·	Cash in the amount of $124,526 payable at closing date (the “Closing Date”);

·

A secured subordinated promissory note in the principal amount of $175,000.  This note (a) earns interest at 6.25% per annum, (b) is payable in full on March 31, 2012, (c) is secured by all of the assets of CommerceTel, Inc., the Company’s wholly owned subsidiary, and (d) is subordinated only to the Company's outstanding 10% Senior Secured Convertible Bridge Notes Due November 3, 2011 (the “Bridge Notes”);

·	An unsecured subordinated promissory note in the principal amount of $194,658, discounted to $182,460.  This note (a) does not bear interest, (b) is payable in installments (varying in amount) from August 2011 through October 2012, and (c) is subordinated only the Bridge Notes;

·

A number of shares of the Company’s common stock (the “Common Stock”) to be issued at closing equal to (a) DigiMark’s net revenue for the twelve-month period ending as of the last day of the month preceding the closing date, minus $175,000, divided by (b) the average of the volume-weighted average trading prices of the Common Stock for the 25 trading days immediately preceding the closing date (the “Closing Price”); and

·

An earn-out payment (payable 20 months after the Closing Date) consisting of a number of shares of Common Stock equal to (a) 1.5, multiplied by the Company’s net revenue from acquired customers and customer prospects for the twelve-month period beginning six months after the closing date, divided by (b) the average of the volume-weighted average trading prices of the Common Stock for the 25 trading days immediately preceding the earn-out payment (subject to a collar of 85% and 115% of the Closing Price”).

·	Assumption of certain accounts payable of approximately $149,000.

 

Current assets		$	3,000
Customer relationships			592,000
Trade name			39,000
URL / Website			59,000
Non-competition agreement			10,000
Goodwill			4,373,477
Total purchase price		$	5,076,477

 

Cash		$	120,514
Notes payable			357,460
Shares issued			826,069
Earn-out shares issued			3,657,585
Liabilities assumed			114,849
Total purchase price		$	5,076,477

		Historical
		Mobivity Holdings Corp.				DigiMark, LLC				Pro Forma Adjustments					Pro Forma
Current assets
Cash		$	23,195			$	10			$	(120,524	)	(a)		$	(97,319	)
Accounts receivable			154,978				64,654				(64,654	)	(b)			154,978
Other current assets			43,852				-				3,000		(c)			46,852
Total current assets			222,025				64,664				(182,178	)				104,511
Equipment, net			31,865				-				-					31,865
Goodwill			9,063,763				-				4,373,477		(d)			13,437,240
Intangible assets, net			2,351,383				-				700,000		(e)			3,051,383
Other assets			67,750				-				-					67,750
Total Assets		$	11,736,786			$	64,664			$	4,891,299				$	16,692,749
Current liabilities
Accounts payable		$	304,088			$	88,014			$	26,515		(f)		$	418,617
Accrued interest			91,628				970				(970	)	(b)			91,628
Accrued and deferred personnel compensation			127,802				22,364				(22,364	)	(b)			127,802
Deferred revenue and customer deposits			343,639				-				320		(g)			343,959
Notes payable, net of discount			580,895				-				357,460		(h)			938,355
Convertible notes payable, net of discount			864,167				-				-					864,167
Cash payment obligation, net of discount			219,424				-				-					219,424
Derivative liabilities			923,283				-				-					923,283
Other current liabilities			98,488				42,266				(42,266	)	(b)			98,488
Total current liabilities			3,553,414				153,614				318,695					4,025,723
Non-current liabilities
Deferred revenue			-				13,538				(13,538	)	(b)			-
Line of Credit			-				45,042				(45,042	)	(b)			-
Notes payable			31,807				158,000				(158,000	)	(b)			31,807
Earn-out payable			-				-				3,657,585		(i)			3,657,585
Total non-current liabilities			31,807				216,580				3,441,005					3,689,392
Total liabilities			3,585,221				370,194				3,759,700					7,715,115
Stockholders' equity (deficit)
Common stock			21,509				-				520		(j)			22,029
Other comprehensive loss			-				-				-					-
Additional paid-in capital			18,613,811				(285,404	)			1,110,953		(j)			19,439,360
Accumulated deficit			(10,483,755	)			(20,126	)			20,126		(b)			(10,483,755	)
Total stockholders' equity (deficit)			8,151,565				(305,530	)			1,131,599					8,977,634
Total liabilities and stockholders' equity (deficit)		$	11,736,786			$	64,664			$	4,891,299				$	16,692,749

 

 

