EX-99.2 4 gluu-20161101ex9920dce29.htm EX-99.2 glu_Ex99_2

Exhibit 99.2

UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS

On November 2, 2016, Glu Mobile Inc. (“Glu”), through Comet Transfer Sub LLC, a Delaware limited liability company and a wholly owned subsidiary of Glu (“Sub”), acquired shares (the “Shares”) representing approximately 80.6% of the issued and outstanding voting power of Crowdstar Inc., a Delaware corporation (“Crowdstar”), pursuant to a Stock Transfer Agreement (the “Transfer Agreement”) by and among Glu, Sub, Time Warner Inc. (“Time”), Intel Capital Corporation (“Intel”) and certain other stockholders (the “Participating Holders”) of Crowdstar (the “Acquisition”).  Crowdstar, which is based in Burlingame, California, employed approximately 90 people as of November 2, 2016 and develops fashion and home decor genre games for mobile devices.

Pursuant to the terms of the Transfer Agreement, Glu, through Sub, paid approximately $40.8 million in cash to the Participating Holders in exchange for the Shares.  Following the Acquisition, Sub exercised its right, as the holder of a majority of each of the preferred stock and the capital stock of Crowdstar, to appoint each of the five members of the board of directors of Crowdstar.  In addition, certain drag-along provisions (the “Drag-Along”) specified in a voting agreement by and among Crowdstar, Time, Intel, and certain other stockholders of Crowdstar (the “Voting Agreement”) were triggered.  Pursuant to the terms of the Drag-Along, certain other stockholders of Crowdstar (the “Drag Holders”) were required to tender their Crowdstar capital stock to Sub on the same terms as the Participating Holders. 

On December 6, 2016, Glu acquired the remaining issued and outstanding shares of Crowdstar in a two-step process for approximately $4.7 million in cash, and now has 100% ownership of Crowdstar. In the first step, the Drag Holders tendered their shares to Sub in accordance with the drag-along provisions specified in the Voting Agreement.  In the second step, Sub was merged with and into Crowdstar through a short-form merger under the laws of the State of Delaware, with Crowdstar continuing as the surviving entity and as a wholly-owned subsidiary of Glu (the “Merger”).  Glu paid an aggregate of approximately $45.5 million (which includes the $40.8 million Glu paid in connection with the Acquisition) to acquire 100% ownership of Crowdstar.

The unaudited pro forma condensed combined financial statements are based on the historical consolidated financial statements of Glu and Crowdstar, after giving effect to the Acquisition, Drag-Along and Merger (collectively, the “Full Acquisition”) and the assumptions and adjustments described in the accompanying notes to the unaudited pro forma condensed combined financial statements.

The unaudited pro forma condensed combined balance sheet as of September 30, 2016 is derived from the historical condensed consolidated balance sheets of Glu and Crowdstar as of September 30, 2016 and gives effect to the Full Acquisition as if it had been consummated on September 30, 2016. The unaudited pro forma condensed combined statements of operations for the year ended December 31, 2015 and the nine months ended September 30, 2016 are derived from the historical condensed consolidated statements of operations of Glu and Crowdstar for the year ended December 31, 2015 and nine months ended September 30, 2016, and give effect to the Full Acquisition as if it had been consummated on January 1, 2015, the beginning of the earliest period presented.

The unaudited pro forma condensed combined financial information has been presented for informational purposes only and is not necessarily indicative of what the combined company’s financial position or results of operations actually would have been had the Full Acquisition been completed as of the dates indicated. In addition, the unaudited pro forma condensed combined financial information does not purport to project the future financial position or results of operations of the combined company. The unaudited pro forma condensed combined financial information is based upon currently available information and preliminary estimates and assumptions that our management believes are reasonable as of the date hereof. Any of these preliminary estimates and assumptions may change, be revised or prove to be

1


 

materially different, and the estimates and assumptions may not be representative of facts existing at the time of each of the Acquisition, Drag-Along and Merger. We therefore caution you not to place undue reliance on the unaudited pro forma condensed combined financial statements. Glu expects to incur costs associated with integrating the operations of Glu’s and Crowdstar’s  businesses. The unaudited pro forma condensed combined financial statements do not reflect the costs of any integration activities nor any cost savings from operating efficiencies, synergies or other restructuring, or associated costs to achieve such savings, that may result from the Full Acquisition.

