Exhibit 99.3

UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION

Introduction

On June 1, 2021, Kaleyra, Inc. (“Kaleyra”) and Vivial Inc. (“Vivial”) completed the acquisition by Kaleyra of the business owned by Vivial known as mGage (the “Merger”).

For the purpose of the preparation of this unaudited pro forma combined financial information the historical financial information of mGage has been derived from the unaudited historical condensed consolidated financial statements as of and for the three months ended March 31, 2021 and the audited historical consolidated financial statements as of and for the year ended December 31, 2020 of Vivial Networks LLC (“Vivial Networks”), a subsidiary of Vivial, which, together with its subsidiaries, substantially represents the operations of mGage.

The following unaudited pro forma condensed combined financial information as of and for the three months ended March 31, 2021 is based on the unaudited historical condensed consolidated financial statements of Kaleyra as of and for the three months ended March 31, 2021, and the unaudited historical condensed consolidated financial statements of Vivial Networks as of and for the three months ended March 31, 2021. The following unaudited pro forma combined financial information for the year ended December 31, 2020 is based on the audited historical consolidated financial statements of Kaleyra for the year ended December 31, 2020, and the audited historical consolidated financial statements of Vivial Networks for the year ended December 31, 2020. The above historical financial information of Kaleyra and Vivial Networks has been adjusted to give effect to the following transactions, (together, the “Transactions”):

 

   

The Merger;

 

   

The issue of PIPE Shares (as defined below);

 

   

The issuance of the Notes (as defined below);

 

   

The payment by Kaleyra of the consideration for the Merger (the “Merger Consideration”) to Vivial equity holders; and

 

   

The payment by Kaleyra of certain fees, expenses and other amounts associated with the Merger.

The unaudited pro forma condensed combined balance sheet as of March 31, 2021 gives effect to the Transactions as if they had occurred on March 31, 2021. The unaudited pro forma combined statements of operations for the three months ended March 31, 2021 and the year ended December 31, 2020 gives effect to the Transactions as if they had occurred on January 1, 2020.

The unaudited pro forma combined financial information does not necessarily reflect what the combined company’s financial condition or results of operations would have been, had the Merger occurred on the dates indicated. It also may not be useful in predicting the future financial condition and results of operations of the combined company. The actual financial condition and results of operations of the combined company may differ significantly from the pro forma amounts reflected herein due to a variety of factors.

 

1


Kaleyra Inc.

Pro Forma Condensed Combined Balance Sheet

As of March 31, 2021

(Unaudited)

 

     Historical     Pro forma  
(in thousands)    Kaleyra     Vivial
Networks
    Closing
Cash
Adjustment
    Financing
Adjustment
     Merger
Adjustment
    Pro forma
Combined
 
                 Note 4     Note 5      Note 6        

ASSETS

             

Current assets:

             

Cash and cash equivalents

   $ 35,507     $ 11,068     $ (8,400   $ 287,720      $ (202,314   $ 123,581  

Short-term investments

     4,287       —         —         —          —         4,287  

Trade receivables, net

     41,611       24,746       —         —          —         66,357  

Prepaid expenses

     1,233       1,599       —         —          (658     2,174  

Other current assets

     5,222       —         —         —          —         5,222  
  

 

 

   

 

 

   

 

 

   

 

 

    

 

 

   

 

 

 

Total current assets

     87,860       37,413       (8,400     287,720        (202,972     201,621  

Property and equipment, net

     7,113       8,402       —         —          —         15,515  

Intangible assets, net

     7,156       —         —         —          103,700       110,856  

Goodwill

     16,612       —         —         —          104,878       121,490  

Deferred tax assets

     40       —         —         —          623       663  

Other long-term assets

     299       —         —         —          —         299  
  

 

 

   

 

 

   

 

 

   

 

 

    

 

 

   

 

 

 

Total assets

   $ 119,080     $ 45,815     $ (8,400   $ 287,720      $ 6,229     $ 450,444  
  

 

