UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 6-K
Report of Foreign Private Issuer

Pursuant to Rule 13a-16 or 15d-16
under the Securities Exchange Act of 1934

For the month of May 2020 (Report No. 2)

Commission File Number: 000-51694

Perion Network Ltd.
(Translation of registrant's name into English)

1 Azrieli Center, Building A, 4th Floor
26 HaRokmim Street, Holon, Israel 5885849
(Address of principal executive offices)

Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.

Form 20-F ☒   Form 40-F ☐

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1): N/A

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7): N/A



CONTENTS

Perion Network Ltd., or Perion, hereby furnishes this Report on Foreign Private Issuer on Form 6-K, or this Form 6-K, in order to provide the following financial information:


(a)
historical financial information for Content IQ LLC, a New York limited liability company, or Content IQ, which was acquired by Perion pursuant to a Membership Interest Purchase Agreement, dated as of January 14, 2020, by and among Perion, Content IQ and each of Asaf Katzir and Ziv Yirmiyahu (the selling members of Content IQ); and


(b)
pro forma financial information for Perion to give effect to its acquisition of Content IQ as if such acquisition had been consummated previously (as described below).

The financial information annexed to this Form 6-K consists of the following:


(i)


(ii)
 

 
SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 
PERION NETWORK LTD.
 
       
 
By:
/s/ Maoz Sigron
 
 
Name:
Maoz Sigron
 
 
Title:
Chief Financial Officer
 

Date: May 6, 2020




Exhibit 99.1


CONTENT IQ, LLC.
(Formerly known as BOREDOMTHERAPY, LLC.)

CONSOLIDATED FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2019

U.S. DOLLARS IN THOUSANDS

INDEX

 
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Kost Forer Gabbay & Kasierer
144 Menachem Begin Road, Building A
Tel-Aviv 6492102, Israel
Tel: +972-3-6232525
Fax: +972-3-5622555
ey.com

REPORT OF INDEPENDENT AUDITORS

To the Shareholders' and Board of Directors of

CONTENT IQ, LLC.
(Formerly known as BOREDOMTHERAPY, LLC.)

Report on the consolidated Financial Statements
We have audited the accompanying consolidated financial statements of Content IQ, LLC. (Formerly known as Boredomtherapy.) ("the Company") and its subsidiaries, which comprise the consolidated balance sheet as of December 31, 2019, and the related consolidated statement of operations, changes in members' equity, and cash flow for the year then ended, and the related notes to the consolidated financial statements.

Management's Responsibility for the consolidated Financial Statements
Management is responsible for the preparation and fair presentation of these consolidated financial statements in conformity with U.S. generally accepted accounting principles; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of consolidated financial statements that are free of material misstatement, whether due to fraud or error.

Auditor's Responsibility
Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity's preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Opinion

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of the Company and its subsidiaries as of December 31, 2019, and the consolidated results of its operations and its cash flow for the year then ended, in conformity with accounting principles generally accepted in the United States.

Tel-Aviv, Israel
KOST FORER GABBAY & KASIERER
11 March 2020
A Member of Ernst & Young Global

- 2 -


CONTENT IQ

CONSOLIDATED BALANCE SHEET
U.S. dollars in thousands

   
December 31,
 
   
2019
 
       
 ASSETS
     
       
CURRENT ASSETS:
     
Cash and cash equivalents
 
$
1,148
 
Trade Receivables, net
   
9,116
 
Other receivables
   
45
 
         
Total current assets
   
10,309
 
         
LONG- TERM ASSETS:
       
Property and equipment, net
   
4
 
         
Total long- term assets
   
4
 
         
Total assets
 
$
10,313
 
         
LIABILITIES AND MEMBERS' EQUITY
       
         
CURRENT LIABILITIES:
       
Trade payables
 
$
1,289
 
Accrued expenses and other short-term liabilities
   
701
 
         
Total current liabilities
   
1,990
 
         
MEMBERS' EQUITY:
       
Retained earnings
   
8,323
 
         
Total members' equity
   
8,323
 
         
Total liabilities and shareholders' equity
 
$
10,313
 

The accompanying notes are an integral part of the consolidated financial statements.