The unaudited pro forma condensed combined financial statements should be read in conjunction with the historical consolidated financial statements of Glu included in Glu's Quarterly Report on Form 10-Q for the quarter ended September 30, 2016 filed with the Securities and Exchange Commission (“SEC”) on November 9, 2016 and Annual Report on Form 10-K for the year ended December 31, 2015 filed with the SEC on March 4, 2016, and the historical unaudited consolidated financial statements of Crowdstar as of September 30, 2016 and for the nine months ended September 30, 2016 and 2015 and as of December 31, 2015 and the historical audited consolidated financial statements of Crowdstar for the year then ended included as Exhibit 99.1 to this Current Report on Form 8–K/A.

The unaudited pro forma condensed combined financial information conforms Crowdstar’s accounting policies to those of Glu. Each of Glu’s and Crowdstar’s financial information is prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”). Based on Glu’s review of the summary of significant accounting policies disclosed in the financial statements of Crowdstar, deferred costs of Crowdstar’s have been reclassified to prepaid expenses and other assets on the unaudited pro forma condensed combined balance sheet to conform to Glu’s presentation.  Such reclassifications had no effect on the unaudited pro forma condensed combined statements of operations.  A further detailed review is currently being performed. As a result of that review, Glu may identify differences between the accounting policies of the two companies that, when conformed, may have a material impact on the combined financial statements.

2


 

UNAUDITED PRO FORMA COMBINED CONDENSED BALANCE SHEET AS OF
SEPTEMBER 30, 2016
(in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Pro Forma

 

Pro Forma

 

    

Glu Mobile Inc.

    

Crowdstar

    

Adjustments

    

Combined

ASSETS

 

 

 

 

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

147,515 

 

$

6,023 

 

$

(45,461)

(a)  

$

108,077 

Accounts receivable, net

 

 

14,161 

 

 

3,430 

 

 

 

 

 

17,591 

Prepaid royalties

 

 

10,464 

 

 

96 

 

 

 

 

 

10,560 

Prepaid expenses and other assets

 

 

18,392 

 

 

5,546 

 

 

(5,023)

(b)  

 

18,915 

Total current assets

 

 

190,532 

 

 

15,095 

 

 

(50,484)

 

 

155,143 

Property and equipment, net

 

 

5,539 

 

 

332 

 

 

 

 

 

5,871 

Restricted cash

 

 

1,162 

 

 

— 

 

 

 

 

 

1,162 

Long-term prepaid royalties

 

 

31,877 

 

 

— 

 

 

 

 

 

31,877 

Other long-term assets

 

 

3,866 

 

 

— 

 

 

 

 

 

3,866 

Intangible assets, net

 

 

10,891 

 

 

114 

 

 

15,886 

(c)  

 

26,891 

Goodwill

 

 

88,108 

 

 

— 

 

 

26,605 

(c)  

 

114,713 

Total assets

 

$

331,975 

 

$

15,541 

 

$

(7,993)

 

$

339,523 

 

 

 

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

Accounts payable

 

$

10,647 

 

$

1,318 

 

 

 

 

$

11,965 

Accrued liabilities

 

 

1,646 

 

 

2,768 

 

$

2,112 

(d)  

 

6,526 

Accrued compensation

 

 

9,342 

 

 

— 

 

 

 

 

 

9,342 

Accrued royalties

 

 

7,769 

 

 

— 

 

 

 

 

 

7,769 

Accrued restructuring

 

 

381 

 

 

— 

 

 

 

 

 

381 

Deferred revenue

 

 

32,426 

 

 

16,749 

 

 

