EX-99.2 4 d761440dex992.htm EX-99.2 EX-99.2

Exhibit 99.2

UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION

(in thousands, except per share data)

On May 14, 2014, Glu Mobile Inc. (“Glu” or the “Company”) completed the acquisition of PlayFirst, Inc., a Delaware corporation (“PlayFirst”). PlayFirst, which is based in San Francisco, California, and develops casual games for smartphones and other mobile devices.

In connection with the acquisition, the purchase price consideration amounted to $11,553, representing 2,955 shares valued at $3.91 per share. The number of shares comprising the purchase price consideration was reduced from 3,000 shares to 2,955 shares due to a working capital adjustment. In addition, the Company withheld a total of 106 shares to cover stockholders’ agent expenses and tax obligations of certain PlayFirst stockholders, which resulted in the Company issuing a total of 2,849 shares valued at $11,141 and paying $412 in cash. Of the 2,849 shares issued in the acquisition, 1,500 shares were held back in escrow and will be retained by the Company for 24 months to satisfy potential indemnification claims under the PlayFirst merger agreement. In addition, the Company assumed approximately $3,280 of PlayFirst net liabilities. All outstanding PlayFirst capital stock, stock options and warrants were cancelled at the Closing.

The following unaudited pro forma combined condensed financial information gives effect to the acquisition by the Company of all of the outstanding shares of PlayFirst. These unaudited pro forma statements were prepared as if the acquisition had been completed as of January 1, 2013 for the statement of operations and as of March 31, 2014 for the balance sheet.

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 PlayFirst. The Company’s historical consolidated financial statements for the year ended December 31, 2013 are included in its Form 10-K filed with the Securities and Exchange Commission on March 14, 2014 and the Company’s historical condensed consolidated financial statements for the three months ended March 31, 2014 are included in its Form 10-Q filed on May 12, 2014. PlayFirst’s historical statement of operations for the year ended December 31, 2013 and the three months ended March 31, 2014 and historical balance sheet as of March 31, 2014 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 Company’s 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 Company’s financial position is or results of operations would have been if the acquisition had occurred on that date or to project the Company’s results of operations for any future period. Since the Company and PlayFirst 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.

 

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UNAUDITED PRO FORMA COMBINED CONDENSED CONSOLIDATED BALANCE SHEET AS OF

MARCH 31, 2014

(in thousands)

 

     Glu Mobile Inc.     PlayFirst, Inc.     Pro Forma
Adjustments
    Pro Forma
Combined
 
ASSETS         

Current assets:

        

Cash and cash equivalents

   $ 36,954      $ 93      $ (252 )(7)    $ 36,795   

Accounts receivable, net

     19,695        909        —          20,604   

Prepaid expenses and other

     8,899        409        (245 )(2)      9,063   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total current assets

     65,548        1,411        (497     66,462   

Property and equipment, net

     4,737        19          4,756   

Restricted cash

     1,730        200        (160 )(7)      1,770   

Other long-term assets

     616        —          —          616   

Intangible assets, net

     4,917        —          3,700 (3)      8,617   

Goodwill

     19,474        —          10,539 (4)      30,013   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total assets

   $ 97,022      $ 1,630      $ 13,582      $ 112,234   
  

 

 

   

 

 

   

 

 

   

 

 

 
LIABILITIES AND STOCKHOLDERS’ EQUITY         

Current liabilities:

        

Accounts payable

   $ 8,723      $ 1,319      $ —        $ 10,042   

Accrued liabilities

     2,028        388        1,181 (9)      3,597   

Accrued compensation

     5,790        —          —          5,790   

Accrued royalties

     1,830        —          —          1,830   

Line of credit

     —          890        —          890   

Term loan, net

     —          599        —          599   

Subordinated covertible notes payable

     —          3,100        (3,100 )(5)      —     

Deferred revenues

     20,680        759        (759 )(6)      20,680   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total current liabilities

