Attached files
Exhibit 99.3
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL
STATEMENTS
On
March 12, 2021, the RumbleOn, Inc. (the “Company) entered
into a Plan of Merger and Equity Purchase Agreement (the
“RideNow Agreement”) to acquire RideNow Group and
Affiliates, a non-legal entity, (“RideNow” or
“The Group”). RideNow is a collection of franchised
dealerships operating in the powersports industry. Collectively,
the Group is referred to as the Acquired Companies in the
Agreement. The Group is engaged in the sale of new and used
motorcycles, all- terrain vehicles, personal watercraft, other
powersports vehicles, and related products and services, including
repair and maintenance services, parts and accessories, riding
gear, and apparel. As of December 31, 2020, RideNow owned and
operated more than 45 retail dealerships in the United States,
predominately in the Sunbelt region. The core brands sold by
RideNow are Harley-Davidson, Honda, Yamaha, Kawasaki, Suzuki,
Bombardier, Polaris, BMW, Ducati and Triumph, which are sold
through franchise dealer agreements.
The
RideNow Agreement provides that the Company will acquire the
Acquired Companies in exchange for (i) $400,400,000 in cash plus or
minus any adjustments for net working capital and closing
indebtedness, and (ii) shares of the Company's Class B Common Stock
having a value of $175,000,000 (the “Closing Payment
Shares”), valued equally, on a per share basis, based upon
the lowest value of (A) $30.00; (B) the VWAP of the Company's Class
B Common Stock for the twenty (20) trading days immediately
preceding the Closing, and (C) the value on a per share basis paid
for the Class B Common Stock or any shares underlying securities
convertible into or exercisable for Class B Common Stock by any
person which purchases Class B Common Stock or any shares
underlying securities convertible into or exercisable for Class B
Common Stock from the Company from the date of the RideNow
Agreement until the Closing not including purchases of Class B
Common Stock underlying currently outstanding options, warrants,
convertible notes, or other derivative securities. Ten percent
(10%) of the Closing Payment Shares will be escrowed at Closing and
will be released pursuant to the terms of the RideNow Agreement.
The Company will finance the cash consideration through a
combination of approximately $280,000,000 of debt provided by the
Initial Lender (as defined below) and through the issuance of new
equity for the remainder thereof.
The
following unaudited pro forma condensed combined financial
statements are based on the Company’s audited historical
consolidated financial statements and RideNow’s audited
historical combined financial statements as adjusted to give effect
to the Company’s acquisition of RideNow and the related
financing transactions. The unaudited Pro Forma Condensed Combined
Balance Sheet as of December 31, 2020 gives effect to these
transactions as if they occurred on December 31, 2020. The
unaudited pro forma condensed combined statements of operations for
the twelve months ended December 31, 2020 give effect to these
transactions as if they occurred on January 1, 2020.
The
unaudited pro forma condensed combined financial statements should
be read together with the Company’s audited historical
financial statements, which are included in the Company’s
most recent Annual Report on Form 10-K, which was filed with the
Securities and Exchange Commission on March 31, 2021, and
RideNow’s audited historical financial statements included in
this Form 8-K.
The
unaudited pro forma combined financial information is provided for
informational purpose only and is not intended to represent or be
indicative of the consolidated results of operations or financial
position that the Company would have reported had the RideNow
transaction closed on the dates indicated and should not be taken
as representative of our future consolidated results of operations
or financial position.
The
pro forma adjustments related to the RideNow Agreement are
described in the notes to the unaudited pro forma combined
financial information and principally include the
following:
■
Pro
forma adjustment to eliminate the RideNow assets, liabilities and
owners’ equity not acquired.
■
Pro
forma adjustment to record the equity and debt financing obtained
in connection with the RideNow merger.
■
Proforma
adjustment to record the merger of the Company and
RideNow.
■
Proforma
adjustments to record the record the estimated interest expense and
other expenses resulting from the merger.
■
Record
the estimated tax provision on the consolidated income before tax,
as adjusted for the above pro forma adjustments.
The
adjustments to fair value and the other estimates reflected in the
accompanying unaudited pro forma condensed consolidated financial
statements may be materially different from those reflected in the
combined company’s consolidated financial statements
subsequent to the merger. In addition, the unaudited pro forma
condensed combined financial statements do not purport to project
the future financial position or results of operations of the
combined companies. Reclassifications and adjustments may be
required if changes to RideNow’s financial presentation are
needed to conform RideNow’s accounting policies to the
accounting policies of RumbleOn.
