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EX-99.3 - EXHIBIT 99.3 - GLU MOBILE INC | c23175exv99w3.htm |
EX-99.1 - EXHIBIT 99.1 - GLU MOBILE INC | c23175exv99w1.htm |
8-K/A - FORM 8-K/A - GLU MOBILE INC | c23175e8vkza.htm |
Exhibit 99.2
UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL INFORMATION
(in thousands)
(in thousands)
Introductory Note
On
August 2, 2011, Glu Mobile Inc. (Glu or the
Company) completed the acquisition of Griptonite, Inc., a
Washington corporation (Griptonite) and formerly a wholly owned subsidiary of Foundation 9
Entertainment, Inc., a Delaware corporation
(Parent), pursuant to an Agreement and Plan of Merger
dated as of August 2, 2011, as amended on August 15, 2011 (the Merger Agreement). Griptonite,
which is based in Kirkland, WA and employs approximately 200 people, is a developer of games for
the Xbox 360, Wii, DS, PSP and iPhone platforms.
In connection with the Merger, Glu issued to Parent, as Griptonites sole shareholder, in exchange
for all of the issued and outstanding shares of Griptonite capital stock, a total of 6,106,015
shares of Glus common stock, of which 600,000 shares will be held in escrow for 15 months to
satisfy indemnification claims under the Merger Agreement.
The following unaudited pro forma combined condensed financial information gives effect to the
acquisition by the Company of all of the outstanding shares of Griptonite. These unaudited proforma
statements were prepared as if the acquisition had been completed as of January 1, 2010 for
statement of operations purposes and as of June 30, 2011 for balance sheet purposes.
The unaudited pro forma combined condensed financial information has been prepared from, and should
be read in conjunction with, the respective historical consolidated financial statements of the
Company and Griptonite. The Companys historical consolidated financial statements for the year
ended December 31, 2010 are included in its Form 10-K filed with the Securities and Exchange
Commission on March 21, 2011 and the Companys historical consolidated financial statements for the
six months ended June 30, 2011 included in its Form 10-Q filed on August 15, 2011. Griptonites
historical statement of operations for the year ended December 31, 2010 and the six months ended
June 30, 2011 and historical balance sheet as of June 30, 2011 are included in this Form 8-K/A.
The pro forma acquisition adjustments described in Note 2 were based on available information and
certain assumptions made by the Companys management and may be revised as additional information
becomes available. The unaudited pro forma combined condensed financial information was presented
for illustrative purposes only and is not necessarily intended to represent what the Companys
financial position is or results of operations would have been if the acquisition had occurred on
that date or to project the Companys results of operations for any future period. Since the
Company and Griptonite were not under common control or management for any period presented, the
unaudited pro forma combined condensed financial results may not be comparable to, or indicative
of, future performance.
The unaudited pro forma combined condensed statement of operations included herein has been
prepared pursuant to the rules and regulations of the Securities and Exchange Commission. Certain
information and certain footnote disclosures normally included in financial statements prepared in
accordance with accounting principles generally accepted in the United States of America have been
condensed or omitted pursuant to these rules and regulations; however, management believes that the
disclosures are adequate to make the information presented not misleading.
