Form: 8-K/A

Current report filing

August 28, 2023

Exhibit 99.3

UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION

The following unaudited pro forma condensed combined financial information is presented to aid you in your analysis of the financial aspects of the completed acquisition of Broadbean (as defined below) by Veritone, Inc. (the “Company”) and Veritone UK, Ltd. (collectively, “Veritone”) from CareerBuilder, LLC, CareerBuilder International Holding B.V., and CareerBuilder France Holding, LLC (collectively, “CareerBuilder”) (this transaction between Veritone and CareerBuilder, the “Acquisition”).

 

The Acquisition consisted of (i) the Company acquiring (a) 100% of the issued and outstanding share capital of (x) Broadbean Technology Pty Ltd ACN 116 011 959 / ABN 79 116 011 959, a limited company incorporated under the laws of Australia, and (y) Broadbean, Inc., a Delaware corporation, and (b) certain assets and liabilities related thereto, and (ii) Veritone UK, Ltd. acquiring 100% of the issued and outstanding share capital of (a) Broadbean Technology Limited, a limited company incorporated under the laws of England and Wales and (b) CareerBuilder France S.A.R.L., a limited liability company organized under the laws of France (such acquired assets, collectively, “Broadbean”).

The following unaudited pro forma condensed combined financial information presents the combination of the financial information of Broadbean and the Company adjusted to give effect to the Acquisition. The following unaudited pro forma condensed combined financial information has been prepared in accordance with Article 11 of Regulation S-X (as amended by final rule, Release No. 33-10786). The unaudited pro forma adjustments are based on information currently available, assumptions, and estimates underlying the pro forma adjustments and are described in the accompanying notes. Actual results may differ materially from the assumptions used to present the accompanying unaudited pro forma condensed combined financial information. The unaudited pro forma condensed combined financial information does not reflect the realization of any expected cost savings and other synergies resulting from the Acquisition as a result of any cost saving initiatives planned subsequent to the closing of the Acquisition.

 

The unaudited pro forma condensed combined balance sheet as of March 31, 2023, combines the historical unaudited balance sheets of Broadbean and the Company as of March 31, 2023, on a pro forma basis as if the Acquisition had been consummated on March 31, 2023.

 

The unaudited pro forma condensed combined statement of operations for the three months ended March 31, 2023, combines the historical unaudited statements of operations of Broadbean and the Company for the three months ended March 31, 2023, on a pro forma basis as if the Acquisition had been consummated on January 1, 2022, the beginning of the earliest period presented. The unaudited pro forma condensed combined statement of operations for the year ended December 31, 2022, combines the historical audited statements of operations of Broadbean and the Company for the year ended December 31, 2022, on a pro forma basis as if the Acquisition had been consummated on January 1, 2022, the beginning of the earliest period presented.

 

The unaudited pro forma condensed combined financial information is derived from and should be read in conjunction with (i) the historical audited consolidated financial statements of the Company and accompanying notes as of and for the year ended December 31, 2022, included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2022; (ii) the historical unaudited condensed consolidated financial statements of the Company and accompanying notes as of and for the three-month period ended March 31, 2023, included in the Company’s Quarterly Report in Form 10-Q for the fiscal quarter ended March 31, 2023; (iii) the historical audited combined financial statements of Broadbean as of and for the year ended December 31, 2022, included in this Current Report on Form 8-K/A; and (iv) the historical unaudited condensed combined financial statements of Broadbean as of and for the three months ended March 31, 2023, included in this Current Report on form 8-K/A.

 


 

VERITONE, INC.

UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET

As of March 31, 2023

(in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Historical

 

 

Transaction Accounting Adjustments

 

 

 

 

 

 

Veritone, Inc.
(As reported)

 

 

Broadbean
(Historical) After Reclassifications

 

 

Total PPA Step Up Adjustments

 

 

Total Pro Forma Adjustments

 

 

Pro Forma Combined

 

ASSETS

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

139,707

 

 

 

5,753

 

 

 

(53,224

)

 5(a)

 

-

 

 

 

92,236

 

Accounts receivable, net

 

 

54,071

 

 

 

9,890

 

 

 

-

 

 

 

-

 

 

 

63,961

 

Expenditures billable to clients

 

 

13,035

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

13,035

 

Prepaid expenses and other current assets

 

 

13,585

 

 

 

1,849

 

 5(b)

 