These
unaudited pro forma condensed combined financial statements do not
give effect to any anticipated synergies, operating efficiencies or
cost savings that may be associated with the RideNow Agreement.
These financial statements also do not include any integration
costs the companies may incur related to the Transactions as part
of combining the operations of the companies.
PF-1
RumbleOn Inc. and Subsidiaries
Pro Forma Condensed Combined Balance Sheet
as of December 31, 2020
(Unaudited)
|
RumbleOn
|
RideNow
|
Pro Forma
Adjustments
|
Notes
|
Pro Forma
Combined
|
ASSETS
|
|
|
|
|
|
Current
assets:
|
|
|
|
|
|
Cash and cash
equivalents
|
$1,466,831
|
$3,905,686
|
$70,392,514
|
A
|
$75,765,031
|
Restricted
cash
|
2,049,056
|
-
|
|
|
2,049,056
|
Accounts
receivable, net
|
9,407,960
|
105,295,826
|
(84,478,128)
|
B
|
30,225,658
|
Inventory
|
21,360,441
|
109,749,521
|
|
|
131,109,962
|
Other current
assets
|
3,446,225
|
1,625,109
|
|
|
5,071,334
|
Total current
assets
|
37,730,513
|
220,576,142
|
(14,085,614)
|
|
244,221,041
|
|
|
|
|
|
|
Property and
equipment - net
|
6,521,446
|
23,705,230
|
|
|
30,226,676
|
Right of use
assets
|
5,689,637
|
71,280,471
|
|
|
76,970,108
|
Other indefinite
lived intangible assets
|
-
|
-
|
194,483,527
|
C
|
194,483,527
|
Goodwill
|
26,886,563
|
55,294,222
|
347,985,099
|
C
|
430,165,884
|
Other
assets
|
151,076
|
1,553,183
|
(1,264,424)
|
D
|
439,835
|
Total
assets
|
$76,979,235
|
$372,409,248
|
$527,118,588
|
|
$976,507,071
|
|
|
|
|
|
|
LIABILITIES AND
STOCKHOLDERS' EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
|
Accounts payable
and accrued liabilities
|
$12,563,300
|
$64,421,687
|
$(23,352,582)
|
E
|
$53,632,405
|
Lease
liabilities-current portion
|
1,630,002
|
19,815,301
|
|
|
21,445,303
|
Notes payable-floor
plan
|
17,811,626
|
68,533,679
|
|
|
86,345,305
|
Current portion of
long-term debt
|
3,439,527
|
8,597,444
|
|
|
12,036,971
|
Total current
liabilities
|
35,444,455
|
161,368,111
|
(23,352,582)
|
|
173,459,984
|
|
|
|
|
|
|
Long term
liabilities:
|
|
|
|
|
|
Long-term
debt
|
4,691,181
|
24,816,133
|
235,926,821
|
F
|
265,434,135
|
Convertible debt,
net
|
27,166,019
|
-
|
|
|
27,166,019
|
Derivative
liabilities
|
16,694
|
-
|
|
|
16,694
|
Lease
liabilities-long-term portion
|
4,370,154
|
72,024,876
|
|
|
76,395,030
|
Other long-term
liabilities
|
720,067
|
4,779,112
|
|
|
5,499,179
|
Total long-term
liabilities
|
36,964,115
|
101,620,121
|
235,926,821
|
|
374,511,057
|
|
|
|
|
|
|
Total
liabilities
|
72,408,570
|
262,988,232
|
212,574,239
|
|
547,971,041
|
|
|
|
|
|
|
Stockholders'
equity:
|
|
|
|
|
|
Class B Preferred
stock
|
-
|
-
|
|
|
-
|
Class A
stock
|
50
|
-
|
|
|
50
|
Class B
Stock
|
2,192
|
-
|
10,717
|
G
|
12,909
|
Owners’
equity
|
-
|
109,421,016
|
(109,421,016)
|
H
|
-
|
Additional paid in
capital
|
108,949,204
|
-
|
423,954,648
|
G
|
532,903,852
|
Accumulated
deficit
|
(104,380,781)
|
-
|
|
|
(104,380,781)
|
Total stockholders'
equity
|
4,570,665
|
109,421,016
|
314,544,349
|
|
428,536,030
|
Total liabilities
and stockholders' equity
|
$76,979,235
|
$372,409,248
|
$527,118,588
|
|
$976,507,071
|
See
Accompanying Notes to Pro Forma Financial Statements.
