8-K/A

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K/A

(Amendment No. 2)

CURRENT REPORT

Pursuant to Section 13 or 15(d) of

the Securities Exchange Act Of 1934

Date of Report (date of earliest event reported): January 10, 2013

DIGITAL RIVER, INC.

(Exact name of registrant as specified in its charter)

Delaware	000-24643	41-1901640
(State or other jurisdiction of incorporation)	(Commission File Number)	(IRS Employer Identification Number)

10380 Bren Road West, Minnetonka, MN 55343

(Address of principal executive offices) (Zip Code)

(Registrant’s telephone number, including area code): (952) 253-1234

Not Applicable

(Former name or former address, if changed since last report)

oWritten communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

oSoliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

oPre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

oPre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Explanatory Note

This Amendment No. 2 on Form 8-K/A amends and supplements the Current Report on Form 8-K of Digital River, Inc. (“Digital River”) filed with the Securities and Exchange Commission on January 11, 2013 (the “Initial Form 8-K”) for the purpose of including financial statements of a business acquired and pro forma financial information permitted pursuant to Item 9.01 to be excluded from the Initial Form 8-K and filed by amendment to the Initial Form 8-K no later than 71 days after the date on which the Initial Form 8-K was required to be filed.  As previously reported in the Initial Form 8-K, Digital River, through its wholly-owned indirect subsidiary LML Acquisition Corp. (“Acquisition Sub”) acquired all of the outstanding shares of LML Payment Systems Inc., a corporation existing under the laws of British Columbia, Canada (“LML”) pursuant to an Arrangement Agreement, dated as of September 21, 2012, by and among Digital River, Acquisition Sub, and LML, and, as a result, LML become a wholly-owned indirect subsidiary of Digital River.

Item 9.01    Financial Statements and Exhibits.

(a)Financial Statements of Businesses Acquired.

The audited consolidated statements of financial position of LML and its subsidiaries as of March 31, 2012 and March 31, 2011 and the audited consolidated statements of earnings and comprehensive income, consolidated statements of equity and consolidated statements of cash flows of LML and its subsidiaries for the years ended March 31, 2012 and March 31, 2011, and the summary of significant accounting policies and explanatory information  and the related Report of Independent Registered Accounting Firm of Grant Thornton LLP dated June 15, 2012, are incorporated herein by reference to Part IV, Item 15 of LML’s Annual Report on Form 10-K, as filed on June 20, 2012.

The unaudited consolidated statements of financial position of LML and its subsidiaries as of September 30, 2012 and the unaudited consolidated statements of earnings and comprehensive income, consolidated statements of equity and consolidated statements of cash flows of LML and its subsidiaries for the three and six month periods ended September 30, 2012 and 2011, and the notes related thereto, are incorporated herein by reference to Part I of LML’s Quarterly Report on Form 10-Q, as filed on November 13, 2012.

(b)Pro Forma Financial Information.

The unaudited pro forma condensed combined statement of operations for LML Payment Systems for the twelve months ended December 31, 2012 and Digital River for the twelve months ended December 31, 2012 and unaudited pro forma condensed combined balance sheets as of December 31, 2012, and the notes related thereto, are filed as Exhibit 99.4 to this report and incorporated herein by reference.  The unaudited pro forma condensed combined financial statements are based on our historical consolidated financial statements incorporated by reference and LML’s historical consolidated financial statements, incorporated by reference, adjusted to give effect to the January 10, 2013, LML acquisition. The unaudited pro forma condensed combined statements of operations for the twelve months ended December 31, 2012, gives effect to the LML acquisition as if it had occurred on January 1, 2012. The unaudited pro forma condensed combined balance sheet as of December 31, 2012, gives effect to the LML acquisition as if it had occurred on December 31, 2012.

The unaudited pro forma condensed combined financial statements were prepared in accordance with the regulations of the Securities and Exchange Commission and the acquisition method of accounting for business combinations.  The pro forma adjustments reflecting the completion of the LML acquisition include adjustments to record the assets and liabilities of LML based on estimates of their fair values.  The assumptions, estimates and adjustments herein have been made solely for the purposes of developing the unaudited pro forma condensed combined financial information and are based upon available information as of the date of this Form 8-K/A.  The unaudited pro forma condensed combined financial statements are presented for informational purposes, only and are not indicative of the future results of operations or the financial condition of the combined company.  No adjustment has been made for actions that may be taken following the completion of the acquisition, such as any of our integration plans.  As a result, the actual amounts recorded in the consolidated financial statements of Digital River in future periods will differ from the amounts reflected in the unaudited pro forma financial statements, and the differences may be material.