 

   

 

 

   

 

 

   

 

 

    

 

 

   

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)

             

Current liabilities:

             

Accounts payable

   $ 46,135     $ 21,653     $ —       $ —        $ —       $ 67,788  

Notes payable due to related parties

     3,750       —         —         —          —         3,750  

Lines of credit

     4,439       —         —         —          —         4,439  

Current portion of bank and other borrowings

     8,082       —         —         —          —         8,082  

Deferred revenue

     3,107       490       —         —          (490     3,107  

Payroll and payroll related accrued liabilities

     3,374       —         —         —          —         3,374  

Other current liabilities

     2,786       —         —         —          —         2,786  
  

 

 

   

 

 

   

 

 

   

 

 

    

 

 

   

 

 

 

Total current liabilities

     71,673       22,143       —         —          (490     93,326  

Long-term portion of bank and other borrowings

     31,020       —         —         —          —         31,020  

Long-term portion of notes payable

     405       —         —         129,804        —         130,209  

Derivative liability

     —         —         —         58,866        —         58,866  

Deferred tax liabilities

     —         —         —         —          6,274       6,274  

Long-term portion of employee benefit obligation

     1,886       —         —         —          —         1,886  

Other long-term liabilities

     2,158       93       —         —          (93     2,158  
  

 

 

   

 

 

   

 

 

   

 

 

    

 

 

   

 

 

 

Total liabilities

     107,142       22,236       —         188,670        5,691       323,739  

Stockholders’ equity (deficit):

             

Common stock

     3       —         —         1        —         4  

Additional paid-in capital

     122,252       65,497       (8,400     99,049        (38,265     240,133  

Treasury stock, at cost

     (30,431     —         —         —          —         (30,431

Accumulated other comprehensive income (loss)

     (1,725     (241     —         —          241       (1,725

Accumulated deficit

     (78,161     (41,677     —         —          38,562       (81,276
  

 

 

   

 

 

   

 

 

   

 

 

    

 

 

   

 

 

 

Total stockholders’ equity (deficit)

     11,938       23,579       (8,400     99,050        538       126,705  
  

 

 

   

 

 

   

 

 

   

 

 

    

 

 

   

 

 

 

Total liabilities and stockholders’ equity (deficit)

   $ 119,080     $ 45,815     $ (8,400   $ 287,720      $ 6,229     $ 450,444  
  

 

 

   

 

 

   

 

 

   

 

 

    

 

 

   

 

 

 

See accompanying notes to unaudited pro forma combined financial information.

 

2


Kaleyra Inc.

Pro Forma Condensed Combined Statement of Operations

For the Three Months Ended March 31, 2021

(Unaudited)

 

     Historical     Pro forma  

(in thousands, except share and per share data)
   Kaleyra     Vivial
Networks
Reclassified
    Financing
Adjustment
    Merger
Adjustment
    Pro forma
Combined
 
           Note 3     Note 5     Note 6        

Revenue

   $ 39,714     $ 31,861     $ —       $ —       $ 71,575  

Cost of revenue

     33,390       22,996       —         1,905       58,291  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Gross profit

     6,324       8,865       —         (1,905     13,284  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Operating expenses:

          

Research and development

     2,868       2,847       —         —         5,715  

Sales and marketing

     2,859       1,151       —         2,004       6,014  

General and administrative

     10,602       1,302       —         3,195       15,099  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total operating expenses

     16,329       5,300       —         5,199       26,828  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income (loss) from operations

     (10,005     3,565       —         (7,104     (13,544

Other income, net

     45       —         —         —         45  

Financial income (expense), net

     (719     —         (6,320     —         (7,039

Foreign currency income (loss)

     355       (49     —         —         306  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income (loss) before income tax expense (benefit)

     (10,324     3,516       (6,320     (7,104     (20,232

Income tax expense (benefit)

     34       (42     —         (1,057     (1,065
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss)

   $ (10,358   $ 3,558     $ (6,320   $ (6,047   $ (19,167
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net loss per common share basic and diluted:

   $ (0.34         $ (0.47
  

 

 

         

 

 

 

Weighted average common shares used in computing net loss per common share basic and diluted

     30,364,943             40,364,943  
  

 

 

         

 

 

 

See accompanying notes to unaudited pro forma combined financial information.

