Form: 8-K/A

Current report filing

November 15, 2021

Exhibit99.3

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 PandoLogic, Ltd. (“PandoLogic”) by Veritone, Inc. (“Veritone”).

 

The following unaudited pro forma condensed combined financial information presents the combination of the financial information of PandoLogic and Veritone 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 the final rule, Release No. 33-10786 “Amendments to Financial Disclosures about Acquired and Disposed Businesses”. The unaudited pro forma condensed combined balance sheet as of June 30, 2021 combines the historical balance sheet of PandoLogic and the historical balance sheet of Veritone on a pro forma basis as if the acquisition, summarized below, had been consummated on June 30, 2021. The unaudited pro forma condensed combined statements of operations for the year ended December 31, 2020, and the six months ended June 30, 2021, combine the historical statements of operations of PandoLogic and Veritone for such periods as if the acquisition, summarized below, had been consummated on January 1, 2020, the beginning of the earliest period presented.

 

The following unaudited pro forma condensed combined balance sheet as of June 30, 2021, the unaudited pro forma condensed combined statement of operations for the year ended December 31, 2020, and the unaudited pro forma condensed combined statement of operations for the six months ended June 30, 2021 are based on the historical financial statements of PandoLogic and Veritone. 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.

 

This information should be read together with the accompanying notes to the unaudited pro forma condensed combined financial statements included herein, the PandoLogic and Veritone unaudited and audited financial statements and related notes.


VERITONE, INC.

UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET

As of June 30, 2021

(Dollars in thousands)

 

 

 

Historical

 

 

Transaction Accounting Adjustments

 

 

 

 

 

 

 

 

As of

June 30,

2021

 

 

 

 

 

 

 

 

 

 

 

 

As of

June 30,

2021

 

 

 

Veritone,

Inc.

(As

reported)

 

 

PandoLogic

(Historical)

After

Reclassifications

 

 

 

Total PPA

Step Up

Adjustments

 

 

Total

Pro Forma

Adjustments

 

 

 

Pro

Forma

Combined

 

ASSETS

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

120,627

 

 

 

25,580

 

 

 

 

(58,733

)

(a)

 

-

 

 

 

 

87,474

 

Accounts receivable, net

 

 

19,518

 

 

 

27,668

 

(b)

 

 

-

 

 

 

-

 

 

 

 

47,186

 

Expenditures billable to clients

 

 

20,783

 

 

 

 

 

 

 

 

-

 

 

 

-

 

 

 

 

20,783

 

Prepaid expenses and other current assets

 

 

8,944

 

 

 

797

 

(c)

 

 

-

 

 

 

-

 

 

 

 

9,741

 

Total current assets

 

 

169,872

 

 

 

54,045

 

 

 

 

(58,733

)

 

 

-

 

 

 

 

165,184

 

Property, equipment and improvements, net

 

 

479

 

 

 

620

 

 

 

 

-

 

 

 

-

 

 

 

 

1,099

 

Intangible assets, net

 

 

8,587

 

 

 

2,141

 

 

 

 

83,859

 

(d)

 

-

 

 

 

 

94,587

 

Goodwill

 

 

6,904

 

 

 

3,410

 

 

 

 

2,205

 

(e)

 

-

 

 

 

 

12,519

 

Long-term restricted cash

 

 

855

 

 

 

 

 

 

 

 

-

 

 

 

-

 

 

 

 

855

 

Other assets

 

 

230

 

 

 

97

 

 

 

 

1,156

 

(f)

 

-

 

 

 

 

1,483

 

Total assets

 

$

186,927

 

 

 

60,313

 

 

 

 

28,487

 

 

 

-

 

 

 

 

275,727

 

LIABILITIES AND STOCKHOLDERS' EQUITY

 

 

 

 

 

 

 

 

 

 

 

-

 

 

 

-

 

 

 

 

-

 

Accounts payable

 

$

(16,174

)

 

 

(13,244

)

(g)

 

 

-

 

 

 

-

 

 

 

 

(29,418

)

Accrued media payments

 

 

(68,266

)

 

 

 

 

 

 

 

-

 

 

 

-

 

 

 

 

(68,266

)

