TIPPT Media Inc.
On December 23, 2011, the Company obtained a sixty-five (65%) percent
ownership interest in TIPPT Media Inc., a Delaware corporation (TIPPT), which will sell coupons and/or discount codes
on behalf of third parties by engaging individuals with a public profile to promote products via internet-based social networking
and microblogging websites and other similar internet-based methods of electronic communications. In consideration
for its investment in TIPPT, the Company paid $2,000 in cash, forgave the repayment of a $250 promissory note owed to the Company
by TIPPT LLC, a Delaware limited liability company and the minority stockholder of TIPPT, and agreed to issue a warrant to purchase
1 million shares of the Companys common stock at an exercise price equal to 115% of the 20-day trading average of the Companys
common stock if certain performance conditions are met within four months of the closing of the transaction. The Company
deems it probable that these performance conditions will be met. The shares of common stock exercisable under the warrant
were valued at $2,378 using the Black Scholes valuation model. The Company recorded the value of these shares of common stock
to intangible assets and current liabilities and will reclassify the liability to equity upon meeting the performance conditions.
The warrant value will be marked to market until the warrants are earned. At December 31, 2011, the Company recorded a mark
to market valuation increase of $324 recorded in general and administrative expenses on the Consolidated Statement of Operations.
In connection with the transaction, the Company entered into a five-year Line of Credit Agreement, pursuant to which the Company
may provide advances to TIPPT to finance its working capital obligations, in an aggregate principal amount not to exceed $20,000,
with an interest rate not to exceed four percent (4%) per annum. The facility is secured by the remaining 35% of the
common shares of TIPPT Media, Inc. owned by TIPPT, LLC, subject to release under certain circumstances described in the loan agreement
in the event the shares are converted into common shares of FNCX. The credit facility may be drawn for approved expenses
in accordance with the budget approved at the time of the commitment, as updated quarterly. In addition, the Company
entered into a Stockholders Agreement with TIPPT LLC regarding, among other things, restrictions on the transfer of shares in TIPPT
and the potential exchange under certain circumstances of all or a portion of the 35% interest in TIPPT held by TIPPT LLC into
the Companys common stock.
The Company determined that immediately before the transaction ,
the activities of TIPPT did not constitute a business. Therefore, the Company accounted for the TIPPT transaction as
an asset acquisition in accordance with ASC 350, Intangibles Goodwill and Other.
TIPPT Purchase Price Allocation
The total estimated purchase price for the TIPPT assets is composed
of the following:
|Forgiveness Promissory Note||
|| ||250|| |
|Fair Value of Common Stock Warrant||
|| ||2,378|| |
|Total Purchase Price||
The purchase price has been allocated to the assets acquired (identifiable
intangible assets) as of the closing date of December 23, 2011 based on their estimated fair values.
Details of the estimated fair values of assets acquired of TIPPT
Media Inc. information available at the date of preparation of the financial statements are as follows:
|Intellectual Property Contracts||
The Company has included the operating results of TIPPT Media, Inc.
in its consolidated financial statements since the date of acquisition.
On December 31, 2011, in furtherance of its business plan, the Company,
through a newly created wholly owned subsidiary, FN(x) I Holding Corporation, now known as Loyalize Inc (FN(x)I
or Loyalize), purchased from Trusted Opinion Inc. (Trusted Opinion), substantially all of its assets,
including certain intellectual property and other assets relating to the Loyalize business owned by Trusted Opinion,
pursuant to an asset purchase agreement executed by the Company and FN(x) I on such date (the Asset Purchase Agreement)
. In consideration for its purchase of the such assets, the Company agreed to pay Trusted Opinion $3,000 in cash and
agreed to deliver 275,038 of the Companys common shares as follows: 65,254 shares delivered directly to Seller
within three business days of delivery of the financial statements and 209,784 shares (the Escrowed Shares) delivered
within three business days of closing to American Stock Transfer and Trust Company LLC, as escrow agent, to be held until December
31, 2012 to secure certain representations, warranties and indemnities given by Trusted Opinion under the Asset Purchase Agreement. The
Company valued the 275,038 common shares as of the date of closing at $1,719 based on the $6.25 per share closing price of its
common stock on the date of closing. In addition to certain minor purchase price adjustments to be made post-closing,
the Company is obligated to also fund as a purchase price adjustment the difference, if any, by which $1,839 exceeds the calculated
value (computed based on the average closing price of the Companys common shares during the 20 days prior to December 31,
2012) of the 275,038 shares on December 31, 2012, either in cash or in common shares of the Company, at the Companys option. Such
additional consideration shall not be payable until claims which remain subject to determination and secured by all the Escrowed
Shares are no longer outstanding. The additional consideration shall be eliminated to the extent final claims exceed
the value of the shares then remaining in escrow.
Loyalize Purchase Price Allocation
The Company accounted for the purchase of Loyalize using the acquisition
method, and accordingly the consideration paid has been allocated on a preliminary basis to the fair value of assets acquired and
liabilities assumed based on managements best estimates of fair value, taking into account all relevant information available
to the time these consolidated financial statements were prepared. The Company expects that the actual amounts for each
of the fair values of these assets and liabilities acquired will vary for the amounts presented below and that such variation may
The total estimated purchase price is composed of the following:
|Fair Value of Common Stock||
|| ||1,719|| |
|Fair Value of Common Stock Guarantee||
|| ||120|| |
|Total Initial Purchase Price||
Details of the estimated fair values of assets acquired and liabilities
assumed from Trusted Opinion are based on information available at the date of preparation of the financial statements, and are
|| ||33|| |
|| ||526|| |
|| ||1,842|| |
|| ||3,015|| |
Less liabilities assumed:
|| || || |
|Net assets acquired||
The actual adjustments that the Company will ultimately make in
finalizing the allocation of the purchase price of Trusted Opinion to the fair value of the net assets acquired at December 31,
2011 will depend on a number of factors, including additional information available at such time.
The following table presents the unaudited pro forma results of
the Company for the three and six months ended December 31, 2011 as if the Loyalize acquisition occurred on July 1, 2010. These
results are not intended to reflect the actual operations of the Company had the acquisition occurred on July 1, 2010.
||Three Months Ended December 31||
||Six Months Ended |
|| || || ||
|| ||1|| |
|Loss Per Share (basic and diluted)||