You should read this information together with:

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·The accompanying notes to the unaudited pro forma condensed combined financial statements;

·The audited consolidated financial statements and accompanying notes of Digital River as of and for the years ended December 31, 2012, 2011, and 2010, and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” which are included in the Digital River Annual Report on Form 10-K for the fiscal year ended December 31, 2012, filed with the Securities and Exchange Commission on February 25, 2013;

·The audited consolidated financial statements and accompanying notes of LML and its subsidiaries as of and for the years ended March 31, 2012 and 2011, which are incorporated herein by reference to Part IV, Item 15 of LML’s Annual Report on Form 10-K for the fiscal year ended March 31, 2012, filed with the Securities and Exchange Commission on June 20, 2012; and

·The unaudited consolidated financial statements and accompanying notes of LML and its subsidiaries as of and for the three and six month periods ended September 30, 2012 and 2011, which are incorporated herein by reference from Part I of LML’s Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2012, filed with the Securities and Exchange Commission on November 13, 2012.

(d)Exhibits.

The Exhibit Index attached to this Current Report on Form 8-K is incorporated herein by reference.

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SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

	DIGITAL RIVER, INC.
	By:	/s/ Stefan B. Schulz
		Name: Stefan B. Schulz
		Title: Chief Financial Officer
Date: March 26, 2013

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EXHIBIT INDEX

Exhibit No.	Description
Exhibit  2.1	Arrangement Agreement, dated as of September 21, 2012, by and among Digital River, Inc., LML Acquisition Corp. and LML Payment Systems Inc. (incorporated by reference to Exhibit 2.1 to Digital River, Inc.’s Current Report on Form 8-K filed with the Commission on September 24, 2012)
Exhibit 23.1		Consent of Grant Thornton LLP, as independent public accounting firm for LML Payment Systems Inc. (filed herewith)
Exhibit 99.1		Press Release regarding consummation of the acquisition of LML Payment Systems Inc. by Digital River, Inc. dated January 10, 2013 (previously filed)
Exhibit 99.2		Audited consolidated statements of financial position of LML Payment Systems Inc. and its subsidiaries as of March 31, 2012 and March 31, 2011 and audited consolidated statements of earnings and comprehensive income, consolidated statements of equity and consolidated statements of cash flows of LML Payment Systems Inc. and its subsidiaries for the years ended March 31, 2012 and March 31, 2011, and the summary of significant accounting policies and other explanatory information and the related Report of Independent Registered Public Accounting Firm of Grant Thornton LLP dated June 15, 2012 (incorporated by reference to Part IV, Item 15 of LML Payment Systems Inc.’s Annual Report on Form 10-K, as filed on June 20, 2012)
Exhibit 99.3		Unaudited consolidated statements of financial position of LML Payment Systems Inc. and its subsidiaries as of September 30, 2012 and the unaudited consolidated statements of earnings and comprehensive income, consolidated statements of equity and consolidated statements of cash flows of LML Payment Systems Inc. and its subsidiaries for the three and six month periods ended September 30, 2012 and 2011, and the notes related thereto, are incorporated herein by reference to Part I of LML Payment Systems Inc.’s Quarterly Report on Form 10-Q, as filed on November 13, 2012
Exhibit 99.4		Unaudited pro forma condensed combined statement of operations for LML Payment Systems for the twelve months ended December 31, 2012 and Digital River for the twelve months ended December 31, 2012 and unaudited pro forma condensed combined balance sheets as of December 31, 2012, and the notes related thereto (filed herewith)

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EX-23.1

Exhibit 23.1

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We have issued our report dated June 15, 2012, with respect to the consolidated financial statements of LML Payment Systems Inc. included in the Annual Report of LML Payment Systems Inc. on Form 10-K for the year ended March 31, 2012. We hereby consent to the incorporation by reference of said report in the Form 8-K/A (Amendment No. 2) filed by Digital River Inc. on March 26, 2013.