11 March 2020
   
Date of approval of the
financial statements
 
Ziv Yirmiyahu
CEO , Founder

- 3 -

CONTENT IQ

CONSOLIDATED STATEMENTS OF OPERATIONS
U.S. dollars in thousands

       
   
Year ended
December 31,
2019
 
       
Revenues
 
$
38,421
 
Cost of sales
   
26,532
 
         
Gross profit
   
11,889
 
         
Operating expenses:
       
Content and Production
   
1,483
 
Research and development
   
3,528
 
Sales and marketing
   
617
 
General and administrative
   
1,851
 
         
Total costs and expenses
   
7,479
 
Operating profit
   
4,410
 
Financial expenses
   
8
 
Taxes on Income
   
320
 
         
Net profit
 
$
4,082
 

The accompanying notes are an integral part of the consolidated financial statements.

- 4 -

CONTENT IQ

CONSOLIDATED STATEMENTS OF CHANGES IN MEMBERS' EQUITY
U.S. dollars in thousands

   
Retrained
 
   
earnings
 
       
Total retrained earnings as of January 1, 2019
   
12,088
 
         
Dividend Distribution
   
(7,847
)
Net profit
   
4,082
 
         
Total retrained earnings as of December 31, 2019
   
8,323
 

The accompanying notes are an integral part of the consolidated financial statements.

- 5 -

CONTENT IQ

CONSOLIDATED STATEMENTS OF CASH FLOW
U.S. dollars in thousands

   
Year ended
December 31,
2019
 
       
Cash flow from operating activities:
     
       
Net profit
 
$
4,082
 
         
Changes in assets and liabilities:
       
         
Decrease (Increase) in short term receivables and advances to suppliers
   
(10
)
Increase in trade receivables, net
   
(2,007
)
Increase (Decrease) in trade payables
   
958
 
Increase in Accrued expenses and other short-term liabilities
   
110
 
Depreciation
   
1
 
         
Net cash used in operating activities
   
3,134
 
         
Cash flow from investing activities:
       
         
Purchase of fixed assets
   
(5
)
         
Net cash used in investing activities
   
(5
)
         
Cash flow from financing activities:
       
         
Dividend Distribution
   
(7,847
)
Net cash provided by financing activities
   
(7,847
)
         
Increase in cash and cash equivalents
   
(4,718
)
Cash and cash equivalents at the beginning of the period
   
5,866
 
         
Cash and cash equivalents at the end of the period
 
$
1,148
 

The accompanying notes are an integral part of the consolidated financial statements.

- 6 -


CONTENT IQ

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands

NOTE 1:       NATURE OF BUSINESS


a.
CONTENT IQ, LLC (“The Company”) was incorporated under the laws of the state of New York on August 14, 2014 under the name of ‘Boredom Therapy LLC’.


b.
The Company changed its name to Content IQ on September 11, 2018.


c.
The company operates in the Digital Publishing space and have created data and analytics tools which deconstruct content, revenue and distribution to solve digital publishing challenges. The Company has a few owned and operated websites and it also offers its technology in the form of a media buying agency.


d.
During the year ended December 31, 2019, 44% of the company's revenues were derived from two customers.


e.
During 2018, the Company established a wholly-owned subsidiary of the Company in Israel, to be named “Content IQ LTD”. The purpose of this subsidiary is to provide R&D services to the parent Company, CONTENT IQ, LLC, on a cost-plus basis.

NOTE 2:
SIGNIFICANT ACCOUNTING POLICIES

The consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States ("U.S. GAAP"). The significant policies in the preparation of the consolidated financial statements are:


a.
Use of estimates:

The preparation of consolidated financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and the accompanying notes. Actual results could differ from those estimates.


b.
consolidated Financial statements in U.S. dollars:

The Company's management believes that the U.S. dollar is the currency of the primary economic environment in which the Company operates. Therefore, the functional and reporting currency for the Company is the U.S. dollar.

The Company's transactions and balances denominated in U.S. dollars are presented at their original amounts.

Non-dollar transactions and balances have been remeasured to U.S. dollars in accordance with ASC 830, "Foreign Currency Matters". All transaction gains and losses from the remeasurement of monetary balance sheet items denominated in non-dollar currencies are reflected in the statement of operations as financial income or expenses, as appropriate.