 

3


Kaleyra Inc.

Pro Forma Combined Statement of Operations

For the Year Ended December 31, 2020

(Unaudited)

 

     Historical     Pro forma  

(in thousands, except share and per share data)
   Kaleyra     Vivial
Networks
Reclassified
    Financing
Adjustment
    Merger
Adjustment
    Pro forma
Combined
 
           Note 3     Note 5     Note 6        

Revenue

   $ 147,368     $ 141,274     $ —       $ —       $ 288,642  

Cost of revenue

     122,932       92,973       —         7,620       223,525  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Gross profit

     24,436       48,301       —         (7,620     65,117  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Operating expenses:

          

Research and development

     9,745       12,943       —         —         22,688  

Sales and marketing

     12,866       5,761       —         8,018       26,645  

General and administrative

     28,195       5,608       —         4,918       38,721  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total operating expenses

     50,806       24,312       —         12,936       88,054  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income (loss) from operations

     (26,370     23,989       —         (20,556     (22,937

Other income, net

     112       —         —         —         112  

Financial income (expense), net

     (1,475     2       (28,175     —         (29,648

Foreign currency income (loss)

     (1,353     (229     —         —         (1,582
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income (loss) before income tax expense (benefit)

     (29,086     23,762       (28,175     (20,556     (54,055

Income tax expense (benefit)

     (2,276     —         —         (4,230     (6,506
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss)

   $ (26,810   $ 23,762     $ (28,175   $ (16,326   $ (47,549
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net loss per common share basic and diluted:

   $ (1.09         $ (1.37
  

 

 

         

 

 

 

Weighted average common shares used in computing net loss per common share basic and diluted

     24,652,004             34,652,004  
  

 

 

         

 

 

 

See accompanying notes to unaudited pro forma combined financial information

 

4


NOTES TO THE PRO FORMA COMBINED FINANCIAL INFORMATION

(Unaudited)

(in thousands of United States dollars, except for share and per share amounts, unless otherwise noted)

 

1.

Basis of Presentation

The unaudited pro forma condensed combined financial information as of and for the three months ended March 31, 2021 has been derived from the unaudited historical condensed consolidated financial statements of Kaleyra as of and for the three months ended March 31, 2021 and the unaudited historical condensed consolidated financial statements of Vivial Networks as of and for the three months ended March 31, 2021. The unaudited pro forma combined financial information for the year ended December 31, 2020 has been derived from the audited historical consolidated financial statements of Kaleyra for the year ended December 31, 2020 and the audited historical consolidated financial statements of Vivial Networks for the year ended December 31, 2020. Certain Vivial Networks historical amounts have been reclassified to conform to the Kaleyra’s financial statement presentation.

The unaudited pro forma combined financial information has been prepared in accordance with Article 11 of Regulation S-X. In addition, the acquisition method of accounting for business combinations was used in accordance with Accounting Standards Codification 805, Business Combinations, with Kaleyra treated as the acquirer. Under the acquisition method of accounting, the fair value of the purchase consideration has been determined as of the closing date of the Merger when Kaleyra obtained control of mGage. The purchase price has been allocated to the underlying assets acquired and liabilities assumed based on their respective fair values, with any excess purchase price allocated to goodwill. The preliminary pro forma purchase price allocation was based on the fair value of the Merger Consideration (as described below) and preliminary estimates of the fair values of the acquired assets and liabilities assumed. In arriving at the estimated fair values, Kaleyra has considered the estimates of independent valuation professionals, which were based on preliminary reviews of the assets related to Vivial Networks (known as mGage). Accordingly, the pro forma adjustments are preliminary, have been made solely for the purpose of providing pro forma combined financial information, and are subject to revision based on a final determination of fair values. Differences between these preliminary estimates and the final Merger accounting may have a material impact on the accompanying pro forma combined financial information and the post-Merger company’s future consolidated results of operations and financial position.