(15,253)

(e)  

 

33,922 

Current portion of long-term debt

 

 

— 

 

 

1,262 

 

 

704 

(f)

 

1,966 

Total current liabilities

 

 

62,211 

 

 

22,097 

 

 

(12,437)

 

 

71,871 

Long-term accrued royalties

 

 

21,384 

 

 

— 

 

 

 

 

 

21,384 

Other long-term liabilities

 

 

1,331 

 

 

108 

 

 

(108)

(g)  

 

1,331 

Long-term debt, less current portion

 

 

— 

 

 

704 

 

 

(704)

(f)  

 

— 

 

Total liabilities

 

 

84,926 

 

 

22,909 

 

 

(13,249)

 

 

94,586 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commitments and contingencies

 

 

 

 

 

 

 

 

 

 

 

 

Stockholders’ Equity:

 

 

 

 

 

 

 

 

 

 

 

 

Preferred stock

 

 

— 

 

 

34,977 

 

 

(34,977)

(g)  

 

— 

Common stock

 

 

14 

 

 

— 

 

 

 

 

 

14 

Additional paid-in capital

 

 

568,396 

 

 

18,022 

 

 

(18,022)

(g)  

 

568,396 

Accumulated other comprehensive income (loss)

 

 

113 

 

 

— 

 

 

 

 

 

113 

Accumulated deficit

 

 

(321,474)

 

 

(60,367)

 

 

58,255 

(g) (d)

 

(323,586)

Total stockholders’ equity

 

 

247,049 

 

 

(7,368)

 

 

5,256 

 

 

244,937 

Total liabilities and stockholders’ equity

 

$

331,975 

 

$

15,541 

 

$

(7,993)

 

$

339,523 

 

3


 

UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENTS OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2016
(in thousands, except per share data)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Pro Forma

 

Pro Forma

 

 

Glu Mobile Inc

 

Crowdstar

 

Adjustments

 

Combined

Revenue

    

$

154,272 

    

$

37,412 

    

 

 

    

$

191,684 

Cost of revenue:

 

 

 

 

 

 

 

 

 

 

 

 

Platform commissions, royalties and other

 

 

57,771 

 

 

12,525 

 

 

 

 

 

70,296 

Impairment of prepaid royalties and minimum guarantees

 

 

29,984 

 

 

— 

 

 

 

 

 

29,984 

Impairment and amortization of intangible assets

 

 

11,981 

 

 

— 

 

$

2,644 

(h)

 

14,625 

Total cost of revenue

 

 

99,736 

 

 

12,525 

 

 

2,644 

 

 

114,905 

Gross profit (loss)

 

 

54,536 

 

 

24,887 

 

 

(2,644)

 

 

76,779 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

Research and development

 

 

61,113 

 

 

7,906 

 

 

 

 

 

69,019 

Sales and marketing

 

 

33,663 

 

 

16,370 

 

 

 

 

 

50,033 

General and administrative

 

 

22,091 

 

 

2,108 

 

 

 

 

 

24,199 

Amortization of intangible assets

 

 

— 

 

 

— 

 

 

 

 

 

— 

Restructuring charge

 

 

2,279 

 

 

— 

 

 

 

 

 

2,279 

Total operating expenses

 

 

119,146 

 

 

26,384 

 

 

 

 

 

145,530 

Loss from operations

 

 

(64,610)

 

 

(1,497)

 

 

(2,644)

 

 

(68,751)

Interest income (expense) and other income (expense), net:

 

 

 

 

 

 

 

 

 

 

 

 

Interest income (expenses), net

 

 

58 

 

 

(209)

 

 

 

 

 

(151)

Other income (expense), net

 

 

(5,695)

 

 

(13)

 

 

 

 

 

(5,708)

Interest income (expense) and other income (expense), net

 

 

(5,637)

 

 

(222)

 

 

 

 

 

(5,859)

Loss before income taxes

 

 

(70,247)

 

 

(1,719)

 

 

(2,644)

 