- 7 -

CONTENT IQ

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands

NOTE 2:
SIGNIFICANT ACCOUNTING POLICIES (Cont.)


c.
Cash and cash equivalents:

Cash and cash equivalents are short-term highly liquid investments that are readily convertible to cash with original maturities of three months or less.


d.
Short-term bank deposits

A short-term bank deposit is a deposit with a maturity of more than three months but less than one year.


e.
Research and development costs:

Research and development cost are charged to the statement of operations as accrued.


f.
Fair value of financial instruments:

The carrying amounts of the Company's financial instruments, including cash and cash equivalents, short-term bank deposit, accounts receivable and prepaid expenses, accounts Payable and accrued expenses, approximate fair value because of their generally short maturities.


g.
Concentrations of credit risk:

Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash and cash equivalents, accounts receivables and prepaid expenses. The Company's cash and cash equivalents are invested in major banks in the US. Management believes that the financial institutions that hold the Company's investments are institutions with high credit standing and, accordingly, minimal risk exists with respect to these investments. The Company has no off-balance-sheet concentrations of credit risk such as, foreign exchange contracts, option contracts or other foreign hedging arrangement.


h.
Revenue recognition:

The Company applies the provisions of Accounting Standards Codification 606, Revenue from Contracts with Customers ("ASC 606" or "Topic 606") The Company adopted the provisions of ASC 606 effective January 1, 2019 using the modified retrospective application method for all uncompleted contracts as of that date. The adoption of ASC 606 did not have a material impact on the Company’s consolidated financial statements. In addition, the adoption of ASC 606 had no impact on the Company's accounts receivable and deferred revenues balance as of December 31, 2019 or on the Company's revenues, cost of sales or its operating expenses during 2019, compared to ASC 605.

The Company generates revenues primarily digital publishing services. The Company generates its revenues mainly on a cost-per-click ("CPC") and cost-per-thousand impression-based ("CPM") basis. A click will be considered to have occurred whenever an end user clicks on the Company's Widgets that has been displayed on the website of the Company's Publisher. The Company recognizes the revenues once the advertisement vendors publish the relevant information across their platform.

- 8 -

CONTENT IQ

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands

NOTE 2:
SIGNIFICANT ACCOUNTING POLICIES (Cont.)

For more disaggregated information of revenues refer to Note 7.

The Company general payments terms are less than one year. Therefore, no finance component is recognized.

The Company evaluates whether its revenues should be presented on a gross basis, which is the amount that a customer pays for the service, or on a net basis, which is the amount of the customer payment less amounts the Company pays to publishers. In making that evaluation, the Company considers whether it controls the promised good or service before transferring that good or service to the customer. The Company considers indicators such as whether the Company is the primary obligor in the arrangement and assumes risks and rewards as a principal or an agent, including the credit risk, whether the Company has latitude in establishing prices and selecting its suppliers and whether it changes the products or performs part of the service. The evaluation of these factors is subject to significant judgment and subjectivity. Generally, in cases in which the Company is primarily obligated in a transaction, is subject to risk, involved in the determination of the product (or the service) specifications, separately negotiates each revenue service agreement or publisher agreement and can have several additional indicators, revenue is recorded on a gross basis. The Company does not have contract assets. Accounts receivable includes amounts billed and currently due from customers. 


i.
Cost of revenues:

Cost of revenues consists mainly cost for advertising impressions purchased from real-time advertising exchanges and other third parties.


j.
Content and Production:

Content and Production expenses are associated with generation of the content and its production across the different sites and advertisements that the company promotes.


k.
Recently Issued Accounting Pronouncements:

In February 2016, the FASB issued ASU 2016-02, “Leases”, on the recognition, measurement, presentation and disclosure of leases for both parties to a contract (i.e., lessees and lessors). The new standard requires lessees to apply a dual approach, classifying leases as either finance or operating leases based on the principle of whether or not the lease is effectively a financed purchase by the lessee. This classification will determine whether lease expense is recognized based on an effective interest method or on a straight-line basis over the term of the lease, respectively. A lessee is also required to record a right-of-use asset and a lease liability for all leases with a term of greater than 12 months regardless of their classification. Leases with a term of 12 months or less will be accounted for in a manner similar to the accounting under existing guidance for operating leases today. The new standard requires lessors to account for leases using an approach that is substantially equivalent to existing guidance for sales-type leases, direct financing leases and operating leases. ASC 842 supersedes the previous leases standard, ASC 840, "Leases". The guidance is effective for the interim and annual periods beginning on or after December 15, 2019, and early adoption is permitted.