PF-2
RumbleOn Inc. and Subsidiaries
Pro Forma Condensed Combined Statement of Operations
For the Year Ended December 31, 2020
(Unaudited)
|
RumbleOn
|
RideNow
|
Pro Forma
Adjustments
|
Notes
|
Pro Forma
Combined
|
Revenue:
|
|
|
|
|
|
Vehicle
sales
|
|
|
|
|
|
Powersports
|
$46,653,668
|
$662,149,234
|
|
|
$708,802,902
|
Automotive
|
337,084,959
|
-
|
|
|
337,084,959
|
Transportation and
vehicle logistics
|
31,816,157
|
-
|
|
|
31,816,157
|
Parts and other
revenue
|
872,459
|
236,741,164
|
|
|
237,613,623
|
Total
Revenue
|
416,427,243
|
898,890,398
|
|
|
1,315,317,641
|
|
|
|
|
|
|
Cost of
revenue
|
|
|
|
|
|
Powersports
|
40,060,571
|
551,652,098
|
|
|
591,712,669
|
Automotive
|
308,800,631
|
-
|
|
|
308,800,631
|
Transportation and
vehicle logistics
|
24,200,229
|
-
|
|
|
24,200,229
|
Other cost of sales
and revenue
|
-
|
91,017,529
|
|
|
91,017,529
|
Cost of revenue
before impairment loss
|
373,061,431
|
642,669,627
|
|
|
1,015,731,058
|
Impairment loss on
automotive inventory
|
11,738,413
|
-
|
|
|
11,738,413
|
Total cost of
revenue
|
384,799,844
|
642,669,627
|
|
|
1,027,469,471
|
|
|
|
|
|
|
Gross
profit
|
31,627,399
|
256,220,771
|
|
|
287,848,170
|
|
|
|
|
|
|
Selling, general
and administrative
|
53,659,348
|
154,520,040
|
2,393,673
|
I
|
210,573,061
|
Insurance recovery
proceeds
|
(5,615,268)
|
-
|
|
|
(5,615,268)
|
Depreciation and
amortization
|
2,142,939
|
4,087,914
|
|
|
6,230,853
|
|
|
|
|
|
|
Operating income
(loss)
|
(18,559,620)
|
97,612,817
|
(2,393,673)
|
|
76,659,524
|
|
|
|
|
|
|
Interest
expense
|
(6,638,325)
|
(6,956,809)
|
(31,402,906)
|
J
|
(44,998,040)
|
Other
income
|
198,970
|
1,967,068
|
|
|
2,166,038
|
|
|
|
|
|
|
Net income (loss)
before provision for income taxes
|
$(24,998,975)
|
$92,623,076
|
(33,796,579)
|
|
33,827,522
|
|
|
|
|
|
|
Income tax
expense
|
-
|
-
|
(8,456,880)
|
K
|
(8,456,880)
|
|
|
|
|
|
|
Net income
(loss)
|
$(24,998,975)
|
$92,623,076
|
$(42,253,459)
|
|
$25,370,642
|
|
|
|
|
|
|
Weighted average
number of common shares outstanding – basic
|
2,184,441
|
|
|
|
10,851,570
|
|
|
|
|
|
|
Net income (loss)
per share – basic
|
$(11.44)
|
|
|
|
$2.34
|
|
|
|
|
|
|
Weighted average
number of common shares outstanding – basic and fully
diluted
|
2,184,441
|
|
|
|
10,991,564
|
|
|
|
|
|
|
Net income (loss)
per share – fully diluted
|
$(11.44)
|
|
|
|
$2.31
|
See
Accompanying Notes to Pro Forma Financial Statements.
PF-3
RumbleOn Inc. and Subsidiaries
Notes to Unaudited Pro Forma
Condensed Combined Financial Statements
Note 1
– Basis of Presentation
The audited historical consolidated financial
statements have been adjusted in the pro forma condensed combined
financial statements to give effect to pro forma events that
are (1) directly attributable to the business combination, (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 following the business
combination.
The
business combination was accounted for under the acquisition method
of accounting in accordance with ASC Topic 805, Business Combinations. As the acquirer
for accounting purposes, the Company has estimated the fair value
of RideNow’s assets acquired and liabilities assumed and
conformed the accounting policies of RideNow to its own accounting
policies.