Client advances

 

 

(7,638

)

 

 

 

 

 

 

 

-

 

 

 

-

 

 

 

 

(7,638

)

Contingent Consideration short term

 

 

 

 

 

 

(1,156

)

 

 

 

(17,867

)

(h)

 

-

 

 

 

 

(19,023

)

Other accrued liabilities

 

 

(12,633

)

 

 

(4,469

)

 

 

 

(11,909

)

(i)

 

(1,426

)

(j)

 

 

(30,437

)

Total current liabilities

 

 

(104,711

)

 

 

(18,869

)

 

 

 

(29,776

)

 

 

(1,426

)

 

 

 

(154,782

)

Contingent Consideration long term

 

 

 

 

 

 

 

 

 

 

 

(8,533

)

(h)

 

-

 

 

 

 

(8,533

)

Other non-current liabilities

 

 

(1,989

)

 

 

(122

)

 

 

 

-

 

 

 

-

 

 

 

 

(2,111

)

Total liabilities

 

 

(106,700

)

 

 

(18,991

)

 

 

 

(38,309

)

 

 

(1,426

)

 

 

 

(165,426

)

Commitments and contingencies

 

 

 

 

 

 

 

 

 

 

 

-

 

 

 

-

 

 

 

 

-

 

Stockholders' equity

 

 

 

 

 

 

 

 

 

 

 

-

 

 

 

-

 

 

 

 

-

 

Convertible Preferred Shares

 

 

 

 

 

 

(21,118

)

 

 

 

21,118

 

(k)

 

-

 

 

 

 

-

 

Common stock

 

 

(33

)

 

 

(3

)

 

 

 

3

 

(k)

 

-

 

 

 

 

(33

)

Additional paid-in capital

 

 

(403,768

)

 

 

(11,806

)

 

 

 

(19,694

)

(k)

 

-

 

 

 

 

(435,268

)

Accumulated deficit / (retained earnings)

 

 

323,647

 

 

 

(8,395

)

 

 

 

8,395

 

(k)

 

1,426

 

(j)

 

 

325,073

 

Accumulated other comprehensive income

 

 

(73

)

 

 

 

 

 

 

 

-

 

 

 

-

 

 

 

 

(73

)

Total stockholders' equity

 

 

(80,227

)

 

 

(41,322

)

 

 

 

9,822

 

 

 

1,426

 

 

 

 

(110,301

)

Total liabilities and stockholders' equity

 

$

(186,927

)

 

 

(60,313

)

 

 

 

(28,487

)

 

 

-

 

 

 

 

(275,727

)

 


UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS FOR THE SIX MONTHS ENDED JUNE 30, 2021

(in thousands, except share and per share data)

 

 

 

Historical

 

 

Transaction

Accounting Adjustments

 

 

 

 

 

 

 

 

Veritone, Inc.

(As reported)

 

 

PandoLogic

(Historical) After

Reclassifications

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Six Months Ended

June 30,

 

 

Six Months Ended

June 30,

 

 

PPA

 

 

Pro Forma

 

 

Veritone, Inc.

Pro Forma

 

 

 

 

2021

 

 

2021

 

 

Step Up

 

 

Adjustments

 

 

Combined

 

 

Revenue

 

$

37,501

 

 

 

20,501

 

 

 

 

 

 

 

 

 

 

 

58,002

 

 

Operating expenses:

 

 

-

 

 

 

-

 

 

 

 

 

 

 

 

 

 

 

-

 

 

Cost of revenue

 

 

10,054

 

 

 

942

 

 

 

 

 

 

 

 

 

 

 

10,996

 

 

Sales and marketing

 

 

11,680

 

 

 

5,448

 

(m)

 

 

 

 

 

 

 

 

 

17,128

 

 

Research and development

 

 

9,606

 

 

 

3,791

 

(m)

 

 

 

 

 

 

 

 

 

13,397

 

 

General and administrative

 

 

47,187

 

 

 

3,408

 

(m)

 

875

 

(l)

 

 

 

 

 

51,470

 

 

Amortization

 

 

2,157

 

 

 

118

 

 

 

7,168

 

(m)

 

-

 

 

 

9,443

 

 