- 9 -

CONTENT IQ

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands

NOTE 2:
SIGNIFICANT ACCOUNTING POLICIES (Cont.)

The Company evaluated the potential effect of the guidance on its financial statements and found that the adoption will result in an insignificant effect.


l.
Fair value of financial instruments:

Fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or a liability. A three-tier fair value hierarchy is established as a basis for considering such assumptions and for inputs used in the valuation methodologies in measuring fair value:

Level 1 - 
 
Observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets.
     
Level 2 - 
 
Includes other inputs that are directly or indirectly observable in the marketplace.
     
Level 3 - 
 
Unobservable inputs which are supported by little or no market activity.

The fair value hierarchy also requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.

The carrying amounts of cash and cash equivalents, trade receivables, short-term deposits, trade payables approximate their fair value due to the short-term maturity of such instruments.

NOTE 3:
ACCRUED EXPENSES AND OTHER SHORT-TERM LIABILITIES

   
December 31,
 
   
2019
 
       
State tax
 
$
91
 
Employees and related
   
355
 
Accrued expenses
   
255
 
   
$
701
 

NOTE 4:
COMMITMENTS AND CONTINGENT LIABILITIES

The Company was filed against several legal claims totaling approximately $175 alleging that the Company infringed upon copyrights photographs. The Complaint seeks damages consisting either of the Company's profits from use of the photographs or statutory penalties, plus attorney's fees, cost and interest.  As of the report day those legal procedures have not yet been settled.

- 10 -

CONTENT IQ

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands

NOTE 5:
INCOME TAXES

The income taxes for the period ended December 31, 2019 consists of the following:

   
December 31,
 
   
2019
 
       
State tax
 
$
320
 

NOTE 6:
DISTRIBUTIONS OF DIVIDENDS

During 2019, The Company distributed $ 7,847, respectively to both founders of the company.

NOTE 7:
GEOGRAPHIC INFORMATION

The following table presents the total revenues for the years ended December 31, 2019, allocated to the geographic areas in which they were generated:

   
2019
 
North America (mainly U.S.)
 
$
34,152
 
Europe
   
1,901
 
Other
   
2,368
 
   
$
38,421
 

NOTE 8:
SUBSEQUENT EVENTS

On January 14, 2020, 100% of the shares of the Company were acquired by Perion Networks Ltd.

Total consideration is up to $73,050, which is comprised of $15,000 paid in cash at closing, with an additional maximum $11,000 to be paid as a retention incentive. As part of the total consideration, there is a maximum of $47,050 in earn-outs over a period of two years. The earn-outs are tied to revenue and EBITDA-based metrics.


- 11 -

Exhibit 99.2

UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION
 
As previously disclosed, on January 14, 2020, Perion Network Ltd. (the “Parent Company”) entered into a membership interest purchase agreement with Content IQ, LLC., a New York limited liability company (“Content IQ”), and completed the acquisition of all the issued and outstanding capital of Content IQ.

The unaudited pro forma condensed combined balance sheet is based on the individual historical balance sheet of the Parent Company and Content IQ, as of December 31, 2019, and has been prepared to reflect the effect of the acquisition as if it had occurred on December 31, 2019. The unaudited pro forma condensed combined statement of operations for the year ended December 31, 2019, gives effect to the acquisition as if it had occurred on January 1, 2019, the beginning of the Parent Company's fiscal year. The historical condensed combined financial information has been adjusted to give effect to pro forma events that are: 1) directly attributable to the acquisition; 2) factually supportable; and 3) with respect to the statement of operations, expected to have a continuing impact on the combined results. The unaudited pro forma financial statements were prepared in accordance with Article 11 of U.S. Securities and Exchange Commission Regulation S-X. In the opinion of management, all adjustments necessary to present fairly the unaudited pro forma condensed combined financial information have been made, as further described in the accompanying notes.

The unaudited pro forma condensed combined financial information is derived from and should be read in conjunction with the Parent Company's historical audited financial statements for the fiscal year ended December 31, 2019, which are available in our Annual Report on Form 20-F for the fiscal year ended December 31, 2019, and the historical audited financial statements of Content IQ included as Exhibit 99.1 in this Report of Foreign Private Issuer on Form 6-K.

