Exhibit 99.3
SPENDSMART NETWORKS, INC.
PRO FORMA UNAUDITED COMBINED FINANCIAL STATEMENTS
INTRODUCTORY NOTE
On September 18, 2014, the Company through its wholly-owned subsidiary SpendSmart-CA, purchased substantially all of the web related assets of TechXpress, Inc. (“TechXpress”), a California corporation, pursuant to the terms of an Asset Purchase Agreement (the “Asset Purchase Agreement”). In consideration of the purchased assets, the Company agreed to pay a purchase price consisting of $454,641 in cash and shares of the Company’s common stock, $0.001 par value per share, equal to $438,518, or an aggregate of 596,315 shares of the Company’s common stock (the “Stock Consideration”).
The Company is providing the following unaudited pro forma condensed combined financial information to aid you in your analysis of the financial aspects of the TechXpress Acquisition.
The following unaudited pro forma condensed combined balance sheet combines the unaudited condensed historical balance sheets of the Company as of June 30, 2014 with the unaudited condensed historical balance sheet of TechXpress as of June 30, 2014, giving effect to the TechXpress Acquisition as if it had been consummated as of that date.
The following unaudited pro forma condensed combined statement of operations combines the unaudited historical statements of operations of the Company for the year ended December 31, 2013 with the unaudited historical statement of operations of TechXpress for the year ended December 31, 2013, giving effect to the TechXpress Acquisition as if it had occurred on January 1, 2013.
The following unaudited pro forma condensed combined statement of operations combines the unaudited historical statements of operations of the Company for the six months ended June 30, 2014 with the unaudited historical statement of operations of TechXpress for the six months ended June 30, 2014, giving effect to the TechXpress Acquisition as if it had occurred on January 1, 2014.
The historical financial information has been adjusted to give effect to pro forma events that are related and/or directly attributable to the TechXpress Acquisition, are factually supportable and are expected to have a continuing impact on the combined results. The adjustments presented on the unaudited pro forma condensed combined financial statements have been identified and presented to provide relevant information necessary for an accurate understanding of the combined company upon consummation of the merger.
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| Spendsmart Networks, Inc. | ||||||||||||||||||||||||
| Pro Forma Condensed Combined Balance Sheet | ||||||||||||||||||||||||
| As of June 30, 2014 | ||||||||||||||||||||||||
| (Unaudited) | ||||||||||||||||||||||||
| A | B | ||||||||||||||||||||||
| SSPC as of June 30, 2014 | TechXpress as of June 30, 2014 | Elimination of TechXpress | Pro Forma Adjustments | Notes | Pro Forma Combined | ||||||||||||||||||
| Assets | |||||||||||||||||||||||
| Current Assets | |||||||||||||||||||||||
| Cash and cash equivalents | $ | 6,017,849 | $ | 69,102 | $ | (69,102 | ) | $ | - | ||||||||||||||
| (454,641 | ) | C | $ | 5,563,208 | |||||||||||||||||||
| Accounts receivable, net | 160,004 | 314 | (314 | ) | 5,758 | C | 165,762 | ||||||||||||||||
| Other current assets | 545,325 | 6,000 | (6,000 | ) | - | 545,325 | |||||||||||||||||
| Total current assets | 6,723,178 | 75,416 | (75,416 | ) | (448,883 | ) | 6,274,295 | ||||||||||||||||
| Property and equipment, net | 139,647 | 12,262 | (12,262 | ) | - | 139,647 | |||||||||||||||||
| Deposits and other assets | 528,158 | 82,430 | (82,430 | ) | - | 528,158 | |||||||||||||||||
| Intangible assets | 2,593,955 | - | - | 169,600 | C | 2,763,555 | |||||||||||||||||
| Goodwill | 3,221,199 | - | - | 717,801 | C | 3,939,000 | |||||||||||||||||
| Total assets | $ | 13,206,137 | $ | 170,108 | $ | (170,108 | ) | 438,518 | 13,644,655 | ||||||||||||||
| Liabilities and Stockholders' Equity | |||||||||||||||||||||||
| Current Liabilities | |||||||||||||||||||||||
| Short term debt | $ | - | $ | 131,754 | $ | (131,754 | ) | - | - | ||||||||||||||
| Accounts payable and accrued expenses | 546,142 | 162,109 | (162,109 | ) | - | 546,142 | |||||||||||||||||
| Deferred Revenue | 529,340 | 93,416 | (93,416 | ) | - | 529,340 | |||||||||||||||||
| Other current liabilities | 388,339 | - | - | - | 388,339 | ||||||||||||||||||
| Total current liabilities | 1,463,821 | 387,279 | (387,279 | ) | $ | - | $ | 1,463,821 | |||||||||||||||
| Long Term Liabilities | |||||||||||||||||||||||
| Deferred acquisiton related payable and earn out | 1,100,986 | - | - | - | 1,100,986 | ||||||||||||||||||
| Note payable | - | 1,313,611 | (1,313,611 | ) | $ | - | $ | - | |||||||||||||||
| Total liabilities | $ | 2,564,807 | $ | 1,700,890 | $ | (1,700,890 | ) | $ | - | $ | 2,564,807 | ||||||||||||
| Stockholders' equity | |||||||||||||||||||||||
| Convertible preferred stock | 4,166 | - | 4,166 | ||||||||||||||||||||
| Common stock | 16,205 | 1,000 | (1,000 | ) | 5,250 | C | 21,455 | ||||||||||||||||
| Additional paid in capital | 84,936,147 | 47,000 | (47,000 | ) | - | ||||||||||||||||||
| 433,268 | C | 85,369,415 | |||||||||||||||||||||
| Accumulated deficit | (74,315,188 | ) | (1,578,782 | ) | 1,578,782.00 | - | (74,315,188 | ) | |||||||||||||||
| Total stockholders equity (deficit) | 10,641,330 | $ | (1,530,782 | ) | $ | 1,530,782 | 438,518 | 11,079,848 | |||||||||||||||
| Total Liabilities and Stockholders' Equity | $ | 13,206,137 | $ | 170,108 | $ | (170,108 | ) | $ | 438,518 | $ | 13,644,655 | ||||||||||||
See accompanying notes to financial statements.
