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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
__________________________________________________
FORM 8-K/A
(Amendment No. 1)
__________________________________________________
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report
(Date of earliest event reported):
___________________________________________________
(Exact name of registrant as specified in charter)
___________________________________________________
| (State or other jurisdiction of incorporation or organization) | (Commission File Number) | (IRS Employer Identification No.) | ||||||||||||
(Address of principal executive offices and zip code)
(972 ) 801-1100
(Registrant’s telephone number, including area code)
N/A
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
| Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425). | |||||
| Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12). | |||||
| Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)). | |||||
| Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)). | |||||
Securities Registered Pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||||||
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
| Emerging growth company | |||||||||||
| If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. | ☐ | ||||||||||
Introductory Note
On February 5, 2025, Upbound Group, Inc. (the “Company”) filed a Current Report on Form 8-K (the “Original Form 8-K”) announcing that on January 31, 2025, it had consummated the previously announced acquisition (the “Acquisition”) of Bridge IT, Inc., a Delaware corporation (“Brigit”), pursuant to that certain Agreement and Plan of Merger, dated as of December 12, 2024, by and among the Company, Fortuna Merger Sub, Inc., a Delaware corporation and wholly owned subsidiary of the Company, Brigit, and Shareholder Representative Services, LLC, solely in its capacity as the representative, agent and attorney-in-fact of the security holders of Brigit (“Representative”).
This Amendment No.1 to the Original Form 8-K is being filed solely for the purpose of amending Items 9.01(a) and (b). This Form 8-K/A should be read in conjunction with the Original Form 8-K.
The pro forma financial information included as Exhibit 99.3 to this Form 8-K/A has been presented for illustrative purposes only, as required by Form 8-K, and is not intended to, and does not purport to, represent what the combined company’s actual results or financial condition would have been if the transactions had occurred on the relevant date, and is not intended to project the future results or financial condition that the combined company may achieve following the Acquisition.
Item 9.01. Financial Statements and Exhibits.
(a) Financial Statements of Business Acquired.
The audited consolidated financial statements of Brigit as of December 31, 2023 and for the year ended December 31, 2023, the notes related thereto, and the independent auditor’s report are filed as Exhibit 99.1 to this Form 8-K/A and incorporated by reference herein.
The unaudited condensed consolidated financial statements of Brigit as of September 30, 2024 and for the nine months ended September 30, 2024 and the notes related thereto, are filed as Exhibit 99.2 to this Form 8-K/A and incorporated by reference herein.
(b) Pro Forma Financial Information.
The unaudited pro forma condensed combined financial information of the Company and Brigit as of September 30, 2024 and for the year ended December 31, 2023, and the nine months ended September 30, 2024 is filed as Exhibit 99.3 to this Form 8-K/A and incorporated by reference herein.
(d) Exhibits:
| Exhibit No. | Description | |||||||
| 23.1 | ||||||||
| 99.1 | ||||||||
| 99.2 | ||||||||
| 99.3 | ||||||||
| 104 | Cover page Interactive Data File (embedded within the inline XBRL document contained in Exhibit 101) | |||||||
SIGNATURES
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 hereunto duly authorized.
| UPBOUND GROUP, INC. | ||||||||||||||
| Date: | April 18, 2025 | By: | /s/ Bryan Pechersky | |||||||||||
| Bryan Pechersky | ||||||||||||||
| Executive Vice President, General Counsel and Corporate Secretary | ||||||||||||||
Exhibit 23.1
Consent of Independent Auditors
We consent to the incorporation by reference in the Registration Statements on Form S-3 of Upbound Group, Inc. (No. 333-285081) and Form S-8 (No. 333-32296, No. 333-40958, No. 333-62582, No. 333-136615, No. 333-139792, No. 333-145121, No. 333-171926, No. 333-211859, No. 333-256927 and No. 333-272494) of our report dated September 20, 2024, relating to the consolidated financial statements of Bridge It, Inc. appearing in this Current Report on Form 8-K/A dated January 31, 2025 of Upbound Group, Inc.