Total operating expenses

 

 

80,684

 

 

 

13,707

 

 

 

8,043

 

 

 

-

 

 

 

102,434

 

 

Loss from operations

 

 

(43,183

)

 

 

6,794

 

 

 

(8,043

)

 

 

 

 

 

 

(44,432

)

 

Other expense, net

 

 

(22

)

 

 

19

 

 

 

 

 

 

 

 

 

 

 

(3

)

 

Finance expense, net

 

 

 

 

 

 

-

 

 

 

 

 

 

 

 

 

 

 

-

 

 

Loss before provision for income taxes

 

 

(43,205

)

 

 

6,775

 

 

 

(8,043

)

 

 

-

 

 

 

(44,473

)

 

Provision for income taxes

 

 

77

 

 

 

1,676

 

 

 

(965

)

(n)

 

-

 

 

 

788

 

 

Net loss

 

$

(43,282

)

 

 

5,099

 

 

 

(7,078

)

 

 

-

 

 

 

(45,261

)

 

Net loss per share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic and diluted

 

$

(1.33

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1.32

)

 

Weighted average shares outstanding:

 

 

-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic and diluted

 

 

32,458,269

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

34,163,091

 

(o)

Comprehensive loss:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

$

(43,282

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(45,261

)

 

Foreign currency translation gain, net of income taxes

 

 

7

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

7

 

 

Total comprehensive loss

 

$

(43,275

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(45,254

)

 

 


UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 2020

(in thousands, except share and per share data)

 

 

 

Historical

 

 

Transaction

Accounting Adjustments

 

 

 

 

 

 

 

 

Veritone, Inc.

(As reported)

 

 

PandoLogic

(Historical) After

Reclassifications

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For Year Ended

December 31,

 

 

For Year Ended

December 31,

 

 

PPA

 

 

Pro Forma

 

 

Veritone, Inc.

Pro Forma

 

 

 

 

2020

 

 

2020

 

 

Step Up

 

 

Adjustments

 

 

Combined

 

 

Revenue

 

$

57,708

 

 

 

47,386

 

 

 

 

 

 

 

 

 

 

 

105,094

 

 

Operating expenses:

 

 

 

 

 

 

-

 

 

 

 

 

 

 

 

 

 

 

-

 

 

Cost of revenue

 

 

15,663

 

 

 

1,240

 

 

 

 

 

 

 

 

 

 

 

16,903

 

 

Sales and marketing

 

 

19,877

 

 

 

5,180

 

(m)

 

 

 

 

 

 

 

 

 

25,057

 

 

Research and development

 

 

14,379

 

 

 

4,955

 

(m)

 

 

 

 

 

 

 

 

 

19,334

 

 

General and administrative

 

 

50,080

 

 

 

2,981

 

(m)

 

3,000

 

(l)

 

1,426

 

(j)

 

57,487

 

 

Amortization

 

 

5,382

 

 

 

114

 

 

 

14,457

 

(m)

 

-

 

 

 

19,953

 

 

Total operating expenses

 

 

105,381

 

 

 

14,470

 

 

 

17,458

 

 

 

1,426

 

 

 

138,735

 

 

Loss from operations

 

 

(47,673

)

 

 

32,916

 

 

 

(17,458

)

 

 

1,426

 

 

 

(33,641

)

 

Other (expense) income, net

 

 

(127

)

 

 

215

 

 

 

 

 

 

 

 

 

 

 

88

 

 

Loss before provision for (benefit from) income taxes

 

 

(47,800

)

 

 

32,701

 

 

 

(17,458

)

 

 

1,426

 

 

 

(31,131

)

 

Provision for (benefit from) income taxes

 

 

76

 

 

 

244

 

 

 

(2,095

)

(n)

 

(171

)

(n)

 

(1,946

)

 

Net loss

 

$

(47,876

)

 

 

32,457

 

 

 

(19,553

)

 

 

1,255

 

 

 

(33,717

)

 

Net loss per share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic and diluted

 

$

(1.73

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1.15

)

 

Weighted average shares outstanding:

 

 

-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic and diluted

 

 

27,594,911

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

29,299,733

 

(o)