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| Spendsmart Networks, Inc. | |||||||||||||||||||
| Pro Forma Condensed Statement of Operations | |||||||||||||||||||
| For the Year Ended December 31, 2013 | |||||||||||||||||||
| (Unaudited) | |||||||||||||||||||
| D | E | ||||||||||||||||||
| SSPC for the Year Ended December 31, 2013 | TechXpress for the Year Ended December 31, 2013 | Pro forma Adjustments | Notes | Pro Forma Combined | |||||||||||||||
| Revenue | 999,991 | 1,698,708 | - | 2,698,699 | |||||||||||||||
| Cost of revenues | - | 281,205 | - | 281,205 | |||||||||||||||
| Gross profit | $ | 999,991 | $ | 1,417,503 | $ | - | $ | 2,417,494 | |||||||||||
| Operating expenses | |||||||||||||||||||
| Selling and marketing | 1,167,803 | - | - | 1,167,803 | |||||||||||||||
| Personnel related | 10,160,138 | 780,729 | - | 10,918,033 | |||||||||||||||
| Processing | 1,570,131 | - | - | 1,570,131 | |||||||||||||||
| Amortization of intangible assets | - | - | 16,960 | F | 16,960 | ||||||||||||||
| General and administrative | 2,546,632 | 300,077 | - | 2,846,709 | |||||||||||||||
| Total operating expenses | $ | 15,444,704 | $ | 1,080,806 | 16,960 | $ | 16,519,636 | ||||||||||||
| Income (loss) from operations | $ | (14,444,713 | ) | $ | 336,697 | $ | (16,960 | ) | $ | (14,102,142 | ) | ||||||||
| $ | - | ||||||||||||||||||
| Other income (expense) | 0 | ||||||||||||||||||
| Interest expense | 8,074 | 100,711 | - | 108,785 | |||||||||||||||
| Change in derivative liabilities | (352,588 | ) | - | - | (352,588 | ) | |||||||||||||
| Other income | (3,921 | ) | (464,531 | ) | - | (468,452 | ) | ||||||||||||
| Total other expenses | $ | (348,435 | ) | $ | (363,820 | ) | $ | - | $ | (712,255 | ) | ||||||||
| Net income (loss) | $ | (14,096,278 | ) | $ | 723,351 | $ | (16,960 | ) | $ | (13,389,887 | ) | ||||||||
| Basic and diluted loss per share | $ | (1.56 | ) | $ | (1.39 | ) | |||||||||||||
| Basic and diluted weighted average common shares outstanding | 9,015,046 | G | 9,611,361 | ||||||||||||||||
See accompanying notes to financial statements.