19
UNAUDITED PRO FORMA COMBINED CONDENSED BALANCE SHEET AS OF
AS OF JUNE 30, 2011
(in thousands)
AS OF JUNE 30, 2011
(in thousands)
Pro Forma | ||||||||||||||||
Glu Mobile Inc. | Griptonite, Inc. | Adjustments | Combined | |||||||||||||
ASSETS |
||||||||||||||||
Current Assets: |
||||||||||||||||
Cash and cash equivalents |
$ | 26,400 | $ | | $ | 10,000 | (2) | $ | 36,400 | |||||||
Accounts receivable, net |
12,365 | 1,552 | | 13,917 | ||||||||||||
Receivable from affiliates |
| 3,855 | (3,855) | (2) | | |||||||||||
Prepaid royalties |
734 | | | 734 | ||||||||||||
Costs and estimated earnings in excess of billings on uncompleted contracts |
| 561 | (561) | (3) | 495 | |||||||||||
495 | (7) | |||||||||||||||
Prepaid expenses and other |
2,450 | 179 | 350 | (4) | 2,979 | |||||||||||
Total current assets |
41,949 | 6,147 | 6,429 | 54,525 | ||||||||||||
Note receivable from affiliate |
| 11,764 | (11,764) | (2) | | |||||||||||
Property and equipment, net |
2,812 | 768 | | 3,580 | ||||||||||||
Other long-term assets |
542 | 33 | | 575 | ||||||||||||
Intangible assets, net |
7,374 | 249 | 5,451 | (5) | 13,074 | |||||||||||
Goodwill |
4,875 | 8,658 | 4,508 | (6) | 18,041 | |||||||||||
Total assets |
57,552 | 27,619 | 4,624 | 89,795 | ||||||||||||
LIABILITIES AND STOCKHOLDERS EQUITY/(DEFICIT) |
||||||||||||||||
Current liabilities: |
||||||||||||||||
Accounts payable |
$ | 7,117 | $ | 233 | $ | | $ | 7,350 | ||||||||
Accrued liabilities |
11,141 | 819 | 276 | (8) | 12,236 | |||||||||||
Payables to affiliates, net |
| 14,914 | (14,914) | (2) | | |||||||||||
Deferred rent |
| 446 | (446) | (8) | | |||||||||||
Billings in
excess of costs and estimated earnings on uncompleted contracts |
| 219 | (219) | (3) | 55 | |||||||||||
55 | (7) | |||||||||||||||
Deferred revenue |
1,811 | | | 1,811 | ||||||||||||
Total current liabilities |
20,069 | 16,631 | (15,248 | ) | 21,452 | |||||||||||
Other long-term liabilities |
7,591 | 394 | (394) | (8) | 10,363 | |||||||||||
720 | (8) | |||||||||||||||
2,052 | (4) | |||||||||||||||
Total liabilities |
27,660 | 17,025 | (12,870 | ) | 31,815 | |||||||||||
Stockholders equity/(deficit) |
||||||||||||||||
Common stock |
6 | | | 6 | ||||||||||||
Additional paid-in capital |
224,727 | 32,846 | (42,141) | (9) | 252,815 | |||||||||||
9,295 | (2) | |||||||||||||||
28,088 | (1) | |||||||||||||||
Accumulative other comprehensive income |
825 | (113 | ) | 113 | (9) | 825 | ||||||||||
Accumulated deficit |
(195,666 | ) | (22,139 | ) | 22,139 | (9) | (195,666 | ) | ||||||||
Total stockholders equity/(deficit) |
29,892 | 10,594 | 17,494 | 57,980 | ||||||||||||
Total liabilities and stockholders equity/(deficit) |
$ | 57,552 | $ | 27,619 | $ | 4,624 | $ | 89,795 | ||||||||
20
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENTS OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 2011
(in thousands, except per share data)
FOR THE SIX MONTHS ENDED JUNE 30, 2011
(in thousands, except per share data)
Pro Forma | ||||||||||||||||
Glu Mobile Inc. | Griptonite, Inc. | Adjustments | Combined | |||||||||||||
Product revenues |
$ | 34,106 | $ | 138 | $ | | $ | 34,244 | ||||||||
Service revenues |
| 9,004 | | 9,004 | ||||||||||||
Revenues |
34,106 | 9,142 | | 43,248 | ||||||||||||
Cost of revenues: |
||||||||||||||||
Royalties |
6,961 | | | 6,961 | ||||||||||||
Cost of services |
| 7,099 | | 7,099 | ||||||||||||
Amortization of intangible assets |
1,520 | | | 1,520 | ||||||||||||
Total cost of revenues |
8,481 | 7,099 | | 15,580 | ||||||||||||
Gross profit |
25,625 | 2,043 | | 27,668 | ||||||||||||
