Variable Interest Entities

9 Months Ended

Sep. 30, 2022

Business Combination and Asset Acquisition [Abstract]

8. VARIABLE INTEREST ENTITIES

Adsmurai

On August 5, 2022, the Company made a loan in the principal amount of €12,535,000 (approximately $12.8 million as of that date) to an entity affiliated with owners of a majority interest in Adsmurai, S.L. (“Adsmurai”), a company engaged in the sale and marketing of digital advertising. The loan has a two-year term, bears interest at a rate of 5% annually, and can be converted into 51% of the issued and outstanding shares of stock of Adsmurai at the Company’s sole discretion. If the Company elects not to convert the loan, the borrower has the option to repay the loan at maturity either in cash or with 51% of the issued and outstanding shares of stock of Adsmurai.

The Company has determined that (i) Adsmurai is a VIE because the equity investors at risk, as a group, lack the characteristics of a controlling financial interest; and (ii) the Company is the primary beneficiary because its conversion right gives it the power to direct the activities of the entity that most significantly impact the entity’s economic performance. See Note 2 for more details.

The Company has determined that Adsmurai is a business and has accounted for its consolidation under the provisions of ASC Topic 805, “Business Combinations”, and included Adsmurai's results of operations since the date of the loan in the Company's Consolidated Statements of Operations. The Company is in the process of completing the purchase price allocation for Adsmurai. The following is a summary of the preliminary purchase price allocation (in millions):


Cash	$	7.4
Accounts receivable		12.2
Other assets		0.7
Fixed assets		2.8
Intangible assets subject to amortization		8.2
Goodwill		13.2
Current liabilities		(14.6	)
Deferred tax		(2.0	)
Debt		(2.8	)
Noncontrolling interest		(12.3	)
Convertible loan		(12.8	)

Intangible assets subject to amortization acquired includes:


Intangible Asset	Estimated Fair Value (in millions)		Weighted average life (in years)
Advertiser relationships	$	4.7	7.0
Existing technology		2.4	5.0
Trade name		1.1	5.0

The fair value of the trade receivables was $12.2 million. The gross amount due under contract is $12.3 million, of which $0.1 million is expected to be uncollectable.

The goodwill, which is not expected to be deductible for tax purposes, is assigned to the Company’s digital segment and is attributable to Adsmurai’s workforce and synergies from combining Adsmurai’s operations with those of the Company

During the three- and nine-month periods ended September 30, 2022, the Company consolidated Adsmurai's revenues of $8.0 million, and net loss of $0.4 million.

The following unaudited pro forma information has been prepared to give effect to the Company’s consolidation of Adsmurai as if the transaction had occurred on January 1, 2021. This pro forma information was adjusted to exclude acquisition fees and costs of $0.2 million for each of the three- and nine-month periods ended September 30, 2022, which were expensed in connection with the transaction. This pro forma information does not purport to represent what the actual results of operations of the Company would have been had this transaction occurred on such date, nor does it purport to predict the results of operations for any future periods.


In thousands, except share and per share data	Three-Month Period				Nine-Month Period
	Ended September 30,				Ended September 30,
	2022		2021		2022		2021
Pro Forma:
Total revenue	$	244,963	$	208,321	$	688,241	$	552,915
Net income (loss) attributable to common stockholders	$	9,706	$	12,205	$	20,557	$	25,511

Basic and diluted earnings per share:
Net income (loss) per share, attributable to common stockholders, basic	$	0.11	$	0.14	$	0.24	$	0.30
Net income (loss) per share, attributable to common stockholders, diluted	$	0.11	$	0.14	$	0.23	$	0.29

Weighted average common shares outstanding, basic		84,945,873		85,390,333		85,469,675		85,207,992
Weighted average common shares outstanding, diluted		87,417,501		88,315,732		87,671,726		87,694,395

Jack of Digital

On August 3, 2022, the Company made an investment of $0.1 million in exchange for approximately 15% of the issued and outstanding stock of Jack of Digital, a digital marketing services company that serves as the exclusive advertising sales partner of TikTok in Pakistan.

The Company has determined that it is the primary beneficiary and consolidates the VIE because (i) the equity investors at risk, as a group, lack the characteristics of a controlling financial interest; and (ii) the Company is the primary beneficiary because it has the

power to direct the activities of the entity that most significantly impact the entity’s economic performance. See Note 2 for more details.

The Company consolidated Jack of Digital's revenue of $0.3 million for the three- and nine-months periods ended September 30, 2022.

The table below presents the reconciliation of changes in noncontrolling interests (in thousands):


	Three-Month Period					Nine-Month Period
	Ended September 30,					Ended September 30,
	2022			2021		2022			2021
Beginning balance	$	-		$	-	$	-		$	-
Initial fair value of noncontrolling interests		12,897			-		12,897			-
Net income (loss) attributable to noncontrolling interest		(303	)		-		(303	)		-
Ending balance	$	12,594		$	-	$	12,594		$	-

The changes in the carrying amount of goodwill for each of the Company’s operating segments for the nine-month period ended September 30, 2022 are as follows (in thousands):


	December 31,		Purchase Price		Additions From		September 30,
(in thousands)	2021		Adjustments		VIEs		2022
Television	$	40,549	$	-	$	-	$	40,549
Digital		31,159		1,451		13,556		46,166
Consolidated	$	71,708	$	1,451	$	13,556	$	86,715