PARETEUM Corp - FORM 8-K - EX-99.1 - EXHIBIT 99.1

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EX-99.4 - EXHIBIT 99.4 - PARETEUM Corp	tv499423_ex99-4.htm
EX-99.3 - EXHIBIT 99.3 - PARETEUM Corp	tv499423_ex99-3.htm
EX-99.2 - EXHIBIT 99.2 - PARETEUM Corp	tv499423_ex99-2.htm
8-K - FORM 8-K - PARETEUM Corp	tv499423_8k.htm

Exhibit 99.1

UNAUDITED PRO FORMA CONDENSED
COMBINED FINANCIAL INFORMATION

(in Dollars)

On June 7, 2018, pursuant to Rule 2.7 of the Takeover Code, Pareteum and Artilium released the Offer Announcement disclosing the terms on which Pareteum intends to make a recommended offer to acquire the issued and to be issued ordinary shares of Artilium in a cash and stock transaction. Under the terms of the Offer, Artilium shareholders will be entitled to receive, for each Artilium ordinary share held by such shareholders, 1.9 pence in cash and 0.1016 new shares of Pareteum common stock. The Acquisition is to be effected by means of a court-sanctioned scheme of arrangement between Artilium and Artilium shareholders under the UK Companies Act 2006, as amended.

The following unaudited pro forma condensed combined financial information gives effect to the Acquisition, which includes adjustments for the following:

the conversion of Artilium’s historical financial statements from Euros to U.S. Dollars;

the conversion of Artilium’s historical financial statements prepared in accordance with IFRS to U.S. GAAP;

certain reclassifications to conform Artilium’s historical financial statement presentation to Pareteum’s presentation; and

transaction costs in connection with the Acquisition.

The following unaudited pro forma condensed combined statements and related notes are based on and should be read in conjunction with (i) the historical consolidated financial statements of Pareteum and the related notes included in Pareteum’s Annual Report on Form 10-K for the year ended December 31, 2017 which was filed with the SEC on March 30, 2018 and the historical unaudited consolidated financial statements of Pareteum and related notes included in Pareteum’s Quarterly report on Form 10-Q for the period ended March 31, 2018 which was filed with the SEC on May 11, 2018, each of which is incorporated by reference in this document, and (ii) the audited consolidated financial statements of Artilium for the years ended June 30, 2017 and 2016 and the related notes and the unaudited condensed consolidated financial statements of Artilium for each of the nine months ended March 31, 2018 and March 31, 2017 and related notes contained herein.

The unaudited pro forma condensed combined statements of income for the three months ended March 31, 2018 and the year ended December 31, 2017 combine the historical consolidated statements of income of Pareteum and Artilium, giving effect to the Acquisition as if it had been completed on January 1, 2017. The accompanying unaudited pro forma condensed combined statement of financial position as of March 31, 2018 combines the historical condensed combined statements of financial position of Pareteum and Artilium, giving effect to the Acquisition as if it had been completed on March 31, 2018.

The historical consolidated financial information has been adjusted in the pro forma financial statements to give effect to pro forma events that are (i) directly attributable to the Acquisition, (ii) factually supportable and (iii) with respect to the unaudited pro forma condensed combined statements of income, expected to have a continuing effect on the combined results of Pareteum and Artilium. The statements contained herein do not reflect the costs of any integration activities or benefits that may result from the realization of future cost savings from operating efficiencies, or any other synergies that may result from the Acquisition.

The statements and related notes are being provided for illustrative purposes only and do not purport to represent what the combined company’s actual results of operations or financial position would have been had the Acquisition been completed on the dates indicated, nor are they necessarily indicative of the combined company’s future results of operations or financial position for any future period.

The pro forma adjustments are based upon available information and certain assumptions as described in the accompanying notes to the unaudited pro forma condensed combined financial information which management believes are reasonable under the circumstances. Actual results may differ materially from the assumptions within the accompanying unaudited pro forma condensed combined financial information.