The
unaudited pro forma condensed combined financial statements are
based on our audited historical consolidated financial statements
and RideNow’s audited historical combined financial
statements as adjusted to give effect to the Company’s
acquisition of RideNow and the related financing transactions. The
Unaudited Pro Forma Condensed Combined Balance Sheet as of December
31, 2020 gives effect to these transactions as if they occurred on
December 31, 2020. The Unaudited Pro Forma Condensed Combined
Statements of Operations for the twelve months ended December 31,
2020 give effect to these transactions as if they occurred on
January 1, 2020.
The
allocation of the purchase price used in the unaudited pro forma
financial statements is based upon a preliminary valuation by
management. The final estimate of the fair values of the assets and
liabilities will be determined with the assistance of a third-party
valuation firm. The Company’s preliminary estimates and
assumptions are subject to materially change upon the finalization
of internal studies and third-party valuations of assets, including
investments, property and equipment, intangible assets including
goodwill, and certain liabilities.
The
Unaudited Pro Forma Condensed Combined Financial Statements are
provided for informational purpose only and is not necessarily
indicative of what the combined company’s financial position
and results of operations would have actually been had the
Transactions been completed on the dates used to prepare these pro
forma financial statements. The adjustments to fair value and the
other estimates reflected in the accompanying unaudited pro forma
condensed combined financial statements may be materially different
from those reflected in the combined company’s consolidated
financial statements subsequent to the Transactions. In addition,
the Unaudited Pro Forma Condensed Combined Financial Statements do
not purport to project the future financial position or results of
operations of the combined companies. Reclassifications and
adjustments may be required if changes to RumbleOn’s
financial presentation are needed to conform RumbleOn’s
accounting policies to the accounting policies of the
RideNow.
These
unaudited pro forma condensed combined financial statements do not
give effect to any anticipated synergies, operating efficiencies or
cost savings that may be associated with the Transactions. These
financial statements also do not include any integration costs the
companies may incur related to the Transactions as part of
combining the operations of the companies.
Note 2 – Summary of Significant Accounting
Policies
The unaudited pro forma condensed combined
financial statements have been prepared in a manner consistent with
the accounting policies adopted by the Company. The accounting
policies followed for financial reporting on a pro forma basis are
the same as those disclosed in the 2020 Annual Report on Form 10-K
and for RideNow, the accounting policies followed for financial
reporting on a pro forma basis are the same as those disclosed in
the audited financial statements included in this Form 8-K . The
unaudited pro forma condensed combined financial statements do not
assume any differences in accounting policies among the Company and
RideNow. The Company is reviewing the accounting policies of
RideNow to ensure conformity of such accounting policies to those
of the Company and, as a result of that review, the Company may
identify differences among the accounting policies of the
two companies, that when confirmed, could have a material impact on
the consolidated financial statements. However, at this time, the
Company is not aware of any difference that would have a material
impact on the unaudited pro forma condensed combined financial
statements.
PF-4
RumbleOn
and RideNow have recorded leases in accordance with ASC 842. In the
pro forma combined balance sheet theses lease are reported as a
single amount for short-term and long-term lease liabilities. The
following table provides the segregation of these leases between
operating leases and financing leases for the audited historical
financial statements for RumbleOn and RideNow.
|
RumbleOn
|
RideNow
|
Lease liabilities
– current portion
|
|
|
Operating
leases
|
$1,630,002
|
$15,755,805
|
Financing
leases
|
-
|
4,059,496
|
Total lease
liabilities – current portion
|
$1,630,002
|
$19,815,301
|
|
|
|
Lease liabilities
– long-term portion
|
|
|
Operating
leases
|
$4,370,154
|
$57,473,929
|
Financing
leases
|
-
|
14,550,947
|
Total lease
liabilities – long-term portion
|
$4,370,154
|
$72,024,876
|
RideNow
has notes receivable due from a related party, which is included in
other assets in the pro forma combined balance sheet. In addition,
RideNow has certain payables due from related parties and are
included in the current and long-term portions of long-term debt in
the pro forma combined balance sheet. The following table is
provided to segregate these amounts before being combined in the
balance sheet.