		Historical
		Mobivity Holdings Corp.				DigiMark, LLC				Pro Forma Adjustments					Pro Forma
Revenues
Revenues		$	693,746			$	619,618			$	-				$	1,313,364
Cost of revenues			258,888				273,425				-					532,313
Gross margin			434,858				346,193				-					781,051
Operating expenses
General & administrative			1,183,849				113,982				-					1,297,831
Sales & marketing			280,010				153,843				-					433,853
Engineering, research, & development			325,764				-				-					325,764
Depreciation & amortization			126,778				-				184,750		(k)			311,528
Total operating expenses			1,916,401				267,825				184,750					2,368,976
Loss from operations			(1,481,543	)			78,368				(184,750	)				(1,587,925	)
Other income/(expense)
Interest income			174				-				-					174
Interest expense			(243,666	)			(38,287	)			26,471		(l),(m)			(255,482	)
Change in fair market value of derivative liabilities			(584,506	)			-				-					(584,506	)
Total other income/(expense)			(827,998	)			(38,287	)			26,471					(839,814	)
Income tax benefit/(expense)			38				-				-					38
Net loss		$	(2,309,503	)		$	40,081			$	(158,279	)			$	(2,427,701	)
Net loss per share - basic and diluted		$	(0.12	)											$	(0.12	)
Weighted average number of shares
during the period - basic and diluted			19,534,081								519,540		(n)			20,053,621

 

 

		Historical
		Mobivity Holdings Corp.				DigiMark, LLC				Pro Forma Adjustments					Pro Forma
Revenues
Revenues		$	919,216			$	838,550			$	-				$	1,757,766
Cost of revenues			417,870				357,717				-					775,587
Gross margin			501,346				480,833				-					982,179
Operating expenses
General & administrative			1,163,479				119,691				-					1,283,170
Sales & marketing			225,783				253,934				-					479,717
Engineering, research, & development			405,819				-				-					405,819
Depreciation & amortization			-				-				369,500		(o)			369,500
Total operating expenses			1,795,081				373,625				369,500					2,538,206
Income/(Loss) from operations			(1,293,735	)			107,208				(369,500	)				(1,556,027	)
Other income/(expense)
Interest expense			(120,388	)			(37,810	)			19,948		(p),(q)			(138,250	)
Change in fair market value of derivative liabilities			(14,861	)			-				-					(14,861	)
Gain on debt extinguishment			199,401				-				-					199,401
Total other income/(expense)			64,152				(37,810	)			19,948					46,290
Income tax benefit/(expense)			-				-				-					-
Net income/(loss)		$	(1,229,583	)		$	69,398			$	(349,552	)			$	(1,509,737	)
Net loss per share - basic and diluted		$	(0.14	)											$	(0.16	)
Weighted average number of shares
during the period - basic and diluted			8,950,585								519,540		(r)			9,470,125

 

 

(a)  Represents the $120,514 cash paid at closing of the acquisition net of the cash not acquired.
(b)  Represents elimination of the assets, liabilities and equity that were not acquired in the transaction.
(c)  Represents the current assets of $3,000 acquired in the acquisition net of the current assets not acquired.
(d)  To reflect the estimated amount of goodwill resulting from the excess of the purchase price over the fair value of net tangible and identifiable intangible assets acquired.
(e)  To reflect the estimated fair value of identifiable intangible assets acquired in the acquisition.
(f)  Represents the accounts payable balance of $114,529 assumed in the acquisition net of the accounts payable not assumed.
(g)  Represents the deferred revenue of $320 assumed in the acquisition net of the deferred revenue not assumed.
(h)  Represents the secured subordinated promissory note and the unsecured subordinated promissory note of $175,000 and $182,460, respectively, issued in the acquisition net of notes payable not assumed.
(i)  To reflect the $3,657,585 earn-out payable recorded at closing which estimates the number of common shares to be issued to settle the earn-out payable is 2,422,242.
(j)  To reflect the common stock issued as consideration in the acquisition net of DigiMark, LLC additional paid in capital not acquired in the transaction.
(k)  Represents the amortization of $184,750, related to the fair value of identifiable amortizable intangible assets acquired in the transaction, as if the acquisition had been completed on January 1, 2011. (l)  Represents the elimination of interest expense of $38,287, within DigiMark LLC historical financial statement for the six months ended June 30, 2011. (m)  Represents interest expense as if the notes payable issued in the transaction were issued January 1, 2011. (n)  To reflect the issuance of 519,540 shares of common stock on the date of acquisition. (o)  Represents the amortization of $369,500, related to the fair value of amortizable identifiable intangible assets acquired in the transaction, as if the acquisition had been completed on January 1, 2010.
(p)  Represents the elimination of interest expense of $37,810, within DigiMark LLC historical financial statement for the year ended December 31, 2010.
(q)  Represents interest expense as if the notes payable issued in the transaction were issued January 1, 2010. (r)  To reflect the issuance of 519,540 shares of common stock on the date of acquisition.