Pareteum Corporation
Unaudited Pro Forma Condensed Combined Statement of Financial Position
As of March 31, 2018

				Artilium plc
	Historical Pareteum			Historical U.S. Dollars (IFRS)			Pro Forma Reclassification Adjustments [Note 1]			Pro Forma (U.S. GAAP)			Pro Forma Adjustments (Note 2)			Pro Forma Condensed Combined
ASSETS
Current assets:
Cash and cash equivalents	$	15,988,645		$	2,736,476		$	-		$	2,736,476		$	(15,467,248	)	$	3,257,873
Accounts receivable, net		1,954,495			4,272,654			-			4,272,654						6,227,149
Other current assets		1,153,742			99,284			-			99,284						1,253,026
Total current assets		19,096,882			7,108,414			-			7,108,414			(15,467,248	)		10,738,048

Investments		3,230,208			7,878,935			-			7,878,935			(11,109,143	)		-

Fixed assets, net		4,176,199			612,112			-			612,112						4,788,311

Note receivable		601,583			-			-			-						601,583

Intangible assets		-			3,440,932			-			3,440,932						3,440,932

Other assets		93,730			-			-			-						93,730

Goodwill		-			25,407,871			153,507			25,561,378			82,991,482			108,552,860

TOTAL ASSETS	$	27,198,602		$	44,448,264		$	153,507		$	44,601,771		$	56,415,091		$	128,215,464

LIABILITIES AND STOCKHOLDER’S EQUITY

Current liabilities:
Accounts payable		2,286,347		$	3,830,530		$	201,803			4,032,333					$	6,318,680
Line of credit		-			-			-			-						-
Other current liabilities		5,157,202			616,226			-			616,226						5,773,428
Deferred revenue - current					2,468,624			77,902			2,546,526						2,546,526
Convertible notes		118,813			-			-			-						118,813
Loans payable		-			12,325			-			12,325						12,325
Total current liabilities		7,562,362			6,927,705			279,705			7,207,410			-			14,769,772

Long-term liabilities
Derivative liabilities		1,911,381			-			-			-						1,911,381
Deferred tax liabilities		-			234,966			-			234,966						234,966
Deferred revenue - long-term		-			4,151,548			(279,705	)		3,871,843						3,871,843
Other long term liabilities		738,208			518,266			-			518,266						1,256,474
Total current and long-term liabilities		10,211,951			11,832,485			-			11,832,485			-			22,044,436

Stockholder's equity:
Preferred shares		-			-			-			-						-
Common stock		324,866,254			24,418,230			-			24,418,230			71,569,347			420,853,831
Additional paid in capital		-			66,250,916			222,667			66,473,583			(66,473,583	)		-
Treasury stock		-			(2,458,068	)		-			(2,458,068	)		2,458,068			-
Accumulated other comprehensive loss		(6,202,289	)		2,296,813			-			2,296,813			(2,296,813	)		(6,202,289	)
Accumulated deficit		(301,677,314	)		(57,892,112	)		(69,160	)		(57,961,272	)		51,158,072			(308,480,514	)
Total stockholder's equity		16,986,651			32,615,779			153,507			32,769,286			56,415,091			106,171,028

TOTAL LIABILITIES AND EQUITY	$	27,198,602		$	44,448,264		$	153,507		$	44,601,771		$	56,415,091		$	128,215,464

Pareteum Corporation

Unaudited Pro Forma Condensed Combined Statement of Operations

For the Three Months Ended March 31, 2018

				Artilium plc
	Historical Pareteum			Historical U.S. Dollars (IFRS)			Pro Forma Reclassification Adjustments [Note 1]			Pro Forma (U.S. GAAP)			Pro Forma Adjustments (Note 2)			Pro Forma Condensed Combined
Revenue	$	4,112,570		$	6,383,434		$	-		$	6,383,434			-		$	10,496,004
Cost of revenue		1,194,523			3,326,877			-			3,326,877						4,521,400
Gross profit		2,918,047			3,056,557			-			3,056,557			-			5,974,604
Operating expenses:
Selling, general and administrative		4,751,585			3,825,282			24,370			3,849,652			6,803,200			15,404,437