Operating expenses: |
||||||||||||||||
Research and development |
15,605 | 1,752 | (76) | (12) | 17,281 | |||||||||||
Sales and marketing |
7,101 | 140 | (6) | (12) | 7,235 | |||||||||||
General and administrative |
6,440 | 1,065 | (46) | (12) | 7,459 | |||||||||||
Amortization of intangible assets |
| 23 | 777 | (11) | 800 | |||||||||||
Restructuring charge |
637 | | | 637 | ||||||||||||
Total operating expenses |
29,783 | 2,980 | 649 | 33,412 | ||||||||||||
Income (loss) from operations |
(4,158 | ) | (937 | ) | (649 | ) | (5,744 | ) | ||||||||
Interest and other income/(expense), net |
||||||||||||||||
Interest income (expense), net |
(43 | ) | 120 | | 77 | |||||||||||
Other income/(expense), net |
552 | | | 552 | ||||||||||||
Interest and other income/(expense), net |
509 | 120 | | 629 | ||||||||||||
Income/(loss) before income taxes |
(3,649 | ) | (817 | ) | (649 | ) | (5,115 | ) | ||||||||
Income tax provision |
(1,275 | ) | | 221 | (13) | (1,054 | ) | |||||||||
Net loss |
$ | (4,924 | ) | $ | (817 | ) | $ | (428 | ) | $ | (6,169 | ) | ||||
Net loss per share |
(0.09 | ) | | | (0.10 | ) | ||||||||||
Weighted average common shares outstanding basic and diluted |
53,318 | 59,424 | ||||||||||||||
21
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2010
(in thousands, except per share data)
FOR THE YEAR ENDED DECEMBER 31, 2010
(in thousands, except per share data)
Pro Forma | ||||||||||||||||
Glu Mobile Inc | Griptonite, Inc. | Adjustments | Combined | |||||||||||||
Product revenues |
$ | 64,345 | $ | 571 | $ | | $ | 64,916 | ||||||||
Service revenues |
| 20,724 | (440) | (10) | 20,284 | |||||||||||
Revenues |
64,345 | 21,295 | (440 | ) | 85,200 | |||||||||||
Cost of revenues: |
||||||||||||||||
Royalties |
16,643 | | | 16,643 | ||||||||||||
Impairment of prepaid royalties and guarantees |
663 | | | 663 | ||||||||||||
Cost of services |
| 15,756 | | 15,756 | ||||||||||||
Amortization of intangible assets |
4,226 | | 2,500 | (11) | 6,726 | |||||||||||
Total cost of revenues |
21,532 | 15,756 | 2,500 | 39,788 | ||||||||||||
Gross profit |
42,813 | 5,539 | (2,940 | ) | 45,412 | |||||||||||
Operating expenses: |
||||||||||||||||
Research and development |
25,180 | 2,608 | (119) | (12) | 27,669 | |||||||||||
Sales and marketing |
12,140 | 383 | (17) | (12) | 12,506 | |||||||||||
General and administrative |
13,108 | 3,057 | (140) | (12) | 16,025 | |||||||||||
Amortization of intangible assets |
205 | 45 | 1,555 | (11) | 1,805 | |||||||||||
Restructuring charge |
3,629 | | | 3,629 | ||||||||||||
Total operating expenses |
54,262 | 6,093 | 1,279 | 61,634 | ||||||||||||
Income (loss) from operations |
(11,449 | ) | (554 | ) | (4,219 | ) | (16,222 | ) | ||||||||
Interest and other income/(expense), net |
||||||||||||||||
Interest income (expense), net |
(575 | ) | 183 | | (392 | ) | ||||||||||
Other income/(expense), net |
(690 | ) | (82 | ) | | (772 | ) | |||||||||
Interest and other income/(expense), net |
(1,265 | ) | 101 | | (1,164 | ) | ||||||||||
Income/(loss) before income taxes |
(12,714 | ) | (453 | ) | (4,219 | ) | (17,386 | ) | ||||||||
Income tax provision |
(709 | ) | 41 | 1,434 | (13) | 766 | ||||||||||
Net loss |
$ | (13,423 | ) | $ | (412 | ) | $ | (2,785 | ) | $ | (16,620 | ) | ||||
Net loss per share |
(0.38 | ) | | | (0.40 | ) | ||||||||||
Weighted average common shares outstanding basic and diluted |
35,439 | 41,545 | ||||||||||||||
22
NOTES TO UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL INFORMATION
(in thousands)
(in thousands)
NOTE 1 PURCHASE PRICE GRIPTONITE, INC.