/s/ Moss Adams LLP
San Francisco, California
April 18, 2025
Report of Independent Auditors and Consolidated Financial Statements Bridge It, Inc. and Subsidiaries December 31, 2023 EXHIBIT 99.1
Table of Contents Page Report of Independent Auditors 1 Consolidated Financial Statements Consolidated Balance Sheet 4 Consolidated Statement of Operations 5 Consolidated Statement of Stockholders’ Equity 6 Consolidated Statement of Cash Flows 7 Notes to the Consolidated Financial Statements 8
1 Report of Independent Auditors The Board of Directors and Stockholders Bridge lt, Inc. Report on the Audit of the Financial Statements Opinion We have audited the consolidated financial statements of Bridge lt, Inc. and its subsidiaries which comprise the consolidated balance sheet as of December 31, 2023, and the related statements of operations, changes in stockholders’ equity, and cash flows for the year then ended, and the related notes to the consolidated financial statements. In our opinion, the accompanying consolidated financial statements present fairly, in all material respects, the financial position of Bridge It, Inc. and its subsidiaries as of December 31, 2023, and the results of their operations and their cash flows for the year then ended in accordance with accounting principles generally accepted in the United States of America. Basis for Opinion We conducted our audit in accordance with auditing standards generally accepted in the United States of America (GAAS). Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Statements section of our report. We are required to be independent of Bridge lt, Inc. and its subsidiaries and to meet our other ethical responsibilities, in accordance with the relevant ethical requirements relating to our audit. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Responsibilities of Management for the Financial Statements Management is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with accounting principles generally accepted in the United States of America, and for the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. In preparing the consolidated financial statements, management is required to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about Bridge lt, Inc. and its subsidiaries’ ability to continue as a going concern within one year after the date that the consolidated financial statements are available to be issued.
2 Auditor’s Responsibilities for the Audit of the Financial Statements Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance but is not absolute assurance and therefore is not a guarantee that an audit conducted in accordance with GAAS will always detect a material misstatement when it exists. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Misstatements are considered material if there is a substantial likelihood that, individually or in the aggregate, they would influence the judgment made by a reasonable user based on the consolidated financial statements. In performing an audit in accordance with GAAS, we: Exercise professional judgment and maintain professional skepticism throughout the audit. Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or error, and design and perform audit procedures responsive to those risks. Such procedures include examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Obtain an understanding of internal control relevant to the audit 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 Bridge lt, Inc. and its subsidiaries’ internal control. Accordingly, no such opinion is expressed. Evaluate the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluate the overall presentation of the consolidated financial statements. Conclude whether, in our judgment, there are conditions or events, considered in the aggregate, that raise substantial doubt about Bridge lt, Inc. and its subsidiaries’ ability to continue as a going concern for a reasonable period of time. We are required to communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit, significant audit findings, and certain internal control–related matters that we identified during the audit. /s/ Moss Adams LLP San Francisco, California September 20, 2024
Consolidated Financial Statements
Bridge It, Inc. and Subsidiaries See accompanying notes. 4 Consolidated Balance Sheet (in thousands, except share and per share amounts) December 31, 2023 Current assets Cash $ 21,026 Restricted cash 4,717 Customer cash advances, net of allowance for credit losses of $3,339 33,980 Accounts receivable, net of allowance for credit losses of $0 1,575 Accrued revenue, net of allowance for credit losses of $0 1,142 Prepaid expenses and other current assets 892 Total current assets 63,332 Property and equipment, net 139 Internally developed internal use software, net 4,175 Operating lease right-of-use assets 246 Other long term assets 165 Total assets $ 68,057 Current liabilities Accounts payable $ 3,579 Accrued liabilities 1,686 Credit facility, net of debt issuance costs 37,759 Convertible debt 9,371 Simple agreements for future equity notes payable 8,652 Loans payable, related party and other lenders 844 Operating lease liabilities, short-term 229 Other current liabilities 1,462 Total current liabilities 63,582 Operating lease liabilities, long-term 21 Total liabilities $ 63,603 Commitments and contingencies (Note 11) Series Seed preferred stock, par value per share $0.00001, 122,702 shares authorized, issued and outstanding at December 31, 2023 $ - Series A-1 preferred stock, par value per share $0.00001, 139,391 shares authorized, issued and outstanding at December 31, 2023 - Series A-2 preferred stock, par value per share $0.00001, 10,644 shares authorized, issued and outstanding at December 31, 2023 - Common stock, par value per share $0.00001, 950,000 shares authorized, 560,383 shares issued and outstanding at December 31, 2023 - Additional paid-in capital 40,754 Accumulated deficit (36,300) Total stockholders’ equity $ 4,454 Total liabilities and stockholders’ equity $ 68,057 STOCKHOLDERS’ EQUITY ASSETS LIABILITIES