Kaleyra and Vivial have not had any historical relationship prior to the Merger. Accordingly, no pro forma adjustments were required to eliminate activities between the companies.

On June 1, 2021, Kaleyra and Vivial Media, LLC (“Vivial Media”) entered into a Transition Services Agreement (the “TSA”) for the administration of certain accounting, rental, payroll and human resources services as well as of services related to the network operating center (“NOC”) effective subsequent to the closing of the Merger. The unaudited historical condensed consolidated financial statements of Vivial Networks as of and for the three months ended March 31, 2021 and the audited historical consolidated financial statements of Vivial Networks as of and for the year ended December 31, 2020 already include certain related party expenses incurred in connection with services substantially comparable to those governed by the TSA. For the purpose of the unaudited pro forma combined financial information, Kaleyra has assumed that the expenses included in the historical consolidated financial statements of Vivial Networks represent a good estimate of the expenses that Kaleyra will incur in connection with the TSA on a recurring basis.

 

  2.

The Merger

Merger Consideration

The Merger Consideration consisted of cash consideration and common stock consideration. In particular, the common stock consideration was paid with the issuance of a total of 1,600,000 shares of Kaleyra common stock (the “Parent Common Stock”). The remainder of the Merger Consideration was paid in cash.

The following table summarizes the components of the Merger Consideration:

 

(in thousands, except share data)

   Shares      Kaleyra
share price as of
June 1, 2021
        

Cash consideration paid (1)

         $ 199,199  

Fair value of Parent Common Stock issued to Vivial equity holders (2)

     1,600,000        11.77        18,832  
        

 

 

 

Merger Consideration

         $ 218,031  
        

 

 

 

 

(1)

Amount subject to adjustment upon finalization of the final net working capital adjustment.

(2)

1,600,000 shares of newly issued Parent Common Stock issued pursuant to the Merger Agreement to the Vivial equity holders based upon the $11.77 per share closing Parent Common Stock price as of June 1, 2021.

 

5


Preliminary Purchase Price Allocation

The table below represents the preliminary purchase price allocation as if the Merger had been completed on March 31, 2021:

 

(in thousands)

   As of March 31, 2021  

Property and equipment

   $ 8,402  

Intangible assets (1)

     103,700  

Deferred tax assets on net operating losses

     22,400  

Cash and cash equivalents

     2,668  

Trade receivables

     24,746  

Prepaid expenses

     941  

Deferred tax liabilities on intangible assets

     (28,051

Accounts payable and other liabilities (current and non-current)

     (21,653

Net identifiable assets acquired

     113,153  

Goodwill

     104,878  
  

 

 

 

Net assets acquired

   $ 218,031  
  

 

 

 

 

(1)

Refer to Note 6 a. (ii) for information on the intangible assets acquired.

The preliminary purchase price allocation has been used to prepare the Merger pro forma adjustments (see Note 6). The purchase price allocation will be finalized when the valuation analysis is complete. The final allocation could differ materially from the preliminary allocation used in the Merger pro forma adjustment.

 

  3.

Accounting Policies and Reclassifications

For the purpose of the preparation of this unaudited pro forma combined financial information, Kaleyra performed a preliminary assessment of Vivial Networks’ financial information to identify differences in accounting policies in the financial statement presentation as compared to those of Kaleyra. At the time of preparing this unaudited pro forma combined financial information, Kaleyra has not identified all the proper reclassifications necessary to conform Vivial Networks’ accounting policies to Kaleyra’s accounting policies. Following the Merger, the combined company will finalize the review of accounting policies, which could be materially different from the amounts set forth in the unaudited pro forma condensed combined financial information presented herein.