|
RumbleOn
|
RideNow
|
Other
assets
|
|
|
Notes receivable
– related party
|
$-
|
$1,264,425
|
Other non-current
assets
|
151,076
|
288,758
|
Total other
assets
|
$151,076
|
$1,553,183
|
|
|
|
|
|
|
Current portion of
long-term debt
|
|
|
Notes
payable-related parties
|
$ -
|
$504,000
|
Notes payable
– other
|
3,439,527
|
8,093,444
|
Total current
portion of long-term debt
|
$3,439,527
|
$8,597,444
|
|
|
|
Long-term
debt
|
|
|
Notes payable
– related parties
|
$ -
|
$6,907,322
|
Notes payable
– PPP Loans
|
-
|
16,923,759
|
Notes payable
– other
|
4,691,181
|
985,052
|
|
$4,691,181
|
$24,816,133
|
PF-5
RideNow
Sweep Account
RideNow
is a participant in a Cash Sweep Account arrangement with a bank
and its affiliates. The Cash Sweep Account combines the cash
balances of all the participating affiliates and invests excess
cash on a daily basis. Interest is paid to each participant based
on the average cash balance in the Cash Sweep account over the
course of the year. Any participant that develops an overdraft cash
balance is charged interest. For the years ended December 31, 2020
and 2019, the Cash Sweep Account was earning interest at 1.10% and
3.11%, respectively, and for overdraft balances, the interest
charged was 3.25% and 3.50%, respectively. In the audited financial
statements for the year ended December 31, 2020, members of the
Group with positive sweep balances reported those balances as
related party receivables, whereas members of the Group with
negative sweep balances reported those balances as related party
payables. The following table provides a summary of these balances
as of December 31, 2020:
Cash Sweep
Accounts:
|
2020
|
Related party
receivable
|
$84,478,128
|
Related party
payable
|
(27,956,598)
|
Net Cash Sweep
Account Balance
|
$56,521,530
|
|
|
For
purposes of the Unaudited Condensed Combined Balance Sheet as of
December 31,2020, the proforma adjustment below to record the
preliminary allocation of the purchase price includes a
reclassification of these related party balances to cash as a
management contemplates that balances in the sweep account on the
date of closing will be transferred to a Company
account.
Note 3 –
Financing Transactions
Senior Secured Term Loan
The
Company is financing $280,000,000 of the cash consideration
pursuant to the RideNow Agreement by the issuance of a new Senior
Secured Term Loan. At the option of the Company, the interest rate
on the new loan will be (a) Adjusted LIBOR (as defined in the
Commitment Letter) plus 8.25%, of which (i) Adjusted LIBOR plus
7.25% shall be paid in cash and (ii) 1.00% shall be payable in kind
or (b) ABR (as defined in the Commitment Letter) plus 7.25%, of
which (i) ABR plus 6.25% shall be paid in cash and (ii) 1.00% shall
be payable in kind. The Credit Facility shall mature on the fifth
anniversary of the Closing date of the RideNow Transaction (subject
to extension with the consent of only the extending lender). For
purposes of these pro forma condensed combined financial
statements, we have used an interest rate of 8.45%.
RMBL Equity Raise
To
finance the balance of the cash consideration, the Company intends
to raise $170,000,000 in new equity, not inclusive of any
overallotment option that may be granted. To estimate the fair
value of this equity, a per share price of $43.00 was used which
results in the issuance of 3,953,488 shares. This price represents
the per has price of the Company’s stock as of the close of
business on April 2, 2020.
Transaction Costs
For
purposes of these pro forma financial statements, the Company has
estimated that the total transaction costs for these financing
transactions will be $19,225,000 for the debt financing and
$11,900,000 for the equity raise. In addition, as discussed below,
the Company has issued a warrant to Oaktree for which we have
estimated a preliminary value of $15,032,046. Legal and other
professional fees and expenses are estimated to be approximately
$4,790,000, are non-recurring, and have not been recorded as a pro
forma adjustment to the Pro Forma Condensed Combined Statement of
Operations.
Warrant
In
connection with the Commitment Letter, in lieu of a commitment fee,
the Company has agreed to issue to Oaktree a warrant to purchase a
number of shares of Class B Common Stock at an exercise price per
share to be determined either at Closing or at termination of the
Commitment Letter (“Warrant”). If issued at Closing,
the Warrant will be for that number of shares equal to $40,000,000
divided by the lowest price per share at which equity is issued in
connection with financing the RideNow Transaction, which price
shall also be the exercise price. If issued in connection with a
termination of the Commitment Letter, the Warrant will be issued to
purchase that number of shares equal to five percent (5%) of the
Company’s fully diluted market capitalization at the close of
business on the day after a termination of the Commitment Letter is
publicly announced divided by the weighted average price of the
Company's Class B Common Stock for the five days immediately
preceding such date, which price shall also be the exercise price.
The Warrant is immediately exercisable upon the Closing and expires
eighteen (18) months after the Closing or termination of the
Commitment Letter.