Bridge It, Inc. and Subsidiaries See accompanying notes. 5 Consolidated Statement of Operations (in thousands) Year Ended December 31, 2023 Operating revenues Subscription revenue $ 85,717 Expedited Transfer Fee revenue 14,820 Marketplace revenue 5,691 Total operating revenues 106,228 Cost of revenue Customer cash advance credit losses 23,384 Processing and service fees 13,710 Total cost of revenue 37,094 Operating expenses Advertising and marketing 35,279 Wages and benefits 9,010 Technology and infrastructure 4,132 Professional fees 1,925 Depreciation and amortization 1,239 Other general and administrative expenses 1,552 Total operating expenses 53,137 Other income (expense) Settlement expense (18,000) Interest income 443 Interest expense (4,019) Other miscellaneous income 542 Total other expenses, net (21,034) Net loss before provision for income taxes (5,037) Provision for income taxes 228 Net loss $ (5,265)
Bridge It, Inc. and Subsidiaries See accompanying notes. 6 Consolidated Statement of Stockholders’ Equity (in thousands, except share amounts) Year Ended December 31, 2023 Additional Accumulated Deficit Total Stockholders’ Shares Amount Shares Amount Shares Amount Shares Amount Paid-in Capital Deficit Equity Balance at December 31, 2022 122,702 -$ 139,391 -$ 10,644 -$ 557,835 -$ 40,389$ (31,035)$ 9,354$ Issuance of common stock - - - - - - 2,548 - 112 - 112 Stock-based compensation - - - - - - - - 253 - 253 Net loss - - - - - - - - - (5,265) (5,265) Balance at December 31, 2023 122,702 -$ 139,391 -$ 10,644 -$ 560,383 -$ 40,754$ (36,300)$ 4,454$ Common StockPreferred A-1 StockPreferred Seed Stock Preferred A-2 Stock
Bridge It, Inc. and Subsidiaries See accompanying notes. 7 Consolidated Statement of Cash Flows (in thousands) Year Ended December 31, 2023 CASH FLOWS FROM OPERATING ACTIVITIES Net loss (5,265)$ Adjustments to reconcile net loss to net cash provided by operating activities Depreciation and amortization 1,239 Customer cash advance credit losses 23,384 Stock-based compensation 253 Amortization of debt issuance costs 211 Non-cash interest 373 Non-cash operating lease expense 183 Changes in operating assets and liabilities Accounts receivable (933) Accrued revenue (728) Prepaid expenses and other current assets (492) Other long term assets (12) Accounts payable 1,366 Operating lease liabilities (179) Accrued liabilities and other current liabilities (131) Net cash provided by operating activities 19,269 CASH FLOWS FROM INVESTING ACTIVITIES Net disbursements and collections of customer cash advances (36,876) Capitalization of internally developed internal use software (2,875) Purchase of property and equipment (66) Net cash used in investing activities (39,817) CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from stock options exercised 112 Proceeds from credit facility 17,100 Proceeds from loans payable, related party and other lenders 63 Net cash provided by financing activities 17,275 NET DECREASE IN CASH AND RESTRICTED CASH (3,273) CASH AND RESTRICTED CASH, beginning of year 29,016 CASH AND RESTRICTED CASH, end of year 25,743$ SUPPLEMENTAL DISCLOSURE OF NON-CASH INFORMATION Operating right of use assets in exchange for operating lease liabilities 429$ SUPPLEMENTAL CASH FLOW INFORMATION Cash paid during the year for Income taxes 40$ Interest expense 2,925$ The following table provides a reconciliation of cash and restricted cash reported within the consolidated balance sheet with the same as shown in the consolidated statement of cash flows: Cash 21,026$ Restricted cash 4,717 Total cash and restricted cash, end of year 25,743$
Bridge It, Inc. and Subsidiaries 8 Notes to the Consolidated Financial Statements (in thousands, except share and per share amounts) Year Ended December 31, 2023 Note 1 – Nature of Operations Organization and business – Bridge It, Inc. (“the Company”, “Brigit” or “Bridge It”), is a Delaware corporation founded in October 2017 and headquartered in New York, New York. The Company owns 100% of its subsidiary, Brigit – Kala SPV, LLC. The Company also owns 100% of its four dormant subsidiaries: Brigit SPV1, LLC, Brigit – Lowell SPV, LLC, Brigit SPV3, LLC, and Brigit SPV4, LLC. The Company, through its mobile and web application offers various financial health products and tools including Finance Helper, Earn and Save, Instant Cash, Credit Builder, ID Theft Protection and more. The Company offers the following features for free: Financial Helper – Finance Helper helps members (“User” or “Users”) improve money habits through budgeting tools, personalized real-time recommendations, providing an overview of their expenses, overdraft prediction, and bill forecasting. Brigit