No reclassifications were made to present Vivial Networks’ unaudited historical condensed consolidated balance sheet as of March 31, 2021 to conform with that of Kaleyra.

 

6


Refer to the table below for a summary of reclassifications made to present Vivial Networks’ unaudited historical condensed consolidated statement of operations for the three months ended March 31, 2021 to conform with that of Kaleyra:

 


(in thousands)
Kaleyra Presentation
   Vivial Networks Presentation    Historical
Vivial
Networks
     Accounting
policy and
reclassification
adjustments
     Note      Historical
Vivial
Networks
reclassified
 

Revenue

  

Revenue

   $ 31,861      $ —           $ 31,861  
  

Operating expenses:

           

Cost of revenue

  

Cost of revenue (exclusive of certain depreciation and amortization expenses included below)

     22,246        750        (1      22,996  
              

 

 

 

Gross profit

                 8,865  

Operating expenses:

              

Research and development

           2,847        (2      2,847  

Sales and marketing

           1,151        (3      1,151  

General and administrative

  

Selling, general and administrative expense

     5,243        (3,941      (4      1,302  
  

Depreciation and amortization

     856        (856      (5      —    
     

 

 

    

 

 

       

 

 

 

Total operating expenses

  

Total operating expenses

     28,345        (49         5,300  
     

 

 

    

 

 

       

 

 

 

Loss from operations

  

Operating income

     3,516        49           3,565  
  

Other (income) expenses:

           

Foreign currency income (loss)

  

Interest expense

        (49      (6      (49
     

 

 

    

 

 

       
  

Total other expense, net

     —          (49      
     

 

 

    

 

 

       

 

 

 

Loss before income tax expense (benefit)

  

Income (loss) before income taxes

     3,516        —             3,516  

Income tax expense (benefit)

  

Income tax (benefit)

     (42      —             (42
     

 

 

    

 

 

       

 

 

 

Net income (loss)

  

Net income

   $ 3,558      $ —           $ 3,558  
     

 

 

    

 

 

       

 

 

 

 

(1)

Represents a reclassification of depreciation and amortization to cost of revenue.

(2)

Represents a reclassification of selling, general and administrative expense to research and development.

(3)

Represents a reclassification of selling, general and administrative expense to sales and marketing.

(4)

Includes a reclassification of depreciation and amortization to general and administrative.

(5)

Represents a reclassification of depreciation and amortization to cost of revenue and general and administrative.

(6)

Represents a reclassification of selling, general and administrative expense to foreign currency income (loss).

Refer to the table below for a summary of reclassifications made to present Vivial Networks’ audited historical consolidated statement of operations for the year ended December 31, 2020 to conform with that of Kaleyra:

 


(in thousands)
Kaleyra Presentation
   Vivial Networks Presentation    Historical
Vivial
Networks
     Accounting
policy and
reclassification
adjustments
     Note      Historical
Vivial
Networks
reclassified
 

Revenue

  

Revenue

   $ 141,274      $ —           $ 141,274  
  

Operating expenses:

           

Cost of revenue

  

Cost of revenue (exclusive of certain depreciation and amortization expenses included below)

     89,906        3,067        (1      92,973  
              

 

 

 

Gross profit

                 48,301  

Operating expenses:

              

Research and development

           12,943        (2      12,943  

Sales and marketing

           5,761        (3      5,761  

General and administrative

  

Selling, general and administrative expense

     24,112        (18,504      (4      5,608  
  

Depreciation and amortization

     3,496        (3,496      (5      —    
     

 

 

    

 

 

       

 

 

 

Total operating expenses

  

Total operating expenses

     117,514        (229         24,312  
     

 

 

    

 

 

       

 

 

 

Loss from operations

  

Operating income

     23,760        229           23,989  
  

Other (income) expenses:

           

Financial income (expense), net

  

Interest income

     2        —             2  

Foreign currency income (loss)

