||
| Net interest income | 9,514 | 2,498 | ||||||
| Net income before income taxes | 2,451,608 | 1,099,831 | ||||||
| Recovery (provision) for income taxes | 79,836 | — | ||||||
| Net income (loss) | $ | 2,531,444 | $ | 1,099,831 | ||||
| 4. | Transition Services Agreement |
As part of the sale of the Business, TST entered into a transitional services agreement (“TSA”) with the Purchaser of the Businesses, whereby TST will pay rent for a portion of the Leased Real Property to be used by TST employees post the Sales Transaction outlined either under the TSA or a separate sublease mutually acceptable to the parties. In addition, under the TSA, the Company will provide IT infrastructure and other support services during the 12 months immediately following the sale of the RateWatch business to help ensure an orderly transition following the completion of the sale.
The TSA may be amended by mutual agreement and the length of the TSA depends on how quickly the transition of such services is completed.