GRANT THORNTON LLP

Vancouver, Canada

March 26, 2013

EX-99.4

Exhibit 99.4

UNAUDITED PRO FORMA STATEMENTS OF OPERATIONS

FOR THE 12 MONTHS ENDED DECEMBER 31, 2012

(IN THOUSANDS, EXCEPT PER SHARE DATA)

	Digital River			LML IFRS			U.S. GAAP Adjustments			Pro Forma Adjustments			Pro Forma Digital River
Revenue	$	386,222		$	28,288		$	—		$	—		$	414,510
Costs and expenses (exclusive of depreciation and amortization expense shown separately below):
Direct cost of services	12,661			15,549			(37		)(b),(c)	56,228		(k)	84,401
Network and infrastructure	53,562			—			—			—			53,562
Sales and marketing	162,201			1,117			(404		)(c)	(56,215		)(k)	106,699
Product research and development	63,510			1,207			(57		)(b),(c)	—			64,660
General and administrative	58,383			4,501			49		(b),(c)	(810		)(k),(o)	62,123
Goodwill impairment	175,241			—			—			—			175,241
Depreciation and amortization	20,307			—			93		(c)	—			20,400
Amortization of acquisition-related intangibles	7,067			—			604		(c)	4,449		(h),(l)	12,120
Total costs and expenses	552,932			22,374			248			3,652			579,206
Income (loss) from operations	(166,710		)	5,914			(248		)	(3,652		)	(164,696		)
Interest income	3,820			163			—			(51		)(m)	3,932
Interest expense	(8,968		)	—			—			—			(8,968		)
Other income (expense), net	4,796			(28		)	—			—			4,768
Income (loss) before income taxes	(167,062		)	6,049			(248		)	(3,703		)	(164,964		)
Income tax expense (benefit)	28,806			2,586			—			(2,483		)(q),(r),(s)	28,909
Net income (loss)	$	(195,868	)	$	3,463		$	(248	)	$	(1,220	)	$	(193,873	)
Net income (loss) per share - basic	$	(5.90	)										$	(5.84	)
Net income (loss) per share - diluted	$	(5.90	)										$	(5.84	)
Shares used in per-share calculation - basic	33,224												33,224
Shares used in per-share calculation - diluted	33,224												33,224

The accompanying notes are an integral part of these consolidated financial statements.

UNAUDITED PRO FORMA BALANCE SHEETS

AS OF DECEMBER 31, 2012

(IN THOUSANDS)

	Digital River			LML IFRS			U.S. GAAP Adjustments			Pro Forma Adjustments			Pro Forma Digital River
ASSETS
CURRENT ASSETS
Cash and cash equivalents	$	542,851		$	30,281		$	—		$	(101,775	)(j),(p)	$	471,357
Funds held for merchants				22,702			—			—			22,702
Short-term investments	162,794			—			—			—			162,794
Accounts receivable, net of allowance	60,656			1,736			—			—			62,392
Deferred tax assets	457			—			51		(d)	—			508
Prepaid expenses and other	33,714			1,896			—			(1,027		)(p)	34,583
Total current assets	800,472			56,615			51			(102,802		)	754,336
Property and equipment, net	53,265			191			—			—			53,456
Goodwill	108,960			17,874			—			28,039		(g)	154,873
Intangible assets, net of accumulated amortization	11,718			3,402			—			21,652		(i),(n)	36,772
Long-term investments	71,735			—			—			—			71,735
Deferred income taxes	1,724			736			(51		)(d)	—			2,409
Other assets	4,342			279			—			—			4,621
TOTAL ASSETS	$	1,052,216		$	79,097		$	—		$	(53,111	)	$	1,078,202
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES
Accounts payable	$	205,377		$	882		$	—		$	—		$	206,259
Funds due to merchants				22,702			—			—			22,702
Deferred revenue	13,426			497			—			—			13,923
Other accrued liabilities	63,270			1,902			—			—			65,172
Total current liabilities	282,073			25,983			—			—			308,056
NON-CURRENT LIABILITIES
Senior convertible notes	309,909			—			—			—			309,909
Other liabilities	18,236			3			—			—			18,239
Total non-current liabilities	328,145			3			—			—			328,148
TOTAL LIABILITIES	610,218			25,986			—			—			636,204
STOCKHOLDERS’ EQUITY
Preferred stock	—												—
Common stock	489			53,919			—			(53,919		)(f)	489
Treasury stock at cost	(368,721		)	—			—			—			(368,721		)
Additional paid-in capital	737,499			10,593			(738		)(b),(e)	(9,855		)(f)	737,499
Warrants	—			114			(114		)(e)	—			—
Retained earnings (deficit)	75,901			(11,805		)	852		(b)	10,953		(f)	75,901
Accumulated other comprehensive income (loss)	(3,170		)	290			—			(290		)(f)	(3,170		)
Total stockholders’ equity	441,998			53,111			—			(53,111		)	441,998
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	1,052,216		$	79,097		$	—		$	(53,111	)	$	1,078,202

The accompanying notes are an integral part of these consolidated financial statements.