-

 

 

 

-

 

 

 

15,434

 

Total current assets

 

 

220,398

 

 

 

17,492

 

 

 

(53,224

)

 

 

-

 

 

 

184,666

 

Property, equipment and improvements, net

 

 

6,394

 

 

 

4,268

 

 

 

-

 

 

 

-

 

 

 

10,662

 

Intangible assets, net

 

 

74,555

 

 

 

962

 

 

 

26,538

 

 5(c)

 

-

 

 

 

102,055

 

Goodwill

 

 

46,460

 

 

 

7,100

 

 

 

19,185

 

 5(d)

 

-

 

 

 

72,745

 

Long-term restricted cash

 

 

862

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

862

 

Other assets

 

 

13,901

 

 

 

1,239

 

5(e)

 

-

 

 

 

-

 

 

 

15,140

 

Total assets

 

$

362,570

 

 

 

31,061

 

 

 

(7,501

)

 

 

-

 

 

 

386,130

 

LIABILITIES AND STOCKHOLDERS' EQUITY

 

 

 

 

 

 

 

 

-

 

 

 

-

 

 

 

 

Accounts payable

 

$

38,015

 

 

 

1,257

 

 

 

-

 

 

 

-

 

 

 

39,272

 

Accrued media payments

 

 

82,407

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

82,407

 

Client advances

 

 

3,412

 

 

 

10,484

 

5(f)

 

-

 

 

 

-

 

 

 

13,896

 

Contingent consideration, current

 

 

190

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

190

 

Other accrued liabilities

 

 

28,123

 

 

 

4,183

 

5(g)

 

-

 

 

 

3,752

 

5(h)

 

36,058

 

Total current liabilities

 

 

152,147

 

 

 

15,924

 

 

 

-

 

 

 

3,752

 

 

 

171,823

 

Contingent consideration, non-current

 

 

137,982

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

137,982

 

Other non-current liabilities

 

 

11,721

 

 

 

1,269

 

5(i)

 

6,367

 

5(j)

 

-

 

 

 

19,357

 

Total liabilities

 

 

301,850

 

 

 

17,193

 

 

 

6,367

 

 

 

3,752

 

 

 

329,162

 

Commitments and contingencies

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stockholders' equity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Parents' equity

 

 

-

 

 

 

15,792

 

 

 

(15,792

)

5(k)

 

-

 

 

 

-

 

Common stock

 

 

37

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

37

 

Additional paid-in capital

 

 

455,759

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

455,759

 

Accumulated deficit / (retained earnings)

 

 

(394,234

)

 

 

-

 

 

 

-

 

 

 

(3,752

)

5(h)

 

(397,986

)

Accumulated other comprehensive loss

 

 

(842

)

 

 

(1,924

)

 

 

1,924

 

5(k)

 

-

 

 

 

(842

)

Total stockholders' equity

 

 

60,720

 

 

 

13,868

 

 

 

(13,868

)

 

 

(3,752

)

 

 

56,968

 

Total liabilities and stockholders' equity

 

$

362,570

 

 

 

31,061

 

 

 

(7,501

)

 

 

-

 

 

 

386,130

 

 


 

VERITONE, INC.

UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 2023

(in thousands, except share and per share data)

 

 

 

Historical

 

 

Transaction Accounting Adjustments

 

 

 

 

 

 

Veritone, Inc.
(As reported)

 

 

Broadbean
(Historical) After Reclassifications

 

 

 

PPA Step Up

 

 

Pro Forma Adjustments

 

 

Veritone, Inc.
Pro Forma Combined

 

Revenue

 

$

30,263

 

 

 

8,296

 

 

 

 

-

 

 

 

-

 

 

 

38,559

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost of revenue

 

 

6,809

 

 

 

1,636

 

 

 

 

-

 

 

 

-

 

 

 

8,445

 

Sales and marketing

 

 

12,690

 

 

 

3,896

 

 

 

 

-

 

 

 

-

 

 

 

16,586

 

Research and development

 

 

11,527

 

 

 

448

 

6(l)

 

 

-

 

 

 

-

 

 

 

11,975

 

General and administrative

 

 

17,397

 

 

 

1,970

 

6(m)

 

 

-

 

 

 

-

 

 

 

19,367

 

Amortization

 

 

5,429

 

 

 

708

 

6(m)

 

 

796

 

 6(o)

 

-

 