The Companys consolidated financial statements include the results of operations of
Griptonite, Inc. (Griptonite) from the date of acquisition. Under the purchase method
of accounting, the Company allocated the total purchase price of $28,088, which consisted of
6,106,015 shares of the Companys common stock issued to Griptonite shareholders, to the net tangible and
intangible assets acquired and liabilities assumed based upon their respective estimated fair
values as of the acquisition date. The following summarizes the preliminary purchase price
allocation of the Griptonite acquisition as if the acquisition had occurred on June 30, 2011:
Assets acquired: |
||||
Cash |
$ | 10,000 | ||
Accounts receivable |
1,552 | |||
Costs and estimated earnings in excess of billings on uncompleted contracts |
495 | |||
Prepaid and other current assets |
529 | |||
Property and equipment |
768 | |||
Other long term assets |
33 | |||
Intangible assets |
||||
Non-compete agreements |
3,200 | |||
Developed technology |
2,500 | |||
Goodwill |
13,166 | |||
Total assets acquired |
32,243 | |||
Liabilities assumed: |
||||
Accounts payable |
233 | |||
Accrued liabilities |
1,095 | |||
Billings in
excess of costs and estimated earnings on uncompleted contracts |
55 | |||
Other long-term liabilities |
2,772 | |||
Total liabilities |
4,155 | |||
Net acquired assets |
$ | 28,088 | ||
The valuation of the identifiable intangible assets acquired was based on
managements estimates, currently available information and reasonable and supportable assumptions.
The allocation was generally based on the fair value of these assets determined using the income
and replacement cost approaches. Of the total purchase price, $5,700 was allocated to amortizable
intangible assets. The amortizable intangible assets are being amortized over the respective
estimated useful life of three months to two years. The fair value, estimated useful lives and
amortization for the year ended December 31, 2010 and six months ended June 30, 2011 of the major
amortizable intangible assets purchased from Griptonite as if the acquisition had occurred on
January 1, 2010 were as follows:
23
NOTES TO UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL INFORMATION
(in thousands)
(in thousands)
Year ended | Six Months ended | |||||||||||||||||||||||||||||||
December 31, 2010 | June 30, 2011 | |||||||||||||||||||||||||||||||
Fair | Useful | Elimination of | Proforma | Elimination of | Proforma | |||||||||||||||||||||||||||
Asset Class | Value | Lives | Amortization | Historical Amortization | Adjustment | Amortization | Historical Amortization | Adjustment | ||||||||||||||||||||||||
Non-compete agreements |
3,200 | 2 yrs. | 1,600 | (45 | ) | 1,555 | 800 | (23 | ) | 777 | ||||||||||||||||||||||
Developed technology |
2,500 | 0.25 yrs. | 2,500 | | 2,500 | | | | ||||||||||||||||||||||||
Total identifiable intangible assets |
$ | 5,700 | $ | 4,100 | $ | (45 | ) | $ | 4,055 | $ | 800 | $ | (23 | ) | $ | 777 |
The total expected future amortization related to intangible assets acquired from Griptonite
is as follows:
Amortization | ||||||||||||
Included in | Amortization | |||||||||||
Cost of | Included in | |||||||||||
Periods Ending December 31, | Revenues | Operating Expenses | Total | |||||||||
2011 |
$ | 2,500 | $ | 667 | $ | 3,167 | ||||||
2012 |
| 1,600 | 1,600 | |||||||||
2013 |
| 933 | 933 | |||||||||
$ | 2,500 | $ | 3,200 | $ | 5,700 |
The residual value of $13,166 has been allocated to goodwill. Goodwill represents
the excess of the purchase price over the fair value of the net tangible and intangible assets
acquired. In accordance with ASC 350, Intangibles-Goodwill and Other (ASC 350), goodwill will not
be amortized but will be tested for impairment at least annually. Under ASC 350, the Company
performs the annual impairment review of its goodwill balance as of September 30.
The pro forma adjustments do not reflect any integration adjustments to be incurred in
connection with the merger or operating efficiencies and costs
savings, if any, that may be achieved with
respect to the combined entities as these costs are not directly attributable to the purchase
agreement.