Loss before other income / (expenses)		(1,833,538	)		(768,725	)		(24,370	)		(793,095	)		(6,803,200	)		(9,429,833	)

Interest expense		(50,562	)		(24,016	)		-			(24,016	)		-			(74,666	)
Changes in derivative liabilities		(313,733	)		-			-			-			-			(313,733	)
Other income		69,545			-			-			-			-			69,545
Amortization of deferred financing costs		(6,142	)								-			-			(6,142	)

Net loss before income tax		(2,134,518	)		(792,741	)		(24,370	)		(817,111	)		(6,803,200	)		(9,754,829	)
Benefit for income taxes		(418	)		(61,235	)		-			(61,235	)		-			(61,653	)

Net Loss		(2,134,100	)		(731,506	)		(24,370	)		(755,876	)		(6,803,200	)		(9,693,176	)
Foreign currency loss		104,402			(1,890,429	)		-			(1,890,429	)		-			(1,786,027	)
Change in fair value of available for sale securities		-			851,068			-			851,068			-			851,068

Comprehensive Loss	$	(2,029,698	)	$	(1,770,867	)	$	(24,370	)	$	(1,795,237	)	$	(6,803,200	)	$	(10,628,135	)

Net income (loss) per common share from continuing operations:

Basic	$	(0.04	)	$	(0.01	)		-		$	(0.01	)	$	(0.18	)	$	(0.12	)
Diluted	$	(0.04	)	$	(0.01	)		-		$	(0.01	)	$	(0.18	)	$	(0.12	)

Weight average common share outstanding:
Basic		50,062,434			353,732,000			-			353,732,000			37,852,076			87,914,510
Diluted		50,062,434			353,732,000			-			353,732,000			37,852,076			87,914,510

Pro forma adjustments

The pro forma adjustments are based on our preliminary estimates and assumptions that are subject to change. The following adjustments have been reflected in the unaudited pro forma condensed combined financial information:

Adjustments to the pro forma condensed combined balance sheet:

Note 1 reflects the conversion of the Artilium financial statements from IFRS to U.S. GAAP; and

Note 2 reflect the purchase price and preliminary estimate of goodwill, which represents the excess of the purchase price over the fair value of assets acquired of Artilium.

Artilium, plc is a UK public company whose audited financial statements are presented under IFRS. In connection with Pareteum’s planned acquisition of Artilium, the combined consolidated balance sheets and statements of operations of both entities, as of as of March 31, 2018 and for the quarter ended were prepared. The following entry was made to convert Artilium’s IFRS financial statements to U.S. GAAP:

Note 1	Goodwill	153,507
	Accumulated deficit	44,791
	Deferred revenues - long-term	279,705
	Selling, general and administrative	24,370
	Accounts payable		$	201,803
	Deferred revenues - current			77,902
	Additional paid in capital			222,667

The above entry represents the following adjustments:

Adjustment to increase goodwill with a corresponding credit to additional paid in capital of $153,507 due to fair value adjustment on the shares to be issued as consideration in the acquisition of IDM.

Adjustment to record stock-based compensation expense for options granted to two officers of Artilium, plc in July 2017 in the amount of $44,791 and $24,370 for the year ended December 31, 2017 and for the quarter ended March 31, 2018 with a corresponding credit to additional paid in capital of $69,161.

Adjustment to correct the overstatement in deferred revenue-long-term of $279,705 and to reclass accruals of $201,803 which were erroneously classified as deferred-current to accounts payable.

The following adjustments represent the acquisition and consolidation of Artilium by Pareteum.

Note 2	Common stock	24,418,230
	Additional paid-in capital	66,473,583
	Treasury stock		2,458,068
	Accumulated other comprehensive gain (loss)	2,296,813
	Accumulated deficit		57,961,272
	Goodwill	82,991,482
	Professional Fees - M&A	6,803,200
	Cash		8,864,348
	Cash - M&A Costs		6,602,900
	Investments		11,109,143
	Common Stock		95,787,177
	Common Stock - M&A Fees		200,400

As a part of the acquisition Pareteum acquired Artillium in a common stock purchase and Note 2 represents the entry:

All Artilium shareholder’s equity balances are adjusted by $32,769,286 to reflect the transaction as if completed. Goodwill for the difference of net assets acquired and fair market value totals approximately $82,991,482.