Using
the stock price of $43.00 as of April 2, 2021, the number of
warrants issued is 930,232. The preliminary fair value of the
warrant has been estimated to be $15,032,046 and it is reflected in
the accompanying pro form combined financial statements as debt
discount. The preliminary estimated fair value was determined using
the Black-Scholes method.
PF-6
Note 4 - Purchase Price Allocation
On
March 12, 2021, the Company entered into a Plan of Merger and
Equity Purchase Agreement (the “RideNow Agreement”) to
acquire RideNow Group and Affiliates, a non-legal entity,
(“RideNow” or “The Group”). RideNow is a
collection of franchised dealerships operating in the powersports
industry. Collectively, the Group are referred to as the Acquired
Companies in the Agreement. The Group is engaged in the sale of new
and used motorcycles, all- terrain vehicles, personal watercraft,
other powersports vehicles, and related products and services,
including repair and maintenance services, parts and accessories,
riding gear, and apparel. As of December 31, 2020, RideNow owned
and operated more than 45 retail dealerships in the United States,
predominately in the Sunbelt region. The core brands sold by
RideNow are Harley-Davidson, Honda, Yamaha, Kawasaki, Suzuki,
Bombardier, Polaris, BMW, Ducati and Triumph, which are sold
through franchise dealer agreements.
The
RideNow Agreement provides that the Company will acquire the
Acquired Companies in exchange for (i) $400,400,000 in cash plus or
minus any adjustments for net working capital and closing
indebtedness, and (ii) shares of the Company's Class B Common Stock
having a value of $175,000,000 (the “Closing Payment
Shares”), valued equally, on a per share basis, based upon
the lowest value of (A) $30.00; (B) the VWAP of the Company's Class
B Common Stock for the twenty (20) trading days immediately
preceding the Closing, and (C) the value on a per share basis paid
for the Class B Common Stock or any shares underlying securities
convertible into or exercisable for Class B Common Stock by any
person which purchases Class B Common Stock or any shares
underlying securities convertible into or exercisable for Class B
Common Stock from the Company from the date of the RideNow
Agreement until the Closing not including purchases of Class B
Common Stock underlying currently outstanding options, warrants,
convertible notes, or other derivative securities. Ten percent
(10%) of the Closing Payment Shares will be escrowed at Closing and
will be released pursuant to the terms of the RideNow Agreement.
The Company will finance the cash consideration through a
combination of approximately $280,000,000 of debt provided by the
Initial Lender (as defined below) and through the issuance of new
equity for the remainder thereof.
The
following table summarizes the preliminary allocation of the
purchase price based on the estimated fair value of the acquired
assets and assumed liabilities as of December 31,
2020:
Purchase price
consideration
|
|
Cash
|
$400,400,000
|
Class B
stock
|
250,833,319
|
Total purchase
price consideration
|
$651,233,319
|
|
|
PF-7
Estimated fair
value of assets:
|
|
Cash
|
$55,823,199
|
Contracts in
transit
|
10,736,791
|
Accounts
receivable
|
10,080,908
|
Inventory
|
109,749,521
|
Prepaid
expenses
|
1,625,109
|
Right-of-use
assets
|
71,280,471
|
Property &
equipment
|
23,705,230
|
Other
Assets
|
288,758
|
|
283,289,987
|
|
|
Estimated fair
value of liabilities assumed:
|
|
Accounts payable,
accrued expenses and other current liabilities
|
49,666,549
|
Notes payable -
floor plan
|
68,533,679
|
Lease
liabilities
|
91,840,177
|
Long-term
debt
|
15,000,000
|
Other long-term
liabilities
|
4,779,111
|
|
229,819,516
|
|
|
Net tangible
assets
|
53,470,471
|
Intangible
assets
|
194,483,527
|
Goodwill
|
403,279,321
|
|
|
Total
consideration
|
$651,233,319
|
This
preliminary purchase price allocation has been used to prepare pro
forma adjustments in the pro forma balance sheet and statement of
operations. The final purchase price allocation will be determined
when the Company has completed the detailed valuations and
necessary calculations. The final allocation could differ
materially from the preliminary allocation used in the pro forma
adjustments. The final allocation may include (1) changes in fair
values of property, plant and equipment, (2) changes in allocations
to intangible assets such as trade names, technology, franchise
rights and customer relationships as well as goodwill and (3) other
changes to assets and liabilities.