Note 1 — Periods Presented

(a)The consolidated condensed pro forma statement of operations includes the LML Payment Systems Statement of Operations for the twelve months ended December 31, 2012 and the Digital River Statement of Operations for the twelve months ended December 31, 2012.   The LML Payments Systems Statement of Operations for the twelve months ended December 31, 2012, was derived from combining the last three months of LML Payment Systems fiscal year ended March 31, 2012, and the nine months ended December 31, 2012.  The consolidated condensed pro forma balance sheet reflects December 31, 2012 balances for LML Payment Systems and Digital River.

Note 2 — U.S. GAAP Adjustments

(b)Under US GAAP, the fair value of the share-based awards with graded vesting is calculated as one single grant and the resulting fair value is recognized on a straight-line basis over the longest vesting period.

IFRS require each tranche of a share-based award with different vesting dates to be considered a separate grant for purposes of fair value calculation, and the resulting fair value is amortized over the vesting period of the respective tranches.

As a result of the above difference, an adjustment has been made to stock-based compensation as follows (in thousands):

	Twelve months ended December 31, 2012
Direct cost of services	$	5
Sales and marketing	—
Product research and development	8
General and administrative	235
Total adjustment	$	248

(c)Under IFRS, the amortization and depreciation expenses were included within the appropriate operating expense category and were not separately presented.  Under US GAAP, depreciation of property and equipment, and amortization of patents and intangible assets are separately presented in the consolidated statement of earnings. An adjustment has been made as follows (in thousands):

	Twelve months ended December 31, 2012
Direct cost of services	$	(43	)
Sales and marketing	(404		)
Product research and development	(65		)
General and administrative	(186		)
Depreciation and amortization	94
Amortization of acquisition-related intangibles	604
Total adjustment	$	—

(d)Under IFRS, all deferred tax assets are presented as long term.  Under US GAAP, deferred tax assets are presented as current and long term.

(e)Under IFRS, warrants are presented as a separate component of equity. Under US GAAP, warrants are included in additional paid in capital.

Note 3 — Pro Forma Adjustments

(f)An adjustment has been made to eliminate the historical equity of LML Payment Systems.

(g)An adjustment has been made to record an estimated $45.9 million of goodwill associated with Digital River’s purchase of

LML Payment Systems as if the acquisition had been made on December 31, 2012.  In addition, an adjustment has been made to eliminate LML Payment Systems’ historical goodwill of $17.9 million.  Digital River’s intangible asset valuations are in progress.  The final amount of goodwill to be booked to record the LML Payment Systems purchase entry may be different than that reflected in the unaudited pro forma condensed combined financial statements.

(h)An adjustment has been made to record estimated amortization expense of $5.1 million associated with intangible assets identified and valued at the time of the acquisition. The amortization adjustment is based on estimated fair values, estimated useful lives and straight line amortization.

(i)An adjustment has been made to eliminate $3.4 million of intangible assets on LML Payment Systems books prior to the acquisition.

(j)An adjustment has been made to reflect the use of cash and cash equivalents to fund the acquisition consideration.

(k)LML Payment Systems has historically reported payment processing fees and chargebacks as direct cost of sales, while Digital River has classified them as selling and marketing expense.  In order to ensure consistency and comparability, Digital River’s payment processing fees and chargebacks have been reclassified to direct cost of sales.

(l)An adjustment has been made to eliminate LML Payment Systems historical intangible amortization expense.

(m)An adjustment has been made to eliminate estimated interest income earned on the $102.8 million cash consideration paid to acquire LML Payment Systems.

(n)An estimate of the purchase price allocated to the acquired intangible assets of $25.1 million.  Digital River’s intangible asset valuations are in progress.  The final values and useful lives could be different than those reflected in the unaudited pro forma condensed combined financial statements.

(o)An adjustment has been made to eliminate acquisition related expenses.

(p)An adjustment has been made to eliminate $1 million of LML Payment Systems acquisition related receivables, associated with expenditures made by LML which were to be reimbursed by Digital River.

(q)An adjustment has been made with the assumption that a consolidated US federal tax return would have been filed, which would have included approximately $4.8 million of US income from the LML US group.  The impact would have been a reduction in the US net operating loss deferred tax asset with a corresponding reduction in the amount of US taxes paid.  This decrease in deferred tax assets would cause a reduction in the amount of valuation allowance required, which would impact the statement of operations in the amount of $1.8 million.

(r)An adjustment has been made because the LML US group carried a deferred tax asset of approximately $240 thousand, which would require a valuation allowance recorded against it since all US tax assets of Digital River have a full valuation allowance.

(s)An adjustment was made to record the tax effect of the pro forma pre-tax income adjustments.