24
NOTES TO UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL INFORMATION
(in thousands)
(in thousands)
NOTE 2 PRO FORMA ADJUSTMENTS
The accompanying unaudited pro forma combined condensed financial statements have been
prepared as if the acquisition had been completed on January 1, 2010 for statement of operations
purposes and as of June 30, 2011 for balance sheet purposes and to reflect the following pro forma
adjustments:
(1) | Represents the stock consideration issued from the acquisition of Griptonite valued at $28,088. |
(2) | To record the cash received of $10,000 from the net settlement of the receivable and payables
with affiliates of Griptonite of $705 and a capital contribution by the former stockholders of
Griptonite of $9,295. The net settlment of the receivables and payables to affilites is detailed
below. |
Receivable from affiliates |
3,855 | |||
Note receivable from affiliates |
11,764 | |||
Payables to affiliates, net |
(14,914 | ) | ||
Net receivable from affiliates |
705 |
(3) | To eliminate the historical accounting for the in-progress development
contracts. |
|
(4) | To record deferred tax assets and liabilities for the difference in fair value and
tax basis of acquired assets and liabilities |
|
(5) | To eliminate Griptonites historical amoritzable intangible assets of $249 and to
record the amortizable intangible assets resulting from the acquisition of Griptonite of
$5,700. |
|
(6) | To eliminate Griptonites historical goodwill of $8,658 and to record the
goodwill resulting from the acquisition of Griptonite of $13,166. |
|
(7) | To record the fair value
allocated to in-progress development contracts.
Deferred revenue and deferred costs relate to service contracts assumed in connection with the
acquisition. The estimated fair value of deferred revenue includes primarily prepayments for
services to be provided in the future. The remaining deferred costs relate to development
activities under existing contracts for which payment has not yet been received.
The fair value adjustment allocated to the in-progress development
contracts presented in the Unaudited Pro Forma Combined Condensed Balance Sheet
is detailed below:
|
Fair value of deferred costs (Costs and estimated earnings in excess of billings on uncompleted contracts) |
495 | |||
Fair value of deferred revenues (Billings in excess of costs and estimated earnings on unconpleted contracts) |
55 |
(8) | To eliminate the deferred rent balance recorded by Griptonite as of the acquisition
date and to record fair value adjustment for unfavorable operating lease.
The fair value adjustment for unfavorable operating leases presented
in the Unaudited Pro Forma Combined Condensed Balance Sheet
is detailed below:
|
Current portion of unfavorable lease obligation (Accrued liabilities) |
276 | |||
Long term portion of unfavorable lease obligation (Other long term liabilties) |
720 |
(9) | To eliminate the historical additional paid in captial, accumulated other
comprehensive income and accumulated deficit of Griptonite. The elimination of historical
additional paid in capital is detailed below: |
Griptonites historical additional paid in capital |
32,846 | |||
Capital contribution from the former stockholders of Griptonite |
9,295 | |||
Pro forma adjustment to additional paid in capital |
42,141 |
(10) | To recognize the fair value of
in-progress development contracts over the remaining estimated
life of the contracts. |
|
(11) | To eliminate Griptonites historical amortization of amortizable intangible assets
and to record the amortization of the amortizable intangible assets resulting from the
purchase of Griptonite. See Note 1 above for the estimated useful lives and amortization for
each amortizable intangible asset. |
|
(12) | To recognize the fair value adjustment for the unfavorable operating lease. |
|
(13) | To record the pro forma income tax impact at the weighted-average estimated income
tax rates applicable to the jurisdictions in which the pro forma adjustments are expected to
be recorded. |
Year Ended | Six Months Ended | |||||||
December 31, 2010 | June 30, 2011 | |||||||
Total pro forma adjustments recorded to decrease income before provision for income taxes |
$ | (4,219 | ) | $ | (649 | ) | ||
Estimated provision for income taxes rates applicable to pro forma adjustments |
34 | % | 34 | % | ||||
Pro forma provision for income taxes adjustment |
$ | (1,434 | ) | $ | (221 | ) | ||
25
There were no transactions between the Company and Griptonite during the year ended December
31, 2010 or the six months ended June 30, 2011.
Based on the finalization of the valuation, purchase price allocation, integration plans and other
factors, the pro forma adjustments may change from those presented in
this unaudited pro forma combined
condensed financial information. A change in the value assigned to long-lived tangible and
intangible assets and liabilities could result in a reallocation of the purchase price and a change
in the pro forma adjustments. Any changes in the fair value of the net assets of Griptonite will
change the amount of the purchase price allocated to goodwill. The statement of operations effect
of these changes will depend on the nature and amount of the assets or liabilities adjusted.
26