GigPeak, Inc. - FORM 8-K/A - EX-99.3 - EXHIBIT 99.3 - May 27, 2016

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EX-99.2 - EXHIBIT 99.2 - GigPeak, Inc.ex99_2.htm
EX-99.1 - EXHIBIT 99.1 - GigPeak, Inc.ex99_1.htm
EX-23.1 - EXHIBIT 23.1 - GigPeak, Inc.ex23_1.htm
8-K/A - GIGPEAK, INC. 8-KA 4-5-2016 - GigPeak, Inc.form8ka.htm
Exhibit 99.3

UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL DATA

The following unaudited pro forma condensed combined financial information combines the historical consolidated financial statements of GigPeak, Inc. (“GigPeak”) and Magnum Semiconductor, Inc. (“Magnum”) as if the merger had occurred on January 1, 2015.

Pro Forma Combined Information

The following unaudited pro forma condensed combined balance sheet as of March 27, 2016 is based on (i) the historical consolidated balance sheet of GigPeak as of March 27, 2016 and (ii) the historical consolidated balance sheet of Magnum as of March 31, 2016. The following unaudited pro forma condensed combined statements of operations for the year ended December 31, 2015 and the three months ended March 27, 2016 are based on (i) the historical consolidated statements of operations of GigPeak for the year ended December 31, 2015 and the three months ended March 27, 2016 and (ii) the historical consolidated statements of operations of Magnum for the year ended December 31, 2015 and the three months ended March 31, 2016.

Pro forma combined adjustments and the assumptions related to the Magnum acquisition were prepared using the purchase method of accounting and are based on the assumption that the acquisition of Magnum took place as of March 27, 2016 for purposes of the pro forma condensed combined balance sheet and January 1, 2015 for purposes of the pro forma condensed combined statements of operations.

In accordance with the purchase method of accounting, the actual consolidated financial statements of GigPeak will reflect the Magnum acquisition only from and after the date of acquisition.

The unaudited pro forma condensed combined financial information included herein does not give effect to any potential cost reductions or other operating efficiencies that could result from the Magnum acquisition, including but not limited to those associated with potential (i) reductions of corporate overhead, (ii) eliminations of duplicate functions and (iii) increased operational efficiencies through the adoption of best practices and capabilities from each company.

The pro forma condensed combined financial information has been prepared in accordance with the rules and regulations of the SEC. The pro forma condensed combined financial information is presented for illustrative purposes only and is not necessarily indicative of the combined operating results or financial position that would have occurred if such transactions had been consummated on the dates and in accordance with the assumptions described herein, nor is it necessarily indicative of future operating results or financial position.

The pro forma condensed combined financial information below should be read together with GigPeak’s and Magnum’s historical consolidated financial statements and accompanying notes which have been previously filed with the SEC and Magnum’s historical consolidated financial statements and accompanying notes which are included in their Current Report on form 8-K/A as Exhibit 99.1 and Exhibit 99.2.
 
GIGPEAK, INC.
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
As of March 27, 2016
(in thousands)

   
GigPeak
    
Magnum
    
Pro Forma
Combined
 Adjustments
  
 
  
Pro Forma
Combined
  
ASSETS
                          
Current assets:
                          
Cash and cash equivalents
  
$
36,827
    
$
2,583
    
$
(37,150
)
 (B)
  
$
24,360
  
                     
22,100
  
 (E)
        
Accounts receivable, net
    
9,039
      
1,212
          
 
    
10,251
  
Inventories
    
6,971
      
1,856
      
(529
)
 (D)
    
8,298
  
Prepaid and other current assets
    
788
      
414
          
 
    
1,202
  
Total current assets
    
53,625
      
6,065
      
(15,579
)
 
    
44,111
  
Property and equipment, net
    
2,919
      
237
          
 
    
3,156
  
Intangible assets, net
    
4,210
      
6
      
(5
)
 (A)
    
29,731
  
                     
25,520
  
 (C)
        
Goodwill
    
12,565
      
2,373
      
(2,373
)
 (A)
    
45,936
  
                     
33,371
  
 (C)
        
Restricted cash
    
244
      
-
          
 
    
244
  
Other assets
    
1,457
      
14
          
 
    
1,471
  
Total assets
  
$
75,020
    
$
8,695
    
$
40,934
  
 
  
$
124,649
  
                                   
LIABILITIES, REDEEMABLE COMMON STOCK, REDEEMABLE CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’ EQUITY
                                  
Current liabilities:
                                  
Accounts payable
  
$
3,866
    
$
1,227
          
  
  
$
5,093
  
Accrued compensation
    
1,576
      
1,174
          
 
    
2,750
  
Other current liabilities
    
2,296
      
2,388
          
 
    
4,684
  
Deferred revenue, net of associated costs
            
1,674
      
(116
)
 (F)
    
1,558
  
Notes payable, current
            
26,056
      
(26,033
)
 (A)
    