     39,051        7,055        (2,678     43,428   

Other long-term liabilities

     2,229        875        —          3,104   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total liabilities

     41,280        7,930        (2,678     46,532   
  

 

 

   

 

 

   

 

 

   

 

 

 

Commitments and contingencies

        

Stockholders’ equity:

        

Preferred stock

     —          14        (14 )(8)      —     

Common stock

     8        4        (4 )(8)      8   

Additional paid-in capital

     307,421        33,158        (33,158 )(8)      317,381   
         11,141 (1)   
         (1,181 )(9)   

Accumulated other comprehensive income

     391        —          —          391   

Accumulated deficit

     (252,078     (39,476     39,476 (8)      (252,078
  

 

 

   

 

 

   

 

 

   

 

 

 

Total stockholders’ equity

     55,742        (6,300     16,260        65,702   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total liabilities and stockholders’ equity

   $ 97,022      $ 1,630      $ 13,582      $ 112,234   
  

 

 

   

 

 

   

 

 

   

 

 

 

 

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UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENT OF OPERATIONS

FOR THE THREE MONTHS ENDED MARCH 31, 2014

(in thousands, except per share data)

 

     Glu Mobile Inc.     PlayFirst, Inc.     Pro Forma
Adjustments
    Pro Forma
Combined
 

Revenues

   $ 44,580      $ 2,460      $        $ 47,040   

Cost of revenues:

        

Platform commissions, royalties and other

     13,202        840          14,042   

Amortization of intangible assets

     554        —          218 (10)      772   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total cost of revenues

     13,756        840        218        14,814   
  

 

 

   

 

 

   

 

 

   

 

 

 

Gross profit

     30,824        1,620        (218     32,226   
  

 

 

   

 

 

   

 

 

   

 

 

 

Operating expenses:

        

Research and development

     15,579        1,160          16,739   

Sales and marketing

     9,485        176          9,661   

General and administrative

     4,926        628          5,554   

Amortization of intangible assets

     127        —            127   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total operating expenses

     30,117        1,964        —          32,081   
  

 

 

   

 

 

   

 

 

   

 

 

 

Income/(loss) from operations

     707        (344     (218     145   

Interest and other income/(expense), net:

        

Interest income/(expense)

     6        (31       (25

Other (expense)/income, net

     (136     —            (136
  

 

 

   

 

 

   

 

 

   

 

 

 

Interest and other (expense)/income, net

     (130     (31     —          (161
  

 

 

   

 

 

   

 

 

   

 

 

 

Income/(loss) before income taxes

     577        (375     (218     (16

Income tax provision

     (444     (3       (447
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income/(loss)

   $ 133      $ (378   $ (218   $ (463
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income/(loss) per common share:

        

Basic

   $ 0.00            (0.01

Diluted

   $ 0.00            (0.01

Weighted average common shares outstanding:

        

Basic

     79,719        —          1,349 (11)      81,068   

Diluted

     85,398        —          (4,330 )(11)      81,068   

 

 

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UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENT OF OPERATIONS

FOR THE YEAR ENDED DECEMBER 31, 2013

(in thousands, except per share data)

 

     Glu Mobile Inc.     PlayFirst, Inc.     Pro Forma
Adjustments
    Pro Forma
Combined
 

Revenues

   $ 105,613      $ 11,539      $        $ 117,152   

Cost of revenues:

        

Platform commissions, royalties and other

     32,371        3,964          36,335   

Impairment of prepaid royalties and guarantees

     435        —         

Amortization of intangible assets

     4,238        —          873 (10)      5,111   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total cost of revenues

     37,044        3,964        873        41,446   
  

 

 

   

 

 

   

 

 

   

 

 

 

Gross profit

     68,569        7,575        (873     75,706   
  

 

 

   

 

 

   

 

 

   

 

 

 

Operating expenses:

        