  

Interest expense

        (229      (6      (229
     

 

 

    

 

 

       
  

Total other expense, net

     2        (229      
     

 

 

    

 

 

       

 

 

 

Loss before income tax expense (benefit)

  

Income (loss) before income taxes

     23,762        —             23,762  

Income tax expense (benefit)

  

Income tax (benefit)

     —          —             —    
     

 

 

    

 

 

       

 

 

 

Net income (loss)

  

Net income

   $ 23,762      $ —           $ 23,762  
     

 

 

    

 

 

       

 

 

 

 

7


(1)

Represents a reclassification of depreciation and amortization to cost of revenue.

(2)

Represents a reclassification of selling, general and administrative expense to research and development.

(3)

Represents a reclassification of selling, general and administrative expense to sales and marketing.

(4)

Includes a reclassification of depreciation and amortization to general and administrative.

(5)

Represents a reclassification of depreciation and amortization to cost of revenue and general and administrative.

(6)

Represents a reclassification of selling, general and administrative expense to foreign currency income (loss).

 

  4.

Closing cash pro forma adjustment

Vivial Networks final cash was adjusted for the effect of dividends distributed in the period from April 1, 2021 to June 1, 2021 amounting to $8,400,000 in connection with the Merger.

 

  5.

Financing pro forma adjustment

The following summarizes the pro forma adjustments related to the issuance of common stock and convertible notes to finance the Merger (collectively, the “Financing”).

 

  (i)

Proceeds from the issue and sale by Kaleyra, of an aggregate of 8,400,000 shares of Kaleyra common stock (the “PIPE Shares”) to certain institutional investors (the “PIPE Investors”) at $12.50 per share, pursuant to the subscription agreements dated February 18, 2021; and

 

  (ii)

Proceeds from the issue in a private placement, of $200,000,000 aggregate principal amount of unsecured convertible notes (the “Notes”) to certain institutional investors. The Notes will bear interest at a rate of 6.125% per annum, payable semi-annually, and will be convertible into shares of Kaleyra common stock at a conversion price of $16.875 per share in accordance with the terms of the indenture governing the Notes, and will mature five years after their issuance.

a. Financing pro forma adjustments to the condensed combined balance sheet as of March 31, 2021

 

  i.

Pro forma adjustment to Cash and cash equivalents consists of the following:

 

(in thousands)

   As of March 31, 2021  

Proceeds from Parent Common Stock issued to the PIPE Investors

   $ 105,000  

Parent Common Stock issuance costs

     (5,950

Proceeds from issuance of the Notes

     200,000  

Notes issuance costs

     (11,330
  

 

 

 

Net pro-forma adjustment to Cash and cash equivalents

   $  287,720  
  

 

 

 

 

  ii.

Pro forma adjustment to Long-term portion of notes payable consists of the following:

 

(in thousands)

   As of March 31, 2021  

Proceeds from issuance of the Notes

   $ 200,000  

Notes issuance costs (1)

     (11,330

Derivative liability fair value

     (58,866
  

 

 

 

Net pro forma adjustment to Long- term portion of notes payable

   $  129,804  
  

 

 

 

 

  (1)

Amortized over the contractual term of the Notes.

 

  iii.

Pro forma adjustment to Derivative liability consists of $58,866,000 and reflects the bifurcation of the conversion feature, the mandatory and voluntary redemption and the interest make-whole provision.

 

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  iv.

Pro forma adjustment to Total stockholders’ equity (deficit) consists of the following:

 

(in thousands)

   As of March 31, 2021  
     Common Stock      Additional paid-in
capital
     Total stockholders’
equity (deficit)
 

Proceeds from Parent Common Stock issued to the PIPE Investors

   $ 1      $ 104,999      $ 105,000  

Parent Common stock issuance costs

     —          (5,950      (5,950
  

 

 

    

 

 

    

 

 

 
   $ 1      $ 99,049      $ 99,050  
  

 

 

    

 

 

    

 

 

 

b. Financing pro forma adjustments to the condensed combined statement of operations for the three months ended March 31, 2021 and to the combined statement of operations the year ended December 31, 2020

 

  i.