The allocation of the purchase price as reflected in the unaudited pro forma condensed combined financial information was based on a preliminary valuation of the assets acquired and liabilities assumed, and the accounting is subject to revision as more detailed analyses are completed and additional information about the fair value of assets acquired and liabilities assumed becomes available.

The unaudited pro forma combined condensed financial statements are presented for informational purposes only and are not necessarily indicative of the results of operations that would have resulted had the transaction described above been consummated at the dates indicated, nor are they necessarily indicative of the results of operations which may be realized in the future. Furthermore, the unaudited pro forma combined condensed financial statements do 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 integration of the two companies.
 

Unaudited Pro Forma Condensed Combined Statement of Operations
For the year ended December 31, 2019
(U.S. dollars in thousands)
 
   
Perion Network Ltd
   
Content IQ LLC
   
Pro Forma Adjustments
     
Pro Forma
 
Revenues:
                         
Advertising
 
$
87,863
   
$
38,421
   
$
-
     
$
126,284
 
Search and other
   
173,587
     
-
     
-
       
173,587
 
Total Revenues
   
261,450
     
38,421
     
-
       
299,871
 
                                   
Costs and Expenses:
                                 
Cost of revenues
   
25,520
     
26,532
     
(26,532
)
3(b)
   
25,520
 
Customer acquisition costs and media buy
   
135,891
     
-
     
26,532
 
3(b)
   
162,423
 
Content and Production
   
-
     
1,483
     
(1,483
)
3(b)
   
-
 
Research and development
   
22,585
     
3,528
     
5,484
 
3(c)(d)(f)
   
31,597
 
Selling and marketing
   
34,736
     
617
     
6,883
 
3(b)(c)(d)(e)(f)
   
42,236
 
General and administrative
   
14,999
     
1,851
     
19
 
3(f)
   
16,869
 
Depreciation and amortization
   
9,711
     
-
     
-
       
9,711
 
Total Costs and Expenses
   
243,442
     
34,011
     
10,904
       
288,357
 
                                   
Income (Loss) from Operations
   
18,008
     
4,410
     
(10,904
)
     
11,504
 
Financial expenses, net
   
3,470
     
8
     
1,790
 
3(g)
   
5,268
 
                                   
Income (Loss) before Taxes on Income
   
14,538
     
4,402
     
(12,694
)
     
6,246
 
Taxes on income (benefit)
   
1,645
     
320
     
296
 
3(c)(h)
   
2,261
 
                                   
Net Income (Loss)
 
$
12,893
   
$
4,082
   
$
(12,990
)
     
3,985
 
                                   
Net Earnings (Loss) per Share - Basic:
 
$
0.50
   
$
-
   
$
-
       
0.15
 
                                   
Net Earnings (Loss) per Share – Diluted:
 
$
0.49
   
$
-
   
$
(14.39
)
     
0.15
 
                                   
Weighted average number of shares – Basic:
   
25,965,357
     
-
     
-
       
25,965,357
 
                                   
Weighted average number of shares – Diluted:
   
26,357,585
     
-
     
902,966
       
27,260,551
 
 


Unaudited Pro Forma Condensed Combined Balance Sheet
As of December 31, 2019
(U.S. dollars in thousands)

   
Perion
Network Ltd
   
Content IQ
LLC
   
Pro Forma
Adjustments
         
Pro Forma
 
Assets
                             
Current Assets:
                             
Cash and cash equivalents
 
$
38,389
   
$
1,148
   
$
(16,148
)
   
3(a)

 
$
23,389
 
Restricted cash
   
1,216
     
-
     
-
       
   
1,216
 
Short-term bank deposits
   
23,234
     
-
     
-
       
   
23,234
 
Accounts receivable
   
49,098
     
9,116
     
(9,116
)
   
3(a)

   
49,098
 
Prepaid expenses and other current assets
   
3,170
     
45
     
(45
)
   
3(a)

   
3,170
 
Total Current Assets
   
115,107
     
10,309
     
(25,309
)
     
   
100,107
 
                               
       
Property and equipment, net
   
10,918
     
4
     
-
       
   
10,922
 
Operating lease right-of-use assets
   
22,429
     
-
     
-
       
   
22,429
 
Intangible assets, net
   
2,635
     
-
     
16,726
     
3(a)