 

 

6,933

 

Total operating expenses

 

 

53,852

 

 

 

8,658

 

 

 

 

796

 

 

 

-

 

 

 

63,306

 

Loss from operations

 

 

(23,589

)

 

 

(362

)

 

 

 

(796

)

 

 

-

 

 

 

(24,747

)

Other income (expense), net

 

 

355

 

 

 

(309

)

 

 

 

-

 

 

 

-

 

 

 

46

 

Loss before provision for income taxes

 

 

(23,234

)

 

 

(671

)

 

 

 

(796

)

 

 

-

 

 

 

(24,701

)

(Benefit from) provision for income taxes

 

 

(271

)

 

 

(159

)

 

 

 

(199

)

 6(p)

 

-

 

 

 

(629

)

Net loss

 

$

(22,963

)

 

 

(512

)

 

 

 

(597

)

 

 

-

 

 

 

(24,072

)

Net loss per share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic and diluted

 

$

(0.63

)

 

 

 

 

 

 

 

 

 

 

 

 

(0.66

)

Weighted average shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic and diluted

 

 

36,587,946

 

 

 

 

 

 

 

 

 

 

 

 

 

36,587,946

 

Comprehensive loss:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

$

(22,963

)

 

 

 

 

 

 

 

 

 

 

 

 

(24,072

)

Foreign currency translation (loss) gain, net of income taxes

 

 

(766

)

 

 

 

 

 

 

 

 

 

 

 

 

(766

)

Total comprehensive loss

 

$

(23,729

)

 

 

 

 

 

 

 

 

 

 

 

 

(24,838

)

 

 


 

VERITONE, INC.

UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 2022

(in thousands, except share and per share data)

 

 

 

 

Historical

 

 

Transaction Accounting Adjustments

 

 

 

 

 

 

Veritone, Inc.
(As reported)

 

 

Broadbean
(Historical) After Reclassifications

 

 

 

PPA Step Up

 

 

Pro Forma Adjustments

 

 

Veritone, Inc.
Pro Forma Combined

 

Revenue

 

$

149,728

 

 

 

32,617

 

 

 

 

-

 

 

 

-

 

 

 

182,345

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost of revenue

 

 

27,432

 

 

 

6,301

 

 

 

 

-

 

 

 

-

 

 

 

33,733

 

Sales and marketing

 

 

51,345

 

 

 

13,740

 

 

 

 

-

 

 

 

-

 

 

 

65,085

 

Research and development

 

 

43,589

 

 

 

1,952

 

6(l)

 

 

-

 

 

 

-

 

 

 

45,541

 

General and administrative

 

 

44,177

 

 

 

8,594

 

6(m)

 

 

-

 

 

 

3,752

 

6(n)

 

56,523

 

Amortization

 

 

21,180

 

 

 

3,046

 

6(m)

 

 

2,969

 

 6(o)

 

-

 

 

 

27,195

 

Total operating expenses

 

 

187,723

 

 

 

33,633

 

 

 

 

2,969

 

 

 

3,752

 

 

 

228,077

 

Loss from operations

 

 

(37,995

)

 

 

(1,016

)

 

 

 

(2,969

)

 

 

(3,752

)

 

 

(45,732

)

Other income (expense), net

 

 

14,747

 

 

 

(160

)

 

 

 

-

 

 

 

-

 

 

 

14,587

 

Loss before provision for income taxes

 

 

(23,248

)

 

 

(1,176

)

 

 

 

(2,969

)

 

 

(3,752

)

 

 

(31,145

)

Provision for (benefit from) income taxes

 

 

2,309

 

 

 

(1,669

)

 

 

 

(742

)

 6(p)

 

(938

)

 6(p)

 

(1,040

)

Net income (loss)

 

$

(25,557

)

 

 

493

 

 

 

 

(2,227

)

 

 

(2,814

)

 

 

(30,105

)

Net loss per share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic and diluted

 

$

(0.71

)

 

 

 

 

 

 

 

 

 

 

 

 

(0.84

)

Weighted average shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic and diluted

 

 

36,033,560

 

 

 

 

 

 

 

 

 

 

 

 

 

36,033,560

 

Comprehensive loss:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

 

(25,557

)

 

 

 

 

 

 

 

 

 

 

 

 

(30,105

)

Foreign currency translation (loss) gain, net of income taxes

 

 

28

 

 

 

 

 

 

 

 

 

 

 

 

 

28

 

Total comprehensive loss

 

$

(25,529

)

 

 

 

 

 

 

 

 

 

 

 

 

(30,077

)

 


 

NOTES TO THE UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS

(Amounts in thousands, except per share data)

Note 1. Description of the Transaction

On June 13, 2023, the Company acquired Broadbean, a global leader of talent acquisition software-as-a-service technology, pursuant to a securities and asset purchase agreement dated as of May 27, 2023. The Acquisition is expected to significantly strengthen the Company’s AI-driven human resources product suite, building on the Company’s previous acquisition of PandoLogic.