Pro forma adjustment to Financial income (expense), net consists of the following:

 

(in thousands)

   Three Months
ended March 31,
2021
     Year ended
December 31,
2020
 

Contractual interest expense on the Notes

   $  3,063      $  12,250  

Amortization of the Notes issuance costs

     570        2,747  

Accretion expenses of the Notes discount

     2,687        13,178  
  

 

 

    

 

 

 

Financial (income) expense, net

   $ 6,320      $ 28,175  
  

 

 

    

 

 

 

No pro forma adjustment was recognized for the change in fair value of the derivative related to the Notes, as it cannot be reasonably estimated.

No pro forma tax benefit has been reflected in connection with the pro forma adjustment to Financial income (expense), net as Kaleyra is in a net loss tax position and a valuation allowance would be established for the amount of any deferred tax assets.

 

  6.

Merger pro forma adjustment

a. Merger pro forma adjustment to the condensed combined balance sheet as of March 31, 2021

 

  i.

Pro forma adjustment to Cash and cash equivalents consists of the following:

 

(in thousands)

   As of March 31, 2021  

Cash consideration paid (1)

   $ (199,199

Estimated Merger expenses

     (3,115
  

 

 

 

Net pro forma adjustment to Cash and cash equivalents

   $ (202,314
  

 

 

 

 

  (1)

Amount subject to adjustment upon finalization of the final net working capital adjustment.

 

  ii.

Pro forma adjustment to Intangible assets, net to recognize the estimated fair value of intangible assets acquired consisting of customer relationships, developed technology and trade names that would have been recorded if the Merger occurred on March 31, 2021 consists of the following:

 

(in thousands)

   As of March 31, 2021  

Preliminary fair value of identifiable intangible assets:

  

Customer relationships

   $ 57,400  

Developed technology

     38,100  

Trade names

     8,200  
  

 

 

 

Total adjustment to Intangible assets, net

   $ 103,700  
  

 

 

 

 

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The fair value estimates for identifiable intangible assets are preliminary and are based upon assumptions that market participants would use in pricing an asset. The calculated value is preliminary, subject to change and could vary materially from the final purchase allocation.

 

  iii.

Pro forma adjustment of $104,878,000 to Goodwill to recognize the resulting goodwill that would have been recorded if the Merger had been completed on March 31, 2021.

 

  iv.

Pro forma adjustments of $28,051,000 to record deferred tax liabilities recognized on Intangible assets, net acquired in the Merger and of $22,400,000 to record deferred tax assets on Vivial federal net operating loss carryforwards (“NOLs”). Deferred tax assets and liabilities have been presented on a net basis, where applicable. The combined company’s ability to use NOLs to offset future taxable income for U.S. federal and state income tax purposes is subject to limitations. In general, under Section 382 of the U.S. Internal Revenue Code, a corporation that undergoes an “ownership change” is subject to limitations on its ability to utilize its pre-change NOLs to offset future taxable income. As of the date hereof, Kaleyra has not made a final determination of the ability to utilize all tax attributes, which determination will be subject to a formal Section 382 analysis upon consummation of the Merger.

 

  v.

Pro forma adjustment to Total stockholders’ equity (deficit) consists of the following:

 

     As of March 31, 2021  

(in thousands)

   Common
Stock
     Additional
paid-in
capital
    Accumu-
lated other
comprehen-
sive
income
(loss)
     Accumulated
deficit
    Total
stockholders’
equity
(deficit)
 

Shares of Parent Common Stock issued to Vivial equity holders

   $ —        $ 18,832     $ —        $ —       $ 18,832  

Elimination of Vivial Networks’ historical equity, as adjusted to reflect the closing cash adjustment

     —          (57,097     241        41,677       (15,179

Estimated Merger expenses (1)

     —          —         —          (3,115     (3,115
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

 
   $ —        $ (38,265   $ 241      $ 38,562     $ 538  
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

 

 

(1)

Represents estimated transactions expenses and fees incurred in connection with the Merger. These expenses will not affect the combined statement of operations beyond twelve months after the Merger.

b. Merger pro forma adjustment to the condensed combined statement of operations for the three months ended March 31, 2021 and the combined statement of operations for the year ended December 31, 2020

 

  i.