 

(74,610)

Income tax benefit (provision)

 

 

21 

 

 

(21)

 

 

 

 

 

— 

Net loss

 

$

(70,226)

 

$

(1,740)

 

$

(2,644)

 

$

(74,610)

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss per common share:

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

(0.54)

 

 

 

 

 

 

 

$

(0.57)

Diluted

 

$

(0.54)

 

 

 

 

 

 

 

$

(0.57)

Weighted average common shares outstanding used to compute net loss per share:

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

131,160 

 

 

 

 

 

 

 

 

131,160 

Diluted

 

 

131,160 

 

 

 

 

 

 

 

 

131,160 

4


 

UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2015
(in thousands, except per share data)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Pro Forma

 

Pro Forma

 

 

Glu Mobile Inc

 

Crowdstar

 

Adjustments

 

Combined

Revenue

    

$

249,900 

    

$

37,471 

    

 

 

    

$

287,371 

Cost of revenue:

 

 

 

 

 

 

 

 

 

 

 

 

Platform commissions, royalties and other

 

 

98,184 

 

 

12,577 

 

 

 

 

 

110,761 

Amortization of intangible assets

 

 

9,553 

 

 

— 

 

$

3,525 

(h)

 

13,078 

Total cost of revenue

 

 

107,737 

 

 

12,577 

 

 

3,525 

 

 

123,839 

Gross profit (loss)

 

 

142,163 

 

 

24,894 

 

 

(3,525)

 

 

163,532 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

Research and development

 

 

72,856 

 

 

7,249 

 

 

 

 

 

80,105 

Sales and marketing

 

 

48,240 

 

 

17,369 

 

 

 

 

 

65,609 

General and administrative

 

 

26,092 

 

 

2,396 

 

 

 

 

 

28,488 

Amortization of intangible assets

 

 

201 

 

 

— 

 

 

 

 

 

201 

Restructuring charge

 

 

1,075 

 

 

— 

 

 

 

 

 

1,075 

Total operating expenses

 

 

148,464 

 

 

27,014 

 

 

 

 

 

175,478 

Loss from operations

 

 

(6,301)

 

 

(2,120)

 

 

(3,525)

 

 

(11,946)

Interest income (expense) and other income (expense), net:

 

 

 

 

 

 

 

 

 

 

 

 

Interest income (expense), net

 

 

49 

 

 

(322)

 

 

 

 

 

(273)

Other income (expense), net

 

 

(792)

 

 

(23)

 

 

 

 

 

(815)

Interest income (expense) and other income (expense), net

 

 

(743)

 

 

(345)

 

 

 

 

 

(1,088)

Loss before income taxes

 

 

(7,044)

 

 

(2,465)

 

 

(3,525)

 

 

(13,034)

Provison for income tax

 

 

(141)

 

 

(4)

 

 

 

 

 

(145)

Net loss

 

$

(7,185)

 

$

(2,469)

 

$

(3,525)

 

$

(13,179)

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss per common share:

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

(0.06)

 

 

 

 

 

 

 

$

(0.11)

Diluted

 

$

(0.06)

 

 

 

 

 

 

 

$

(0.11)

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average common shares outstanding used to compute net loss per share:

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

118,775 

 

 

 

 

 

 

 

 

118,775 

Diluted

 

 

118,775 

 

 

 

 

 

 

 

 

118,775 

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NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION

1. Basis of Presentation

These unaudited pro forma condensed combined financial statements present the pro forma financial position and statement of operations of the combined company based upon historical financial information after giving effect to the Full Acquisition and adjustments described in these footnotes.