The total purchase consideration for Broadbean was $53,224 (the “Merger Consideration”), which consisted of upfront consideration in cash. The Company paid the Merger Consideration with cash on hand and did not incur any debt or engage in any financing in connection with the Acquisition. As described in Note 2. Basis of Presentation, the total purchase consideration is preliminary and subject to net working capital adjustments that the Company expects to finalize and settle in the measurement period. The final settlement amount may vary materially as amounts are finalized and ultimately agreed to by the parties. The Company incurred $4,482 in expenses related to the Acquisition and records them in general & administrative expenses in its consolidated statements of operations and comprehensive loss. Transaction costs of $730 were included in the Company’s historical unaudited condensed consolidated statement of operations for the three months ended March 31, 2023. Estimated transaction costs of $3,752, incurred subsequent to March 31, 2023, have been included as an adjustment to the unaudited pro forma condensed combined statement of operations for the year ended December 31, 2022, and the unaudited pro forma condensed combined balance sheet as of March 31, 2023.

Note 2. Basis of Presentation

The unaudited pro forma condensed combined financial statements and related notes have been prepared in accordance with Article 11 of Regulation S-X (as amended by final rule, Release No. 33-10786) and using the acquisition method of accounting as described in Accounting Standards Codification 805, Business Combinations (“ASC 805”). Under the acquisition method of accounting, the Company allocates the purchase price of a business acquisition based on the fair value of the identifiable tangible and intangible assets. Goodwill is recognized to the extent that the purchase consideration exceeds the assets acquired and liabilities assumed. The Company uses its best estimate and third-party valuation specialists to determine the fair value of the assets acquired and liabilities assumed. The Company has made a preliminary allocation of the preliminary purchase price to the estimated assets acquired and liabilities assumed as of the acquisition date of June 13, 2023, based on the Company’s preliminary valuation of the estimated tangible and intangible assets acquired and liabilities assumed. A final determination of the fair value of Broadbean’s assets and liabilities will be based on analysis of Broadbean’s actual assets and liabilities as of the closing date, which may result in a net working capital adjustment to the purchase price. Such analysis has not been completed at this time. During the measurement period, which can be up to one year after the acquisition date, the Company can make adjustments to the fair value of the assets acquired and liabilities assumed, with the offset being an adjustment to goodwill.

Broadbean has historically been managed and operated in normal course with other CareerBuilder businesses through multiple legal entities, some of which were not solely dedicated to the operations of Broadbean. Therefore, the accompanying historical combined financial statements of Broadbean have been derived from the accounting records of CareerBuilder, as if Broadbean’s operations had been conducted independently from those of CareerBuilder, and were prepared on a stand-alone basis in accordance with generally accepted accounting principles in the United States of America (“US GAAP”). The historical combined statements of operations of Broadbean reflect allocations of general corporate expenses from CareerBuilder for certain corporate functions, including executive support, facilities, finance, HR, legal, security, global IT, and other corporate functions on behalf of Broadbean. The expenses associated with these functions have been allocated based on direct usage or benefit where specifically identifiable, with the remainder allocated on a proportional cost allocation method based primarily on revenue or employee headcount, as applicable. Following the Acquisition, the Company will bear substantially all corporate overhead costs previously allocated to Broadbean. These allocated amounts, however, are not necessarily indicative of the actual amounts that might have been incurred had Broadbean operated independently during the periods presented. The unaudited pro forma condensed combined balance sheet includes CareerBuilder assets and liabilities that are specifically identifiable or otherwise attributable to Broadbean.