also creates financial literacy content that help users budget more effectively. Earn and Save – The Company hosts third-party offers for Users to increase their income, save money, and get access to credit. Users can explore available full time jobs, find additional part time work to supplement their existing income, and perform other tasks to earn money (i.e. take surveys, etc.). Additionally, Users can apply to get access to credit, such as personal loans or even car loans. Brigit earns a commission from the third-party partners for referring Brigit’s customers to utilize the partner’s services (“Marketplace Partners”, “MP Partners”). The paid versions offers all the features of the free version, plus additional features: Instant Cash – Brigit provides earned wage access advances between $50 and $250 dollars when needed. By leveraging cash flow information from the User’s bank account as well as user verified income information, Brigit’s algorithm assesses their earned income and ability to repay, with no FICO needed and no impact on credit scores. Brigit’s algorithms also predict when a user may fall short and can automatically send advances to the User’s account if they choose (this is an opt in feature). Brigit offers an optional expedited delivery of the cash advance for a small payment (“Expedited Transfer Fee”). Credit Builder – Credit Builder helps Users establish or improve their credit scores. The loans are originated and held with our bank partner. Unlike traditional loans, the primary goal of Credit Builder is not to provide immediate access to funds, but to allow Users to demonstrate creditworthiness through consistent payments. When a User opens a Credit Builder loan, the entire proceeds of the loan are moved into a secured deposit account (the User does not have access to these proceeds). The Credit Builder loan forms a new tradeline on the borrower’s credit report. The User then makes installment payments over a period typically set at 24 months. These payments are reported to the three largest credit reporting agencies. Credit Builder promotes savings because the User’s payments accumulate in a deposit account, to be withdrawn by the User. The activities related to Credit Builder are not recorded on the Company’s consolidated balance sheet.
Bridge It, Inc. and Subsidiaries Notes to the Consolidated Financial Statements (in thousands, except share and per share amounts) Year Ended December 31, 2023 See accompanying notes. 9 Note 2 – Summary of Significant Accounting Policies Basis of accounting – The accounting and reporting policies of the Company are prepared on the accrual basis of accounting in conformity with accounting principles generally accepted in the United States of America (“GAAP”). The accompanying consolidated financial statements have been prepared under the assumption that the Company will continue as a going concern. In accordance with Accounting Standards Codification (“ASC”) 205-40, Going Concern, the Company’s Management has evaluated whether there are conditions and events, considered in the aggregate, that raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date the accompanying financial statements are available to be issued. As of December, 31, 2023, the Company has gross customer cash advances of $37,319 (see Note 3) and a credit facility of $37,900 (see Note 7) maturing September 2024. Given that the customer cash advances are repaid soon after the User receives their next paycheck, management believes there is limited liquidity risk with respect to this aspect of the business. The entire credit facility held by the Company serves the purpose to fund a significant portion of the Company’s cash advances. As the Company grows, it will draw down more debt on the credit facility to fund additional cash advance. As of December 31, 2023, the Company has convertible debt ($9,371), notes payable (related party and other lenders, $844), and a credit facility (net of debt issuance costs, $37,759) in aggregate of $47,974, maturing in September 2024. Given this amount is larger than the unrestricted cash balance of $21,026, these factors alone qualify as “substantial doubt”, per ASC 205-40, regarding the Company’s ability to continue as a going concern within one year of the date that the financial statements are issued. Management intends to convert the convertible debt to equity at maturity and negotiate an extension or renewal on the credit facility prior to maturity. While these events are possible, it is not for certain that these events will occur. Management intends to repay the notes payable (related party and other lenders). In the event the Company is unable to convert the convertible debt or negotiate an extension or renewal on the credit facility prior to maturity, a Major Investor (Note 12) has agreed to support the Company financially and operationally through at least September 21, 2025. Management has determined that the financial support agreement with the Major Investor is adequate to alleviate the substantial doubt about the Company’s ability to continue as a going concern. The consolidated financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern. Principles of consolidation – The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All intercompany transactions and balances have been eliminated upon consolidation.