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| Spendsmart Networks, Inc. | ||||||||||||||||||||
| Pro Forma Condensed Statement of Operations | ||||||||||||||||||||
| For the Six Months Ended June 30, 2014 | ||||||||||||||||||||
| (Unaudited) | ||||||||||||||||||||
| H | I | ||||||||||||||||||
| SSPC for the Six Months Ended June 30, 2014 | TechXpress for the Six Months Ended June 30, 2014 | Pro forma Adjustments | Notes | Pro Forma Combined | |||||||||||||||
| Revenue | 2,197,483 | 741,855 | - | 2,939,338 | |||||||||||||||
| Cost of reveunes | - | 93,677 | - | 93,677 | |||||||||||||||
| Gross profit | $ | 2,197,483 | $ | 648,178 | $ | - | $ | 2,845,661 | |||||||||||
| Operating expenses | |||||||||||||||||||
| Selling and marketing | 497,004 | - | - | 497,004 | |||||||||||||||
| Personnel related | 4,878,208 | 373,037 | - | 5,251,245 | |||||||||||||||
| Processing | 1,162,166 | - | - | 1,162,166 | |||||||||||||||
| Amortization of intangible assets | 125,501 | - | 8,480 | J | 133,981 | ||||||||||||||
| General and administrative | 1,261,351 | 129,785 | - | 1,391,136 | |||||||||||||||
| Total operating expenses | $ | 7,924,230 | $ | 502,822 | 8,480 | $ | 8,435,532 | ||||||||||||
| Income (loss) from operations | $ | (5,726,747 | ) | $ | 145,536 | $ | (8,480 | ) | $ | (5,589,871 | ) | ||||||||
| $ | - | ||||||||||||||||||
| Other income (expense) | |||||||||||||||||||
| Interest expense | 264 | (33,788 | ) | - | (33,524 | ) | |||||||||||||
| Change in derivative liabilities | (60,592 | ) | - | - | (60,592 | ) | |||||||||||||
| Bad debt | 0 | 8,189 | - | 0 | |||||||||||||||
| Other income | - | 142 | - | 142 | |||||||||||||||
| Total other expenses | $ | (60,328 | ) | $ | (41,835 | ) | $ | - | $ | (102,163 | ) | ||||||||
| Deemed dividend on preferred stock | - | - | - | ||||||||||||||||
| Net income (loss) | (5,787,075 | ) | 103,521 | $ | (8,480 | ) | (5,692,034 | ) | |||||||||||
| Basic and diluted loss per share | $ | (0.39 | ) | $ | (0.37 | ) | |||||||||||||
| Basic and diluted weighted average common shares outstanding | 14,671,413 | K | 15,267,728 | ||||||||||||||||
See accompanying notes to financial statements.
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Notes to the Unaudited Condensed Combined Pro forma Financial Statements
| A | ) | Derived from the unaudited balance sheet of SSPC as of June 30, 2014. | ||||||
| B | ) | Derived from the unaudited balance sheet of TechXpress as of June 30, 2014. | ||||||
| C | ) | The preliminary allocation of the purchase price to the TechXpress balance sheet is shown below: | ||||||
| Accounts receivable, net | $ | 5,758 | ||||||
| Identifiable intangible assets | 169,600 | |||||||
| Goodwill | 717,801 | |||||||
| Total assets acquired | $ | 893,159 | (1) | |||||
| (1 | ) | Consideration Paid | ||||||
| Cash Paid - to TechXpress | $ | 454,641 | ||||||
| 596,315 Common Stock issued to TechXpress | 438,518 | |||||||
| Total Consideration Paid | $ | 893,159 | ||||||
| D | ) | Derived from the audited statement of operations of SSPC for the year ended December 31, 2013. | ||||||||||||
| E | ) | Derived from the audited statement of operations of TechXpress for the year ended December 31, 2013. | ||||||||||||
| F | ) | Intangible Assets Amortization | Estimated Useful | Annual | ||||||||||
| Intangible Assets Acquired | Fair Value | Life | Amortization | |||||||||||
| IP/Technology | $ | 22,500 | 10 | $ | 2,250 | |||||||||
| Customer Base | 121,000 | 10 | 12,100 | |||||||||||
| Trade-Name/Marks | 2,100 | 10 | 210 | |||||||||||
| Non-Compete | 24,000 | 10 | 2,400 | |||||||||||
| Total Intangible Assets Acquired | $ | 169,600 | $ | 16,960 | ||||||||||
| G | ) | Weighted Average Shares - Basic and Diluted | ||||||||||||
| Outstanding as of December 31, 2013 | 9,015,046 | |||||||||||||
| Add: Issuance of shares issued to TechXpress | 596,315 | |||||||||||||
| Total | 9,611,361 | |||||||||||||
| H) | Derived from the unaudited statement of operations of SSPC for the six months ended June 30, 2014. | |||||||||||||
| I | ) | Derived from the unaudited statement of operations of TechXpress for the six months ended June 30, 2014. | ||||||||||||
| J | ) | Intangible Assets Amortization | Estimated Useful | Annual | ||||||||||
| Intangible Assets Acquired | Fair Value | Life | Amortization | |||||||||||
| IP/Technology | $ | 22,500 | 10 | $ | 2,250 | |||||||||
| Customer Base | 121,000 | 10 | 12,100 | |||||||||||
| Trade-Name/Marks | 2,100 | 10 | 210 | |||||||||||
| Non-Compete | 24,000 | 10 | 2,400 | |||||||||||
| Total Intangible Assets Acquired | $ | 169,600 | $ | 16,960 | ||||||||||
| K | ) | Weighted Average Shares - Basic and Diluted | ||||||||||||
| Outstanding as of June 30, 2014 | 14,671,413 | |||||||||||||
| Add: Issuance of shares issued to TechXpress | 596,315 | |||||||||||||
| Total | 15,267,728 | |||||||||||||
These unaudited pro forma combined condensed financial statements are provided for illustrative purposes only, and do not purport to be indicative of the actual financial position or results of operations had the acquisitions occurred at the beginning of the periods presented, nor are they necessarily indicative of the results of future operations. The unaudited pro forma combined condensed financial statements do not reflect any operating efficiencies and/or cost savings that the combined entity may achieve with respect to the combined companies.
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