Cash payments for the acquisition and professional fees for the transaction are approximately $8,864,348 and $6,602,900.

Additional professional fees are to be paid in stock in the amount of approximately $200,400. The elimination of net investment between companies is approximately $11,109,143.

Pareteum will issue equity of approximately $95,787,177 to complete the transaction.

Pareteum Corporation
Unaudited Pro Forma Condensed Combined Statement of Financial Position
For the Year Ended December 31, 2017

				Artilium plc
	Historical Pareteum			Historical U.S. Dollars (IFRS)			Pro Forma Reclassification Adjustments [Note 1]			Pro Forma (U.S. GAAP)			Pro Forma Adjustments (Note 2)			Pro Forma Condensed Combined
ASSETS
Current assets:
Cash and cash equivalents	$	13,737,675		$	3,499,113		$	-		$	3,499,113		$	(15,467,248	)	$	1,769,540
Accounts receivable, net		2,058,284			4,725,090			(1,081,760	)		3,643,330			-			5,701,614
Other current assets		900,369			134,312			-			134,312			-			1,034,681
Total current assets		16,696,328			8,358,515			(1,081,760	)		7,276,755			(15,467,248	)		8,505,835

Investments		3,230,208			6,596,487			-			6,596,487			(9,826,695	)		-
Fixed assets, net		4,713,710			545,494			-			545,494			-			5,259,204
Note receivable		594,520			-			-			-			-			594,520
Intangible assets		-			3,749,141			-			3,749,141			-			3,749,141
Other assets		91,267			-			-			-			-			91,267
Goodwill		-			20,549,865			-			20,549,865			85,315,016			105,864,881

TOTAL ASSETS	$	25,326,033		$	39,799,502		$	(1,081,760	)	$	38,717,742		$	60,021,073		$	124,064,848

LIABILITIES AND STOCKHOLDER’S EQUITY

Current liabilities:
Accounts payable	$	1,978,726		$	2,749,261		$	(187,743	)	$	2,561,518			-		$	4,540,244
Other current liabilities		5,493,116			119,986			-			119,986			-			5,613,102
Deferred revenue - current		-			2,260,347			(285,507	)		1,974,840			-			1,974,840
Convertible notes		66,000			-			-			-			-			66,000
Loans payable		-			11,999			-			11,999			-			11,999
Total current liabilities		7,537,842			5,141,593			(473,250	)		4,668,343			-			12,206,185

Long-term liabilities
Derivative liabilities		1,597,647			-			-			-			-			1,597,647
Deferred tax liabilities		-			314,282			-			314,282			-			314,282
Deferred revenue - long-term		-			4,344,608			(608,510	)		3,736,098			-			3,736,098
Other long term liabilities		769,011			835,715			-			835,715			-			1,604,726
Total current and long-term liabilities		9,904,500			10,636,198			(1,081,760	)		9,554,438			-			19,458,938

Stockholder's equity:
Preferred shares		-			-			-			-			-			-
Common stock		321,271,437			23,484,192			-			23,484,192			72,503,385			417,259,014
Additional paid-in capital		-			62,156,505			44,791			62,201,296			(62,201,296	)		-
Treasury stock		-			(2,458,068	)		-			(2,458,068	)		2,458,068			-
Accumulated other comprehensive gain (loss)		(6,306,691	)		3,141,281			-			3,141,281			(3,141,281	)		(6,306,691	)
Accumulated deficit		(299,543,213	)		(57,160,606	)		(44,791	)		(57,205,397	)		50,402,197			(306,346,413	)
Total stockholder's equity		15,421,533			29,163,304			-			29,163,304			60,021,073			104,605,910

TOTAL LIABILITIES AND STOCKHOLDER’S EQUITY	$	25,326,033		$	39,799,502		$	(1,081,760	)	$	38,717,742		$	60,021,073		$	124,064,848