The unaudited pro forma condensed combined financial information is based upon the historical consolidated financial statements of Glu and Crowdstar after giving effect to the Full Acquisition using the purchase accounting method in accordance with the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 805, Business Combinations, and include all adjustments that are directly attributable to the transactions, are factually supportable and, with respect to the unaudited pro forma condensed combined statements of operations, are expected to have a continuing impact on the consolidated results.  In accordance with ASC 805, Glu allocates the purchase price of the Full Acquisition to the tangible assets, liabilities, and identifiable intangible assets acquired based on their estimated fair values. The excess of the purchase price over those fair values is recorded as goodwill. During the measurement period, as additional information becomes available about facts and circumstances that existed as of acquisition date, Glu may further revise its preliminary valuation of assets acquired and liabilities assumed with the corresponding offset to goodwill. After the measurement period, which could be up to one year after the initial transaction date, Glu will record subsequent adjustments to its statement of operations.

The allocation of the purchase price is preliminary and based on valuations derived from estimated fair value assessments and assumptions used by management. The estimated fair values of the assets acquired and liabilities assumed are considered preliminary and are based on the information that was available as of the date of the Full Acquisition. Glu believes that the information provides a reasonable basis for estimating the fair value of assets acquired and liabilities assumed, however, the preliminary measurements of fair value are subject to change.  Glu expects to finalize the valuation of the assets acquired and liabilities assumed as soon as practicable, but not later than one-year from the initial acquisition date.

The unaudited pro forma condensed combined financial information does not give effect to the potential impact of current financial conditions, regulatory matters, operating efficiencies or other savings or expenses that may be associated with the Full Acquisition. The unaudited pro forma condensed combined financial information also does not include any future integration costs. The unaudited pro forma condensed combined financial information has been prepared by management for illustrative purposes only, in accordance with Article 11 of SEC Regulation S-X and are not necessarily indicative of the consolidated financial position or results of operations in future periods or the results that actually would have been realized had Glu and Crowdstar been operating as a combined company during the specified periods presented.

The financial statements of Glu and Crowdstar are prepared in accordance with accounting principles generally accepted in the United States.  Certain amounts in the historical consolidated financial statements of Crowdstar have been reclassified to conform to Glu’s financial statement presentation.  Deferred costs of Crowdstar’s have been reclassified to prepaid expenses and other assets on the unaudited pro forma condensed combined balance sheet to conform to Glu’s presentation.  Such reclassifications had no effect on the unaudited pro forma condensed combined statements of operations. Management will also continue to assess the accounting policies of Crowdstar for adjustments in addition to those reflected in the unaudited pro forma condensed combined financial information that may be required to conform the accounting policies of Crowdstar to Glu’s.

6


 

2. Pro Forma Acquisition of Crowdstar

Under the purchase method of accounting, Glu allocated the total purchase price of $45.5 million, which consisted of cash consideration paid to Crowdstar stockholders to the net tangible and intangible assets acquired and liabilities assumed based upon their respective estimated fair values as of the initial transaction date.  Glu incurred transaction costs of $0.5 million.  The following summarizes the preliminary purchase price allocation of the Full Acquisition as if the Full Acquisition had occurred on September 30, 2016:

 

 

 

 

(in thousands)

    

September 30, 
2016

Assets acquired:

 

 

 

Cash

 

$

6,023 

Accounts receivable

 

 

3,430 

Prepaid and other current assets

 

 

619 

Property and equipment

 

 

332 

Intangible assets:

 

 

 

Titles, content and technology

 

 

16,000 

Goodwill

 

 

26,605 

Total assets acquired

 

 

53,009 

Liabilities assumed:

 

 

 

Accounts payable

 

 

(1,318)

Accrued liabilities

 

 

(2,768)

Deferred revenue

 

 

(1,496)

Notes payable

 

 

(1,966)

Total liabilities assumed

 

 

(7,548)

Total purchase price

 

$

45,461 

Identifiable intangible assets. The preliminary fair values of intangible assets were determined based on the provisions of ASC 805, which defines fair value in accordance with ASC Topic 820, Fair Value Measurements and Disclosures (“ASC 820”).  ASC 820 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Intangible assets were identified that met either the separability criterion or the contractual-legal criterion described in ASC 805. 