Research and development

     46,877        6,422          53,299   

Sales and marketing

     26,120        3,110          29,230   

General and administrative

     15,550        3,179          18,729   

Amortization of intangible assets

     1,336        —            1,336   

Restructuring charge

     1,448        —            1,448   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total operating expenses

     91,331        12,711        —          104,042   
  

 

 

   

 

 

   

 

 

   

 

 

 

Income/(loss) from operations

     (22,762     (5,136     (873     (28,336

Interest and other income/(expense), net:

        

Interest income/(expense)

     16        (154       (138

Other (expense)/income, net

     (6     64          58   
  

 

 

   

 

 

   

 

 

   

 

 

 

Interest and other (expense)/income, net

     10        (90     —          (80
  

 

 

   

 

 

   

 

 

   

 

 

 

Income/(loss) before income taxes

     (22,752     (5,226     (873     (28,416

Income tax benefit/(provision)

     2,843        (2       2,841   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net loss

   $ (19,909   $ (5,228   $ (873   $ (25,575
  

 

 

   

 

 

   

 

 

   

 

 

 

Net loss per common share:

   $ (0.28   $        $        $ (0.35

Weighted average common shares outstanding - basic and diluted

     71,453        —          1,349 (11)      72,802   

 

 

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NOTES TO UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL INFORMATION

(in thousands, except per share data)

NOTE 1 — Basis of Presentation.

The Company’s consolidated financial statements include the results of operations of PlayFirst, Inc. (“PlayFirst”) from the date of acquisition. Under the purchase method of accounting, the Company allocated the total preliminary purchase price of $11,553, 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 PlayFirst acquisition as if the acquisition had occurred on March 31, 2014:

 

Assets acquired:

  

Cash

   $ 253   

Accounts receivable, net

     909   

Restricted Cash

     40   

Other current assets

     164   

Property and equipment

     19   

Intangible assets:

  

Customer contract and related relationships

     700   

Titles, content and technology

     2,200   

In-process research and development

     800   

Goodwill

     10,539   
  

 

 

 

Total assets acquired

     15,624   
  

 

 

 

Liabilities assumed:

  

Accounts Payable

     (1,319

Other accrued liabilities

     (388

Line of Credit

     (890

Term loan

     (1,474
  

 

 

 

Total liabilities acquired

     (4,071
  

 

 

 

Total preliminary purchase price

   $ 11,553   
  

 

 

 

The total estimated purchase price was preliminarily allocated to the acquired tangible and intangible assets and assumed liabilities based on their estimated fair values at closing as shown in the table below. The excess of the purchase price over the fair value of net assets acquired was recorded as goodwill. The goodwill balance is primarily attributed to expected synergies and the value of acquired assembled workforce. Goodwill is not expected to be deductible for U.S. income tax purposes. 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.

 

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NOTES TO UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL INFORMATION

(in thousands, except per share data)

The preliminary valuation of the identifiable intangible assets acquired was based on management’s estimates, currently available information and reasonable and supportable assumptions. The allocation was generally based on the fair value of these assets. Of the total purchase price, $3,700 was allocated to identifiable intangible assets. The identifiable intangible assets are being amortized over the respective estimated useful life of three to five years. The fair value, estimated useful lives and amortization for the year ended December 31, 2013 and three months ended March 31, 2014 of the preliminary identifiable intangible assets acquired from PlayFirst as if the acquisition had occurred on January 1, 2013 were as follows:

 

            March 31, 2014      December 31, 2013  
     Estimated      Gross      Accumulated     Net      Gross      Accumulated     Net  
     Useful      Carrying      Amortization     Carrying      Carrying      Amortization     Carrying  
     Life      Value      Expense     Value      Value      Expense     Value  

Intangible assets amortized to cost of revenues:

                  

Titles, content and technology

     3 yrs       $ 2,200       $ (916   $ 1,284       $ 2,200       $ (733   $ 1,467   

Customer relationships

     5 yrs         700         (175     525         700         (140     560   

In-Process R&D

     n/a         800         —          800         800         —          800   
     

 