Pareteum Corporation

Unaudited Pro Forma Condensed Combined Statement of Operations

For the 12 month period ended December 31, 2017

				Artilium plc
	Historical Pareteum			Historical U.S. Dollars (IFRS)			Pro Forma Reclassification Adjustments [Note 1]			Pro Forma (U.S. GAAP)			Pro Forma Adjustments (Note 2)			Pro Forma Condensed Combined
Revenue	$	13,547,507		$	12,246,485		$	-		$	12,246,485			-		$	25,793,992
Cost of revenue		3,683,609			2,943,919			-			2,943,919			-			6,627,528
Gross profit		9,863,898			9,302,566			-			9,302,566						19,166,464
Operating expenses:
Selling, general and administrative		18,651,085			10,684,607			44,791			10,729,398			6,803,200			36,183,683
Income before other income / (expenses)		(8,787,187	)		(1,382,041	)		(44,791	)		(1,426,832	)		(6,803,200	)		(17,017,219	)

Interest expense		(4,890,900	)		(243,605	)		-			(243,605	)		-			(5,134,505	)
Changes in derivative liabilities		794,691			-			-			-			-			794,691
Other income		705,140			-			-			-			-			705,140
Amortization of deferred financing costs		(177,519	)		-			-			-			-			(177,519	)

Net income before income tax		(12,355,775	)		(1,625,646	)		(44,791	)		(1,670,437	)		(6,803,200	)		(20,829,412	)
Provision (benefit) for income taxes		107,205			(301,008	)		-			(301,008	)					(193,803	)

Net Loss		(12,462,980	)		(1,324,638	)		(44,791	)		(1,369,429	)		(6,803,200	)		(20,635,609	)
Foreign currency translation gain (loss)		(1,219,782	)		810,157			-			810,157			-			(409,625	)
Change in fair value of available for sale securities		-			2,331,124			-			2,331,124			-			2,331,124

Comprehensive Loss	$	(13,682,762	)	$	1,816,643		$	(44,791	)	$	1,771,852		$	(6,803,200	)	$	(18,714,110	)

Net income (loss) per common share from continuing operations:
Basic	$	(0.84	)	$	(0.01	)	$	-		$	(0.01	)	$	(0.18	)	$	(0.35	)
Diluted	$	(0.84	)	$	(0.01	)	$	-		$	(0.01	)	$	(0.18	)	$	(0.38	)

Weight average common share outstanding:
Basic		16,338,156			316,418,000			-			316,418,000			37,852,076			54,190,232
Diluted		16,338,156			316,418,000			-			316,418,000			37,852,076			54,190,232

Pro forma adjustments

Adjustments to the pro forma condensed combined balance sheet:

Note 1 reflects the conversion of the Artilium financial statements from IFRS to U.S. GAAP; and

Note 2 reflect the purchase price and preliminary estimate of goodwill, which represents the excess of the purchase price over the fair value of assets acquired of Artilium.

Artilium, plc is a UK public company whose audited financial statements are presented under IFRS. In connection with Pareteum’s planned acquisition of Artilium, the combined consolidated balance sheets and statements of operations of both entities, as of December 31, 2017 and for the year then ended were prepared. The following entry was made to convert Artilium’s IFRS financial statements to U.S. GAAP:

Note 1	Accounts payable	187,743
	Deferred revenues - current	285,507
	Deferred revenues - long-term	608,510
	Selling, general and administrative	44,791
	Accounts receivable		1,081,760
	Additional paid in capital		44,791

The above entry represents the following adjustments:

Adjustment to accounts payable, deferred revenues-current and deferred revenues – long-term of $187,743, $285,507 and $608,510, respectively, with a corresponding credit to accounts receivable of $1,081,760 to correct the overstatement in deferred revenue for amounts billed but not collected as of December 31, 2017.

Adjustment to increase selling, general and administrative by $44,791 with a corresponding credit to additional paid in capital to record stock-based compensation for options granted to two officers of Artilium, plc.