 

Note 3. Accounting Policies

The unaudited pro forma condensed combined financial statements do not reflect any differences in accounting policies. The Company has completed the review of Broadbean’s accounting policies and has concluded that differences between the accounting policies of the two companies are not material. However, historically Broadbean has applied different financial statement line-item classifications and/or naming conventions than those used by the Company to certain financial statement line-item categories or amounts. These classification differences were addressed in the accompanying unaudited pro forma condensed combined balance sheet (as described in Note 5) and unaudited pro forma condensed combined statements of operations (as described in Note 6).

Note 4. Estimate of Consideration Transferred and Preliminary Purchase Price Allocation

The preliminary purchase price allocation for the Acquisition is based on estimates, assumptions, valuations and other analyses as of June 13, 2023, that have not been finalized in order to make a definitive allocation. Accordingly, the pro forma adjustments to allocate the purchase consideration will remain preliminary until the Company finalizes the fair values of assets acquired and liabilities assumed. The final amounts allocated to assets acquired and liabilities assumed are dependent upon certain valuations and other studies that have not yet been completed, and as previously stated could differ materially from the amounts presented in the unaudited pro forma condensed combined financial statements.

The total preliminary estimated purchase consideration is allocated to the identifiable assets and liabilities of Broadbean based on their estimated fair values as if the Acquisition had occurred on March 31, 2023, with any excess estimated consideration transferred allocated to goodwill:

 

Acquisition Consideration:

 

Cash consideration at closing

 

$

 

53,224

 

 

 

 

 

 

Preliminary estimate of purchase price allocation:

 

Cash

 

$

 

5,753

 

Accounts receivable

 

 

 

9,890

 

Prepaid and other current assets

 

 

 

1,849

 

Property and equipment

 

 

 

4,268

 

Intangible assets

 

 

 

27,500

 

Other assets

 

 

 

1,239

 

Total assets acquired

 

 

 

50,499

 

Accounts payable

 

 

 

1,257

 

Accrued expenses and other current liabilities

 

 

 

4,183

 

Deferred revenue

 

 

 

10,484

 

Other non-current liabilities

 

 

 

7,636

 

Total liabilities assumed

 

 

 

23,560

 

Identifiable net assets acquired

 

 

 

26,939

 

Goodwill

 

 

 

26,285

 

Total preliminary purchase consideration

 

$

 

53,224

 

The identifiable intangible assets acquired consisted of developed technology and customer relationships with estimated useful lives of four and five years, respectively. The Company amortizes the fair value of these intangible assets on a straight-line basis over their respective useful lives.

Developed technology relates to Broadbean’s internally developed software. The Company valued the developed technology using the relief-from-royalty method under the income approach. This method is based on the application of a royalty rate to forecasted revenue that is expected to be generated by the existing developed technology. The economic useful life was determined based on the technology cycle related to the developed technology, as well as the timing of cash flows over the forecast period. Customer relationships relate to the sales of products and services to Broadbean’s existing customer base. The Company valued the customer relationships using the multi-period excess earnings method under the income approach. This method reflects the present value of the


 

projected cash flows that are expected to be generated by the existing customer relationships less charges representing the contribution of other assets to those cash flows. The economic useful life was determined based on historical customer turnover rates, as well as the timing of cash flows over the forecast period.

The valuation of the intangible assets acquired along with their estimated useful lives, is as follows:

 

Estimated
Fair Value

 

 

Estimated Useful Lives (in years)

Customer relationships

$

17,200

 

 

5

Developed technology

 

10,300

 

 

4

Total intangible assets

$

27,500

 

 

 

The preliminary purchase price allocation above, which is as of the acquisition date of March 31, 2023, has been used to prepare the transaction accounting adjustments in the unaudited pro forma condensed combined balance sheet and unaudited pro forma condensed combined statements of operations.

Note 5. Notes to Unaudited Pro Forma Condensed Combined Balance Sheet

The following is a description of preliminary transaction accounting adjustments reflected in the unaudited pro forma condensed combined balance sheet.

(a)

Cash consideration transferred

Represents the adjustment to record the cash consideration of $53,224.

(b)

Prepaid expenses and other current assets reclassification

Represents the reclassification of “Prepaid expenses” and “other current assets” to “Prepaid expenses and other current assets” of $1,849.

(c)

Intangible assets

Represents the adjustment to record the intangible assets at their estimated fair value of $27,500. See Note 4 for further details on the purchase price allocation and goodwill. Adjustment is offset by elimination of historical intangibles of $962.