Glu has preliminarily allocated $16.0 million to identifiable intangible assets. 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 based on the fair value of these assets.  The amortization expense related to the preliminary fair value of titles, content and technology is reflected as a pro forma adjustment to the unaudited pro forma combined financial statements.  The identifiable intangible assets will be amortized over the weighted average period of 4.6 years on a straight-line basis which is expected to produce the following amortization expense for the combined operations: 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Estimated

 

Amortization for

 

 

Fair

 

Useful

 

Year ended

 

Nine Months ended

Asset Class

 

Value

 

Life

 

December 31, 2015

 

September 30, 2016

Titles, content and technology

    

$

16,000 

    

4.6

    

$

3,525 

    

$

2,644 

Total identifiable intangible assets

 

$

16,000 

 

 

 

$

3,525 

 

$

2,644 

 

7


 

The total expected future amortization related to identified intangible assets is as follows:

 

 

 

 

 

 

    

Amortization

 

 

Included in

 

 

Cost of

Periods Ending December 31,

 

Revenues

Remainder of 2016

 

$

881 

2017

 

 

3,525 

2018

 

 

3,525 

2019

 

 

1,900 

2020

 

 

— 

2021 and thereafter

 

 

— 

 

 

$

9,831 

Goodwill. Goodwill represents the excess of the purchase price over the fair value of the underlying net assets acquired, net of deferred taxes.  Such goodwill is not deductible for tax purposes and represents the value placed on expected synergies recognized in connection with the Full Acquisition. In accordance with ASC Topic 350, Intangibles—Goodwill and Other, goodwill will not be amortized, but instead will be tested for impairment at least annually and whenever events or circumstances have occurred that may indicate a possible impairment. In the event management determines that the value of goodwill has become impaired, the combined company will incur an accounting charge for the amount of the impairment during the period in which the determination is made.

The purchase accounting for the Full Acquisition is preliminary and subject to completion upon obtaining the necessary remaining information, including (1) the identification and valuation of assets acquired and liabilities assumed, including intangible assets and related goodwill, (2) the finalization of the opening balance sheet, including certain accruals and prepaid expenses, and (3) the related tax impacts of the Full Acquisition. Glu has preliminarily valued the acquired assets and liabilities based on their estimated fair value. These estimates are subject to change as additional information becomes available. The preliminary fair values are based on the best estimates of the Company. Any adjustments to the preliminary fair values will be made as such information becomes available, but no later than November 1, 2017.

8


 

3. Pro Forma Adjustments

The unaudited pro forma condensed combined financial statements give effect to the transaction as if it had occurred on September 30, 2016 for purposes of the unaudited pro forma condensed combined balance sheet and on January 1, 2015 for purposes of the unaudited pro forma condensed combined statements of operations. The unaudited pro forma condensed combined statements of operations do not include any material non-recurring charges that will arise as a result of the Full Acquisition. Adjustments in the unaudited pro forma condensed combined financial statements are as follows:

(a)

Represents the cash consideration paid as a result of the Full Acquisition.

(b)

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

(c)

Adjustment to record estimated goodwill and intangible assets relating to the Full Acquisition.

(d)

To accrue for estimated acquisition related transaction costs of $2.1 million incurred by Glu and Crowdstar but not yet reflected in the historical results at September 30, 2016.

(e)

To record the fair value adjustment to deferred revenues related to revenue generated through digital storefronts.   The preliminary estimated fair value represents the estimated costs that will be incurred to fulfill the obligation plus an assumed profit margin for the level of effort to fulfill all obligations associated with the deferred revenue assumed in the Full Acquisition.

(f)

To reclassify long-term debt of Crowdstar to current portion in accordance with the debt agreement, which requires repayment upon a change in control triggering event.

(g)

To eliminate the historical preferred stock warrant liability, preferred stock, common stock, additional paid in capital and accumulated deficit of Crowdstar.

(h)

To record the amortization expense of the identifiable intangible assets resulting from the purchase of Crowdstar. See Note 2 above for the estimated useful lives and amortization expense for intangible asset.

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