This
preliminary purchase price allocation has been used to prepare pro
forma adjustments in the pro forma balance sheet and statement of
operations. The final purchase price allocation will be determined
when the Company has completed the detailed valuations and
necessary calculations. For purposes of the pro forma condensed
combined financial statements, for inventory, property and
equipment, leases and other assets and liabilities the Company used
the carrying value as reported its audited historical financial
statement as reported in its Annual Report on Form 10K for the year
ended December 31, 2020, and as reported in the audited historical
financial statements for RideNow that have been included in this
8-K. The final allocation could differ materially from the
preliminary allocation used in the pro forma
adjustments.
In
accordance with the RideNow Agreement, as discussed above, the
purchase price includes a $400,400,000 in cash plus $175,000,000 in
stock. For purposes of these pro forma combined financial
statements, the number of shares to be issued was determined based
on a price of $30 per share as required under the RideNow Agreement
which results in the issuance of 5,833,333 shares of the
Company’s Class B stock. The fair value of the shares issued
was determined based on a per share price of $43.00, which is the
price of the RumbleOn stock as of the close of business on April 2,
2020. The following table reflects the impact of a 10% increase or
decrease in the per share price on the estimated fair value of the
purchase price and goodwill:
|
Purchase
Price
|
Estimate
Goodwill
|
As presented in the
pro forma combined results
|
$651,233,319
|
$403,279,321
|
10% increase in
common stock price
|
$676,316,651
|
$428,362,653
|
10% decrease in
common stock price
|
$626,149,987
|
$378,195,989
|
Note 5 - 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:
A.
This adjustment records
the net increase in cash resulting from the merger as
follows:
Net proceeds from
issuance of debt
|
260,775,000
|
Net proceeds from
issuance of Class B stock
|
158,100,000
|
Total net proceeds
from financing transactions
|
418,875,000
|
Less cash
consideration paid to Sellers
|
(400,400,000)
|
Net cash received
from sweep account on the Closing Date
|
$56,521,530
|
Less 50% of Net
Working Capital Adjustment due Seller on Date of
Closing
|
(4,604,016)
|
Net increase in
cash
|
70,392,514
|
PF-8
B.
This
adjustment records the reclassification of the positive cash
balances from the sweep account.
C.
As part
of the preliminary valuation analysis, the Company identified
Franchise Rights as a separately identifiable intangible asset. The
fair value of this intangible asset $194,483,527 was determined
primarily using the “income approach,” which requires a
forecast of the expected future cash flows. Since all the
information required to perform a detail valuation analysis of
RideNow’s intangible assets could not be obtained as of the
date of this filing, for purposes of these unaudited pro forma
condensed combined financial statements, the Company used certain
assumptions based on publicly available transactions data for the
industry. Based on our research and discussions with RideNow
management we have concluded that the Franchise Rights intangible
asset has an indefinite life and therefore we have not made any
adjustment in the pro forma condensed combined statement of
operations for amortization.
In
addition, this adjustment reflects the recognition of goodwill of
$403,279,321, less the removal of $55,294,222 of goodwill reflected
on the audited historical balance sheet of RideNow as of December
31, 2020.
D.
This
adjustment reflects the elimination of notes receivable related
party that are expected to be paid off prior to
closing.
E.
This
adjustment includes the payable for 50% of the Net Working Capital
adjustment of $4,604,016, less the reclassification of the negative
cash balances of $27,956,598 from the sweep account.
F.
As
described in Note 3 above, this adjustment records the new debt,
less debt discount and less elimination as follows:
Balance of new
Senior Term Loan
|
$280,000,000
|
Less deferred
financing fees
|
(19,225,000)
|
Less debt
discount
|
(15,032,046)
|
Less removal of
debt not assumed due to the $15 million cap
|
(9,816,133)
|
Net
adjustment
|
$235,926,821
|
G.
This
adjustment records the net proceeds received from the equity raised
to finance payment of the cash consideration of $158,100,000 plus
this issuance of warrants with a fair value of $15,032,036 plus the
issuance of 5,833,333 shares of Class B stock to the sellers as the
equity portion of the purchase consideration, valued at
$250,833,319 based on a per share price of $43.00 which was the per
share price of the Company’s stock as of the close of
business on April 2, 2020.
H.
This
adjustment eliminates RideNow’s Owners’ Equity as
reported in the audited historical financial
statements.
I.