 

    

 

 

   

 

 

    

 

 

    

 

 

   

 

 

 

Total intangibles assets subject to amortization

      $ 3,700       $ (1,091   $ 2,609       $ 3,700       $ (873   $ 2,827   
     

 

 

    

 

 

   

 

 

    

 

 

    

 

 

   

 

 

 

The total expected future amortization related to intangible assets acquired from PlayFirst is as follows:

 

     Amortization  
     Included in  
     Cost of  

Period Ending December 31,

   Revenues  

2014 (remaining nine months)

   $ 655   

2015

     873   

2016

     140   

2017

     141   
  

 

 

 

Total intangible assets subject to amortization

     1,809   

In-process research and development

     800   
  

 

 

 

Total intangible assets, net

   $ 2,609   
  

 

 

 

The pro forma adjustments do not reflect any integration adjustments to be incurred in connection with the merger or operating efficiencies and costs savings that may be achieved with respect to the combined entities as these costs are not directly attributable to the purchase agreement.

 

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NOTES TO UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL INFORMATION

(in thousands, except per share data)

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, 2013 for statement of operations purposes and as of March 31, 2014 for balance sheet purposes and to reflect the following pro forma adjustments:

 

  (1) To record the issuance of Glu common stock for the acquisition of PlayFirst valued at $11,141, representing 2,849 shares valued at $3.91 per share.

 

  (2) To record the preliminary fair value adjustment to the deferred costs related to platform fees paid to digital storefronts.

 

  (3) To record the preliminary estimated identifiable intangible assets, which include customer contracts and related relationships, titles, content and technology and in-process research and development.

 

  (4) To record the preliminary goodwill resulting from the acquisition of PlayFirst of $10,539.

 

  (5) To reflect the elimination of the historical PlayFirst subordinated convertible notes payable as the subordinated convertible notes payable converted into equity upon the acquisition of PlayFirst.

 

  (6) To record the preliminary fair value adjustment to deferred revenues related to revenue generated through digital storefronts.

 

  (7) To record a $160 reclassification of the restricted cash balance to cash and cash equivalents, as debt agreement restrictions were removed upon the acquisition. To record a $412 payment for the stockholders’ agent expenses and tax obligations of certain PlayFirst stockholders, 106 shares were withheld by Glu from the purchase consideration to settle these obligations.

 

  (8) To record the elimination of the historical preferred stock, common stock, additional paid in capital and accumulated deficit of PlayFirst.

 

  (9) To accrue for estimated acquisition related transaction costs of $1,181 incurred by Glu and PlayFirst but not yet reflected in the historical results at March 31, 2014.

 

  (10) To record the amortization expense associated with the preliminary estimated identifiable intangible assets of PlayFirst acquired as a result of the acquisition. See Note 1 above for the estimated useful lives for each preliminary estimated identifiable intangible asset.

 

  (11) To adjust pro forma basic and diluted net income (loss) per share to reflect the issuance of 2,849 shares of common stock related to the acquisition of PlayFirst as if the shares had been outstanding throughout the periods presented as of January 1, 2013. This has been reduced by 1,500 shares, which are restricted shares as they are held back and retained by the Company for 24 months to satisfy potential customary indemnification claims under the Merger Agreement.

There were no material transactions between the Company and PlayFirst during the year ended December 31, 2013 or the three months ended March 31, 2014.

The allocation of the purchase price is preliminary and based on valuations derived from estimated fair value assessments and assumptions used by management. The final purchase price allocation is pending the finalization of appraisal valuations, which may result in an adjustment to the preliminary purchase price allocation. While management believes that its preliminary estimates and assumptions underlying the valuations are reasonable, different estimates and assumptions could result in different valuations assigned to the individual assets acquired and liabilities assumed, and the resulting amount of goodwill.

 

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