   
19,361
 
Goodwill
   
125,809
     
-
     
23,361
     
3(a)

   
149,170
 
Deferred taxes
   
6,171
     
-
     
(2,253
)
   
3(a)

   
3,918
 
Other assets
   
708
     
-
     
-
       
   
708
 
Total Assets
 
$
283,777
   
$
10,313
   
$
12,525
       
 
$
306,615
 
                               
       
Liabilities and Shareholders' Equity
                             
       
Current Liabilities:
                             
       
Accounts payable
 
$
47,681
   
$
1,289
   
$
(1,289
)
   
3(a)

 
$
47,681
 
Accrued expenses and other liabilities
   
18,414
     
701
     
(701
)
   
3(a)

   
18,414
 
Short-term operating lease liability
   
3,667
     
-
     
-
       
   
3,667
 
Short-term loans
   
8,333
     
-
     
-
       
   
8,333
 
Deferred revenues
   
4,188
     
-
     
-
       
   
4,188
 
Short-term payment obligation related to acquisitions
   
1,025
     
-
     
-
       
   
1,025
 
Total Current Liabilities
   
83,308
     
1,990
     
(1,990
)
     
   
83,308
 
Long-Term Liabilities:
                             
       
Long-term debt, net of current maturities
   
8,333
     
-
     
-
       
   
8,333
 
Long-term payment obligation related to acquisitions
   
-
     
-
     
22,838
     
3(a)

   
22,838
 
Long-term operating lease liability
   
20,363
     
-
     
-
             
20,363
 
Other long-term liabilities
   
6,591
     
-
     
-
             
6,591
 
Total Liabilities
   
118,595
     
1,990
     
20,848
             
141,433
 
Commitments and Contingencies
                                       
Shareholders' Equity:
                                       
Ordinary shares
   
213
     
-
     
-
             
213
 
Additional paid-in capital
   
243,211
     
-
     
-
             
243,211
 
Treasury shares at cost
   
(1,002
)
   
-
     
-
             
(1,002
)
Accumulated other comprehensive income
   
130
     
-
     
-
             
130
 
Accumulated deficit
   
(77,370
)
   
8,323
     
(8,323
)
           
(77,370
)
Total Shareholders' Equity
   
165,182
     
8,323
     
(8,323
)
           
165,182
 
Total Liabilities and Shareholders' Equity
 
$
283,777
   
$
10,313
   
$
12,525
           
$
306,615
 



Notes to Unaudited Pro Forma Condensed Combined Consolidated Financial Statements
 
1. Basis of presentation
 
The unaudited pro forma condensed combined statement of operations for the year ended December 31, 2019 was derived from the audited consolidated financial statements included in Parent Company's Annual Report on Form 20-F for the fiscal year ended December 31, 2019, and the audited historical financial information of Content IQ for the year ended December 31, 2019, and has been prepared as if the acquisition had occurred on January 1, 2019. The unaudited pro forma condensed combined financial information herein has been prepared to illustrate the effects of the acquisition in accordance with U.S. GAAP.

The Parent Company has accounted for the acquisition under the acquisition method of accounting in accordance with the authoritative guidance on business combinations under the provisions of Accounting Standards Codification (“ASC”) 805, Business Combinations (“ASC 805”). The purchase price allocation is considered preliminary, and additional adjustments may be recorded during the measurement period in accordance with ASC 805. The purchase price allocation will be finalized as the Parent Company receives additional information relevant to the acquisition, including the final valuation and reconciliation of the assets purchased, including tangible and intangible assets, liabilities assumed. Differences between these preliminary estimates and the final purchase accounting may occur, and these differences could be material.

The unaudited pro forma condensed combined financial information is presented solely for informational purposes and is not necessarily indicative of the combined results of operations or financial position that might have been achieved for the periods presented, nor is it necessarily indicative of the future results of the combined company.

2. Preliminary Purchase Price Allocation
 
On January 14, 2020, the Parent Company entered into a Membership Interest Purchase Agreement, by and among the Parent Company and the founders of Content IQ, pursuant to which the founders assigned, transferred and delivered 100% of their holdings in Content IQ to the Parent Company, in exchange for a total consideration of up to $73,050, of which (i) $15,000 was paid in cash upon closing, (ii) up to $47,050 of earn-out payments tied to revenue and EBITDA-based metrics, to be paid over a period of two years, and (iii) an additional amount of up to $11,000 in retention incentives, to be paid during a period of two years subject to future employment (this amount was accounted for as compensation in accordance with ASC 718 and excluded from the purchase price). The agreement also contains customary representations, warranties, covenants and indemnification provisions.