(d)

Goodwill

Represents the adjustment to record the purchase price paid in excess of the preliminary estimated fair value of assets acquired and liabilities assumed as of March 31, 2023, and elimination of Broadbean’s pre-acquisition goodwill. See Note 4 for further details on the purchase price allocation and goodwill.

(e)

Other assets reclassification

Represents the reclassification of “Operating lease right-of-use assets” and “Other non-current assets” to “Other assets” of $1,239.

(f)

Client advances reclassification

Represents the reclassification of “Deferred revenue” to “Client advances” of $10,484.

(g)

Other accrued liabilities reclassification

Represents the reclassification of “Accrued expenses and other current liabilities” and “Accrued compensation-related expenses” and “Operating lease liabilities, current portion” to “Other accrued liabilities” of $4,183.


 

(h)

Transaction costs

Represents the adjustment to record estimated remaining transaction costs of $3,752, incurred subsequent to March 31, 2023, that were not previously recorded in the historical consolidated financial statements of the Company. This is a non-recurring adjustment. The $3,752 in transaction costs that were not previously recorded in the historical consolidated financial statements have been included in the unaudited pro forma condensed combined statement of operations for the year ended December 31, 2022.

(i)

Other non-current liabilities reclassification

Represents the reclassification of “Deferred income taxes” and “Non-current operating lease liabilities” to “Other non-current liabilities” of $1,269.

(j)

Deferred tax liability

Represents the adjustment to record a deferred tax liability of $7,059 and eliminate the historical deferred tax liability of $692.

(k)

Equity

Represents the adjustment to eliminate historical equity of $15,792 in parents’ equity and $1,924 in accumulated other comprehensive loss.

Note 6. Notes to Unaudited Pro Forma Condensed Combined Statements of Operations

The following is a description of preliminary transaction accounting adjustments reflected in the unaudited pro forma condensed combined statements of operations.

(l)

Research and development reclassification

Represents the reclassification of “Product development” to “Research and development” of $448 in the three months ended March 31, 2023, and $1,952 in the twelve months ended December 31, 2022.

(m)

Depreciation and amortization reclassification

Represents the reclassification of “Depreciation and amortization” to “General and administrative” of $595 in the three months ended March 31, 2023, and $2,365 in the twelve months ended December 31, 2022, for depreciation of property, equipment and improvements and the reclassification of “Depreciation and amortization” to “Amortization” of $708 in the three months ended March 31, 2023, and $3,046 in the twelve months ended December 31, 2022, for historical amortization of intangible assets.

(n)

Transaction costs

Represents the adjustment to record estimated transaction costs of $3,752 incurred subsequent to March 31, 2023, that were not previously recorded in the historical statements of operations of the Company. This is a non-recurring adjustment. These costs will not affect the Company’s statements of operations beyond twelve months after the acquisition date. The historical unaudited condensed consolidated financial statements of the Company for the three months ended March 31, 2023, include $730 of transaction costs recorded during that period.

(o)

Amortization

Represents the adjustment to recognize post-acquisition amortization expense of intangible assets at their acquisition date fair value in the amounts of $1,504 for the three months ended March 31, 2023, and $6,015 for the twelve months ended December 31, 2022, and eliminate historical amortization of $708 for the three months ended March 31, 2023, and $3,046 for the twelve months ended December 31, 2022.


 

(p)

Income tax

The adjustment reflects the tax effect of the transaction accounting adjustments in the three months ended March 31, 2023, and the twelve months ended December 31, 2022. The estimate was determined based on the combined federal and state statutory tax rate in effect during the period presented.

Note 7. Pro Forma Net Loss per Share

Pro forma basic and diluted net loss per share amounts were calculated using the Company’s historical weighted average common shares outstanding for the three months ended March 31, 2023, and the year ended December 31, 2022. The following table presents the computation of pro forma basic and diluted net loss per share:

 

Three Months Ended March 31, 2023

 

 

Year Ended December 31, 2022

 

Numerator:

 

 

 

 

 

Pro forma net loss

$

(24,072

)

 

$

(30,105

)

Denominator:

 

 

 

 

 

Weighted average common shares outstanding

 

36,587,946

 

 

 

36,033,560

 

Pro forma basic and diluted net loss per share

$

(0.66

)

 

$

(0.84

)

Pro forma net loss per share for both periods excludes potentially dilutive shares of common stock that would have been antidilutive. No new shares were issued for the Acquisition.