Comprehensive loss:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

 

(47,876

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(33,717

)

 

Unrealized gain on marketable securities, net of income taxes

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

 

20

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

20

 

 

Total comprehensive loss

 

$

(47,856

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(33,697

)

 

 

 


NOTES TO THE UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS

(Amounts in thousands, except per share data)

Note 1. Description of the Transaction

On September 14, 2021, the Company acquired 100% of PandoLogic., a company incorporated under the laws of the state of Israel, pursuant to an Agreement and Plan of Merger (the “Merger Agreement”) dated as of July 21, 2021. PandoLogic is a leading provider of intelligent hiring solutions and utilizes its proprietary platform to accelerate the time and improve the efficiency in the process for employers hiring at scale for both mass market and difficult-to-source candidates. PandoLogic’s fully autonomous recruiting platform helps employers source talent faster and more efficiently with predictive algorithms, machine learning and AI.

The total purchase consideration for PandoLogic was $116,633 (the “Merger Consideration”), which consisted of upfront consideration of $58,733 in cash and $31,500 for the fair value of the Company’s 1,704,822 shares of common stock, and up to $65,000 in contingent consideration based on achieving certain earnouts tied to financial performance of PandoLogic in fiscal 2021 and 2022, which amount will be paid in a combination of cash and common stock (the “Earnout”).  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 Company utilized a Monte Carlo simulation model to estimate the fair value of a portion of the Earnout. The fair value of the Earnout was estimated to be $30,000 as of September 14, 2021, $26,400 of which was deemed to be purchase consideration and recorded within contingent consideration short term and contingent consideration long term on the condensed consolidated balance sheet. The remaining $3,600 will be recognized as compensation expense over the earnout period in the general & administrative expenses on the condensed consolidated statement of operations and comprehensive loss. Subsequent to the acquisition date, the Company is required to reassess its estimate of the fair value of the Earnout, including certain future Earnout obligations triggered on employment status of certain PandoLogic management, and record any changes in earnings when the estimate is based on information not known as of the acquisition date. The Company incurred $2,161 million in acquisition related expenses and has recorded them in general & administrative expenses in the condensed consolidated statement of operations and comprehensive loss.

Note 2. Basis of Presentation

The unaudited pro forma condensed combined financial statements were prepared using the acquisition method in accordance with Financial Accounting Standards Board 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. 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.

Note 3. Accounting Policies

The unaudited pro forma condensed combined financial statements do not reflect any differences in accounting policies. Veritone has completed the review of PandoLogic accounting policies and has concluded that differences between the accounting policies of the two companies are not material. However, historically PandoLogic classified certain line items under different line item names. These differences in classification were addressed in the accompanying unaudited proforma condensed combined Statement of Operations and is described in Note 6 and in the unaudited proforma condensed combined Balance Sheet and is described in Note 5.


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

The table below represents the preliminary purchase price allocation based on estimates, assumptions, valuations and other analyses as of September 30, 2021, 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 management 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 as shown in the table above is allocated to the tangible and intangible assets and liabilities of PandoLogic based on their estimated fair values as if the Acquisition had occurred on June 30, 2021, which is the assumed acquisition date for purposes of the unaudited pro forma condensed combined balance sheet:

 

Acquisition Consideration:

 

Cash consideration at closing

  

$

58,733

 

Equity consideration at closing

  

 

31,500

 

Contingent earn-out

  

 

26,400

 

Total

  

$

116,633

 

Preliminary estimate of purchase price allocation

 

Cash

  

$

25,580

 

Accounts receivable

  

 

27,668

 

Prepaid and other current assets

  

 

797

 

Property and equipment

  

 

620

 

Intangible assets

  

 

86,000

 

Other assets

  

 

1,253

 

Total assets acquired

  

 

141,918

 

Accounts payable

  

 

13,244

 

Accrued expenses and other current liabilities

  

 

5,747

 

Deferred tax liability

  

 

11,909

 

Total liabilities assumed

  

 

30,900

 

Identifiable net assets acquired

 

 

111,018

 

Goodwill

  

 

5,615

 

Total preliminary purchase consideration

  

$

116,633

 

 