Pursuant
to the RideNow Agreement, the Company is adopting an Equity
Incentive Plan and as disclosed in a Schedule to the RideNow
Agreement rewarding 278,334 of restrictive stock units (RSUs) to
employees of RideNow. Based on the stock price of $43 per share,
these units have a fair value of $11,968,362. The pro forma
adjustment recognizes 20% ($2,393,673) of these awards being
recognized as share-based compensation in the Unaudited Condensed
Combined Statement of Operations for the year ended December 31,
2020. This estimate used the same vesting schedule used by the
Company as disclosed in its audited financial statements for the
year ended December 31, 2020 as reported on Form 10-K.
J.
This
pro forma adjustment records the estimated interest expense as
follows:
Contract interest
on the new Senior Term Loan
|
$24,592,544
|
Amortization of
debt discount (Note 1)
|
6,180,362
|
Amortization of
deferred financing costs (Note 1)
|
720,000
|
Less interest
expense reported by RideNow for debt that won’t be
assumed
|
(90,000)
|
Total interest
expense adjustment
|
$31,402,906
|
Note
(1) Amortization of debt discounts is assumed using an effective
interest method using an interest rate of 11.25%. Deferred finance
costs are amortized on a straight-line basis over the term of the
loan (five years).
K.
This
pro forma adjustment reflects the estimated tax provision that may
be required based on an estimated blended federal and state
statutory tax rate of 25%.
Income before
tax
|
$33,827,522
|
Effective tax
rate
|
25%
|
Provision for
taxes
|
$8,456,880
|
PF-9
Note 6 – Combined Adjusted EBITDA Before Pro Forma
Adjustments
Adjusted EBITDA is
a non-GAAP financial measure and should not be considered as an
alternative to operating income or net income as a measure of
operating performance or cash flows or as a measure of liquidity.
Non-GAAP financial measures are not necessarily calculated the same
way by different companies and should not be considered a
substitute for or superior to U.S. GAAP.
Combined Adjusted
EBITDA Before Pro Forma Adjustments is defined as net income
adjusted to add back interest expense including debt extinguishment
and depreciation and amortization, and certain charges and
expenses, such as goodwill impairment, impairment loss on
automotive inventory, impairment loss on plant & equipment,
insurance recovery proceeds, non-cash stock-based compensation,
change in derivative liability, litigation expenses, severance, new
business development and other non-recurring costs, as these
charges and expenses are not considered a part of our core business
operations and are not an indicator of ongoing, future company
performance.
Adjusted EBITDA is
one of the primary metrics used by management to evaluate the
financial performance of our business. We present Adjusted EBITDA
because we believe it is frequently used by analysts, investors and
other interested parties to evaluate companies in our industry.
Further, we believe it is helpful in highlighting trends in our
operating results, because it excludes, among other things, certain
results of decisions that are outside the control of management,
while other measures can differ significantly depending on
long-term strategic decisions regarding capital structure and
capital investments.
The
following tables reconcile Combined Adjusted EBITDA Before Pro
Forma Adjustments to net income based on the Company’s
audited Consolidated Statement of Operations for the year ended
December 31, 2020 and RideNow’s audited Combined Statements
of Operations for the year ended December 31, 2020, as reported in
this Form 8-K:
|
RumbleOn
|
RideNow
|
Combined (Before Pro Forma Adjustments)
|
Net
income
|
$(24,998,975)
|
$92,623,076
|
$67,624,101
|
|
|
|
|
Add
back:
|
|
|
|
Interest expense
(including debt extinguishment)
|
6,450,161
|
6,956,809
|
13,406,970
|
Depreciation and
amortization
|
2,142,939
|
4,087,914
|
6,230,853
|
Interest income and
miscellaneous income
|
-
|
(1,967,068)
|
(1,967,068)
|
EBITDA
|
(16,405,875)
|
101,700,731
|
85,294,856
|
Adjustments
|
|
|
|
Impairment loss on
automotive inventory
|
11,738,413
|
-
|
11,738,413
|
Impairment loss on
plant & equipment
|
177,626
|
-
|
177,626
|
Insurance recovery
proceeds
|
(5,615,268)
|
-
|
(5,615,268)
|
Non-cash
stock-based compensation
|
2,978,236
|
-
|
2,978,236
|
Change in
derivative liability
|
(10,806)
|
-
|
(10,806)
|
Litigation
expenses
|
1,295,717
|
-
|
1,295,717
|
Other Non-recurring
costs
|
51,387
|
-
|
51,387
|
Adjusted
EBITDA
|
$(5,790,570)
|
$101,700,731
|
$95,910,161
|
PF-10