5,694
  
                     
5,671
  
 (E)
        
Shareholder subordinated notes payable, current
            
5,323
      
(5,323
)
 (A)
    
-
  
Total current liabilities
    
7,738
      
37,842
      
(25,801
)
 
    
19,779
  
Pension liabilities
    
354
                  
 
    
354
  
Deferred revenue, long-term
            
2,918
      
(251
)
 (F)
    
2,667
  
Convertible preferred stock warrant liability
            
623
      
(623
)
 (A)
        
Long- term debt
                    
16,429
  
 (E)
    
16,429
  
Other long term liabilities
    
911
      
1,126
      
(530
)
 (A)
    
1,507
  
Total liabilities
    
9,003
      
42,509
      
(10,776
)
 
    
40,736
  
                                   
Redeemable common stock
    
4,700
        -          
 
    
4,700
  
                                   
Redeemable convertible preferred stock
      -      
88,543
      
(88,543
)
 (A)
      -  
                                   
Stockholders’ equity (deficit)
                                  
Preferred stock
      -      
43
      
(43
)
 (A)
      -  
Common stock
    
46
      
4
      
(4
)
 (A)
    
53
  
                     
7
  
 (B)
        
Additional paid-in capital
    
164,203
      
47,838
      
(47,838
)
 (A)
    
182,092
  
                     
17,889
  
 (B)
        
Treasury stock
    
(2,209
)
      -          
 
    
(2,209
)
Accumulated other comprehensive income
    
344
        -          
 
    
344
  
Accumulated deficit
    
(101,067
)
    
(170,242
)
    
170,242
  
 (A)
    
(101,067
)
Total stockholders’ equity (deficit)
    
61,317
      
(122,357
)
    
140,253
  
 
    
79,213
  
Total liabilities, redeemable common stock, redeemable convertible preferred stock and stockholders’ equity (deficit)
  
$
75,020
    
$
8,695
    
$
40,934
  
 
  
$
124,649
  

See accompanying notes to unaudited pro forma condensed combined financial information.
 
GIGPEAK, INC.
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
For the Year Ended December 31, 2015
(in thousands, except per share amounts)

   
GigPeak
    
Magnum
    
Pro Forma
Combined
 Adjustments
  
 
  
Pro Forma
Combined
  
                           
Revenue
  
$
40,394
    
$
17,084
    
$
-
  
 
  
$
57,478
  
Cost of revenue
    
14,898
      
3,746
      
2,387
  
 (G)
    
21,031
  
Gross profit
    
25,496
      
13,338
      
(2,387
)
 
    
36,447
  
Operating expenses:
                                  
Research and development expense
    
12,955
      
15,391
       -  
 
    
28,346
  
Selling, general and administrative expense
    
11,127
      
5,368
      
378
  
 (G)
    
16,873
  
Restructuring expense
      -      
1,640
       -  
 
    
1,640
  
Total operating expenses
    
24,082
      
22,399
      
378
  
 
    
46,859
  
Income (loss) from operations
    
1,414
      
(9,061
)
    
(2,765
)
      
(10,412
)
Interest expense, net
    
(19
)
    
(5,589
)
    
(851
)
 (H)
    
(6,459
)
Other income (expense), net
    
(76
)
    
4,563
       -  
 
    
4,487
  
Income (loss) before provision for income taxes
    
1,319
      
(10,087
)
    
(3,616
)
 
    
(12,384
)
Provision for income taxes
    
67
      
220
       -  
 
    
287
  
Income (loss) from consolidated companies
    
1,252
      
(10,307
)
    
(3,616
)
 
    
(12,671
)
Loss on equity investment
    
(3
)
     -       -  
 
    
(3
)
Net income (loss)
    
1,249
      
(10,307
)
    
(3,616
)
 
    
(12,674
)
Accretion of redeemable convertible preferred stock
     -      
228
      
(228
)
 (I)
    
-
  
Net income (loss) attributable to common stockholders
  
$
1,249
    
$
(10,079
)
  
$
(3,844
)
 
  
$
(12,674
)
                                   
Net income (loss) attributable to common stockholders per share - basic and diluted
  
$
0.03
                        
$
(0.29
)
                                   
Shares used in computing basic net income (loss) attributable to common stockholders per share
    
36,624
              
6,879
  
 (J)
    
43,503
  
Shares used in computing  diluted net income (loss) attributable to common stockholders per share
    
38,114
              
5,389
  
 (J)
    
43,503
  

See accompanying notes to unaudited pro forma condensed combined financial information.
 