The fair value of the intangible assets has been estimated using a combination of the income and cost approaches. Under the income approach, the after-tax cash flows associated with the asset are discounted to present value. The key assumptions include the Company's estimates of the projected cash flows and discount rates. Under the cost approach, the replacement cost is used to estimate the value of the asset. The key assumptions include the Company's estimates of the direct and indirect costs required to replace the asset. The valuation of the intangible assets acquired from PandoLogic along with their estimated useful lives, is as follows (in thousands):

 

 

Estimated

Fair Value

 

 

Estimated

Useful Lives

(in years)

 

Customer relationships

 

68,000

 

 

 

7

 

Developed technology

 

16,000

 

 

 

4

 

Trade name

 

2,000

 

 

 

5

 

Total intangible assets

$

86,000

 

 

 

 

 

 

The preliminary purchase price allocation above, which is as of the acquisition date of September 30, 2021, has been used to prepare the transaction accounting adjustments in the unaudited pro forma condensed combined balance sheet and unaudited pro forma condensed combined statement of operations.


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

 

(a)

Cash consideration transferred

Represents the adjustment to record the cash portion of the consideration of $58.7 million

 

(b)

Accounts Receivable

To Reclassify “Trade Receivable” to “Accounts Receivable” of $27.7 million

 

(c)

Prepaid expenses and other current assets

To Reclassify “Other Receivables” to “Prepaid expenses and other current assets” of $0.8 million

 

(d)

Intangible assets

Represents the adjustment to record the intangible assets at their estimated fair value of $86 million Represents the adjustment to record the purchase price paid in excess of the preliminary estimated fair value of assets acquired and liabilities assumed. See Note 4 for further details on the purchase price allocation and goodwill. Adjustment is offset by elimination of historical intangibles of $2.1 million

 

(e)

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 June 30, 2021 and elimination of PandoLogic’s pre-acquisition goodwill. See Note 4 for further details on the purchase price allocation and goodwill.

 

(f)

Other assets

To Reclassify “Long Term Deposits” to “Other assets” of $0.1 million

Represents the adjustment to recognize indemnification assets for escrowed contingent earnout.

 

(g)

Accounts Payable

To Reclassify “Trade payables” to “Accounts payable” of $13.2 million

 

(h)

Contingent consideration

Represents the adjustment to recognize contingent consideration earnout of $17.9 million in short term and $8.5 million in long term

 

(i)

Other accrued liabilities

Represents the adjustment to recognize deferred tax liability of $11.9 million

 

(j)

Transaction costs

Represents the adjustment to record estimated remaining transaction costs of $1.4 million that were not previously recorded in the historical combined financial statements. This is a non-recurring adjustment. It has been included in the Statement of Operations in the 12 months ended December 31, 2020.

 

(k)

Equity

Represents the adjustment to eliminate historical equity of $21.1 million convertible preferred shares, $11.8 million additional paid-in capital and $8.4 million retained earnings offset by the recognition of the fair value of Veritone equity issued in connection with the transaction of $31.5 million.


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

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

 

(l)

General & administrative

Represents the adjustment to recognize post acquisition recognition of the portion of contingent consideration that is deemed compensation of $0.9 million in the six months ended June 30, 2021 and $3.0 million in the twelve months ended December 31, 2020 respectively

 

(m)

Amortization

Represents

the adjustment to recognize post acquisition recognition of amortization expense of intangible assets recognized in the transaction of $7.2 million in the six months ended June 30, 2021 and $14.6 million in the twelve months ended December 31, 2020 and as well as removing historical amortization of $0.1 million related to retired assets from each period.

To Reclassify from “Sales & marketing”, “Research and Development”, and “General & administrative” to “Amortization” of $0.1 million

 

(n)

Income Tax

The adjustment reflects the tax effect of the transaction accounting adjustments as well as the tax provision of $1.0 million in the six months ended June 30, 2021 and $2.1 million in the twelve months ended December 31, 2020 based on the historical PandoLogic income before provision for income taxes. The estimate was determined based on the combined federal and state statutory tax rate in effect during the period presented.

 

(o)

Shares outstanding

Represents the adjustment to recognize shares issued in conjunction with the transaction of 1.7 million