Pro forma adjustment for amortization of Intangible assets, net is based on the estimated fair values of intangible assets acquired amortized over the respective estimated useful lives. The table below presents the pro forma adjustments for amortization for the three months ended March 31, 2021 and the year ended December 31, 2020:

 

(in thousands, except estimated useful life in years)

   Estimated
useful life
(in years)
     Estimated
Fair
Value
     Three
Months
Ended
March 31,
2021
     Year Ended
December 31,
2020
 

Customer relationships

     9      $ 57,400      $ 1,594      $ 6,378  

Developed technology

     5      $ 38,100        1,905        7,620  

Trade names

     5      $ 8,200        410        1,640  
        

 

 

    

 

 

 

Pro forma adjustment for Amortization expense

 

      $ 3,909      $ 15,638  
     

 

 

    

 

 

 

 

10


Amortization expense related to customer relationships and trade names has adjusted Sales and marketing; amortization expense related to developed technology has adjusted Cost of revenue.

 

  ii.

Pro forma adjustment to record (i) estimated transaction costs incurred in connection with the Merger for $3,115,000 and $4,590,000 for the three months ended March 31, 2021 and the year ended December 31, 2020, respectively, and (ii) certain incremental insurance costs associated with the Merger for $80,000 and $328,000 for the three months ended March 31, 2021 and the year ended December 31, 2020, respectively. The estimated Merger transaction costs will not affect the combined statement of operations beyond twelve months after the Merger.

 

  iii.

Pro forma adjustment to record the income tax impacts of the pro forma adjustments for amortization using a statutory tax rate of 27.05%. This rate does not reflect the combined company’s effective tax rate, which may differ from the rates assumed for purposes of preparing these unaudited pro forma condensed combined financial statements. The applicable statutory tax rates used for these unaudited pro forma condensed combined financial statements will likely vary from the actual effective rates in periods as of and subsequent to the completion of the Merger.

 

  7.

Pro forma loss per common share

Pro forma loss per common share for the three months ended March 31, 2021 and the year ended December 31, 2020 has been calculated based on the estimated weighted average number of common shares outstanding on a pro forma basis, as described below. The pro forma weighted average number of common shares outstanding has been calculated as if the shares issued in the Transactions had been issued and outstanding on January 1, 2021 and January 1, 2020, respectively. The following table sets forth the computation of pro forma weighted average shares for the three months ended March 31, 2021 and the year ended December 31, 2020:

 

     Three months ended
March 31, 2021
     Year ended
December 31, 2020
 

Historical Kaleyra weighted average shares

     30,364,943        24,652,004  

Shares of Parent Common Stock issued to Vivial equity holders

     1,600,000        1,600,000  

Shares of Kaleyra common stock issued to PIPE Investors

     8,400,000        8,400,000  
  

 

 

    

 

 

 

Pro forma weighted average shares used in computing net loss per share – basic and diluted

     40,364,943        34,652,004  
  

 

 

    

 

 

 

Kaleyra’s unaudited historical condensed consolidated statement of operations for the three months ended March 31, 2021 and Kaleyra’s audited historical consolidated statement of operations for the year ended December 31, 2020 were in a net loss position, thus Kaleyra’s stock awards and outstanding warrants were excluded from the computation of net loss per share because their effect would have been anti-dilutive. There is no adjustment for the dilutive impact of stock awards and outstanding warrants in the pro forma combined financial information due to the combined results being in a net loss position.

***

 

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