GIGPEAK, INC.
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
For the Three Months Ended March 27, 2016
(in thousands, except per share amounts)

   
GigPeak
    
Magnum
    
Pro Forma
Combined
 Adjustments
  
 
  
Pro Forma
Combined
  
                           
Revenue
  
$
11,362
    
$
3,269
    
$
-
  
 
  
$
14,631
  
Cost of revenue
    
3,683
      
405
      
597
  
 (G)
    
4,685
  
Gross profit
    
7,679
      
2,864
      
(597
)
 
    
9,946
  
Operating expenses:
                                  
Research and development expense
    
3,525
      
2,687
       -  
 
    
6,212
  
Selling, general and administrative expense
    
4,162
      
1,616
      
95
  
 (G)
    
5,873
  
Total operating expenses
    
7,687
      
4,303
      
95
  
 
    
12,085
  
Loss from operations
    
(8
)
    
(1,439
)
    
(692
)
      
(2,139
)
Interest expense, net
     -      
(1,259
)
    
(259
)
 (H)
    
(1,518
)
Other expense, net
    
(4
)
    
(254
)
     -  
 
    
(258
)
Net loss before provision for income taxes
    
(12
)
    
(2,952
)
    
(951
)
 
    
(3,915
)
Provision for income taxes
    
40
      
1
       -  
 
    
41
  
Net loss
    
(52
)
    
(2,953
)
    
(951
)
 
    
(3,956
)
Accretion of redeemable convertible preferred stock
      -      
56
      
(56
)
 (I)
    
-
  
Net loss attributable to common stockholders
  
$
(52
)
  
$
(2,897
)
  
$
(1,007
)
 
  
$
(3,956
)
                                   
Net loss attributable to common stockholders per share - basic and diluted
  
$
(0.00
)
     -       -        
$
(0.08
)
                                   
Shares used in computing basic and diluted net loss attributable to common stockholders per share
    
44,789
       -      
6,879
  
 (J)
    
51,668
  

See accompanying notes to unaudited pro forma condensed combined financial information.
 
Notes to Unaudited Pro Forma Condensed Combined Financial Information

(1) Basis of Purchase Price Allocation

The purchase consideration for the merger of approximately $55.0 million consisted of $37.2 million cash used to repay Magnum’s outstanding debt and other liabilities and $17.9 million equity for the purchase of all of the shares of stock of Magnum.

The total purchase price of $55.0 million was allocated to the tangible and identifiable intangible assets acquired and liabilities assumed based on their estimated fair values at the date of acquisition as follows (in thousands):

Tangible assets acquired:
      
Cash and cash equivalents
   $
1,739
  
Accounts receivable
    
1,936
  
Inventories
    
1,293
  
Other current assets
    
291
  
Property and equipment
    
234
  
Other assets
    
17
  
Liabilities assumed:
        
Accounts payable
    
(1,279
)
Accrued compensation
    
(1,146
)
Other current liabilities
    
(2,959
)
Long-term income tax payable
    
(581
)
Other long-term liabilities
    
(2,680
)
Identifiable intangible assets acquired:
        
Trade name
    
330
  
Developed technology
    
16,710
  
Customer relationships
    
800
  
In-process research and development
    
7,680
  
Goodwill
    
32,661
  
         
Total purchase price
   $
55,046
  
 
(2) Pro Forma Combined Adjustments

The following pro forma combined adjustments have been reflected in the unaudited pro forma condensed combined financial information. These adjustments give effect to pro forma events that are (i) directly attributable to the Magnum merger, (ii) factually supportable and (iii) with respect to the statement of operations, expected to have continuing impact on the combined company.

Balance Sheet Adjustments

 
(A)
To eliminate Magnum’s historical goodwill, intangibles, goodwill related deferred tax, notes payable including the related accrued interest, convertible preferred stock warrant liability, equity accounts and accumulated deficit.
(B)
To reflect the preliminary purchase price including consideration of approximately $55.0 million, consisting of cash paid of $37.2 million and common stock issued of approximately $17.9 million, as shown above.
(C)
To reflect the establishment of identified intangible assets of $25.5 million and goodwill of $32.7 million.
(D)
To adjust Magnum’s inventory balance to estimated fair value as of March 31, 2016.
 
(E)
To record the loan that was entered into simultaneous with the acquisition and was part of the purchase transaction.
(F)
To adjust Magnum’s deferred revenue on uncompleted contracts as of March 31, 2016 to the estimated fair value of the fulfillment effort.
 
Income Statement Adjustments

(G)
To reflect the expense associated with the amortization of intangible assets using preliminary estimated lives between fifteen months to seven years based on the fair value of the related intangible assets.
(H)
To record the interest expense related to the term loan and line of credit.
(I)
To adjust accretion of redeemable convertible preferred stock assuming this transaction occurred at the beginning of the period.
(J)
To reflect the assumed issuance of basic common shares as a result of the transaction, assuming this transaction occurred at the beginning of the period, including the effect of anti-diluted shares due to the pro forma combined net loss attributable to common stockholders.

For purposes of preparing these unaudited pro forma condensed combined financial statements, the fair value of Magnum’s accounts receivable and property and equipment were estimated to approximate their carrying value on the date of acquisition.
 
 

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