For purposes of measuring the estimated fair value, where applicable, of the assets acquired and liabilities assumed, as reflected in the unaudited pro forma condensed combined financial information, the guidance in ASC 820, Fair Value Measurements and Disclosures (“ASC 820”) has been applied, which establishes a framework for measuring fair value. In accordance with ASC 820, fair value is an exit price and is defined 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.” Under ASC 805, acquisition-related transaction costs are not included as components of consideration transferred but are accounted for as expenses in the period in which the costs are incurred.


The purchase price allocation is considered preliminary, and additional adjustments may be recorded during the measurement period in accordance with ASC 805. The following tables summarize the preliminary purchase price allocation:

Cash
 
$
15,000
 
Fair value of contingent consideration (i)
   
22,838
 
Fair value of consideration transferred
 
$
37,838
 



(i)
The contingent consideration represents the fair value of up to $47,050 in earn-out payments over a period of two years. The earn-outs are tied to revenue and EBITDA-based metrics that would be paid in full if Content IQ generates $158 million in revenues and more than $17 million of EBITDA in aggregate, over the next two years.

The following is a summary of the preliminary estimated fair values of the net assets acquired as if the acquisition of Content IQ had occurred on January 1, 2019:

   
Total
   
Useful life
 
Fair value of assets acquired
           
Property and equipment, net
   
4
       
Technology
   
12,483
     
5.0
 
Customer relationship
   
4,243
     
7.0
 
Deferred taxes
   
(2,253
)
       
Goodwill
   
23,361
         
   
$
37,838
         

The significant intangible assets identified in the purchase price allocation discussed above include customer relationships and technology, which are amortized over their estimated useful lives based on the pattern of consumption of the economic benefits or, if that pattern cannot be readily determined, on a straight-line basis. To value the customer relationship asset the Parent Company utilized the income approach, specifically a discounted cash-flow method known as the excess earnings method. Technology consists of products that have reached technological feasibility. The developed technology intangible was valued using a relief from royalty method, which considers both the market approach and the income approach.

3. Pro Forma Adjustments
 
The following describes the pro forma adjustments related to the acquisition that have been made in the accompanying unaudited pro forma condensed combined statements of operations for the year ended December 31, 2019, giving effect to the acquisition as if it had been consummated at the beginning of the period presented, and in the accompanying unaudited pro forma condensed balance sheet as of December 31, 2019, giving effect of the acquisition as if it had occurred on December 31, 2019, all of which are based on preliminary estimates that could change significantly as additional information is obtained:
 
(a)
Represents the consideration paid and the assets acquired and liabilities assumed, as if the acquisition of Content IQ was consummated on December 31, 2019.
 
 
(b)
Represents reclassification of Content IQ’s expenses in 2019 to align with Parent Company’s presentation.
   
(c)
Represents the amortization of acquired Intangible assets and related Deferred Taxes, during the year ended December 31, 2019, as if the acquisition of Content IQ was consummated on January 1, 2019.
 
 
(d)
Represents the retention obligations, as described in note 2, during the year ended December 31, 2019, as if the acquisition of Content IQ was consummated on January 1, 2019.
 
 
(e)
Represents the bonus obligations tied to revenue and EBITDA-based metrics that would be paid to Content IQ’s employees for meeting certain performance goals, during the year ended December 31, 2019, as if the acquisition of Content IQ was consummated on January 1, 2019.
   
(f)
Represents the performance (based on revenues and EBITDA metrics) and service based RSU’s stock-based expenses, during the year ended December 31, 2019, as if the acquisition of Content IQ was consummated on January 1, 2019.
   
(g)
Represents the revaluation of the earnout liability during the year ended December 31, 2019 for the passage of time, as if the acquisition of Content IQ was consummated on January 1, 2019.
   
(h)
Represents the tax expenses for Content IQ LLC as if it was taxed as a corporation during the year ended December 31, 2019, as if the acquisition of Content IQ was consummated on January 1, 2019.