Bridge It, Inc. and Subsidiaries Notes to the Consolidated Financial Statements (in thousands, except share and per share amounts) Year Ended December 31, 2023 See accompanying notes. 10 Use of estimates – The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosures of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. Management’s significant estimates includes the allowance for credit losses, the capitalization of internally developed internal use software and useful life, the determination of the fair value of the Company’s common stock used in the calculation of stock-based compensation, and the valuation allowance for deferred tax assets. Cash – The Company’s cash is held in various financial institutions. At times throughout the year, balances can exceed Federal Deposit Insurance Corporation (FDIC) insurance limits. The Company has not experienced any historical losses associated with balances maintained with financial institutions in excess of FDIC insurance limits, and Management continues to monitor the financial condition of the financial institutions where these funds are held. Restricted cash – Restricted cash primarily represents cash held at financial institutions to meet prefunding obligations of cash advance, as well as cash that is pledged as collateral for specific accounts that may become overdrawn and minimums required by financial institutions to keep the bank account open. As of December 31, 2023, the Company had $4,717 in restricted cash required to be held for potential overspend with processors, bank account minimums and prefunding obligations. Customer cash advances, net of allowance for credit losses – Customer cash advances are recorded at their original advance amount and reduced by an allowance for credit losses. Customer cash advances are treated as finance receivables under ASC 310, Receivables. The Company pools its customer advances, all of which are short-term in nature, based on similar risk characteristics to assess their risk of credit loss. The Company uses an aging method and historical loss rates as a basis for estimating the allowance for credit losses. The Company considers whether reasonable and supportable forecasts about future conditions warrant an adjustment to its historical loss experience. The Company evaluates current economic conditions, changes in customer payment terms, and cash collections subsequent to the balance sheet date to assess for such adjustments. The allowance for credit losses is recognized upon origination of customer cash advances. Any changes in the estimate of lifetime expected credit losses are recognized in customer cash advance losses in the consolidated statement of operations. Customer cash advances are deemed not collectible after 45 days beyond the due date and are written- off as a reduction to the allowance for credit losses and gross customer cash advance balance. Subsequent recoveries of written-off customer cash advances are recorded when received as a recovery to the allowance for credit losses.
Bridge It, Inc. and Subsidiaries Notes to the Consolidated Financial Statements (in thousands, except share and per share amounts) Year Ended December 31, 2023 See accompanying notes. 11 Accounts receivable – The Company’s accounts receivable consist of trade receivables derived primarily from its contracts with Marketplace Partners. At each consolidated balance sheet date, the Company evaluates an expected allowance for credit losses. Management evaluates the ability to collect accounts receivable based on a combination of factors. All trade receivables are short term in nature, and most of the Company’s clients are recurring customers with established payment histories. An allowance for credit loss is maintained, as necessary, based on the length of time receivables are past due or the status of a partner’s financial position. An expected loss model is utilized to assess potential future credit loss based on historical payment trends and a reasonable and supportable forecast. The Company writes off receivables when there is information that indicates the debtor is facing significant financial difficulty and there is no possibility of recovery. Management has determined that no allowance for credit loss is necessary as of December 31, 2023. Accrued revenue – The Company’s accrued revenue consist of subscription revenue and Expedited Transfer Fee revenue earned, but not yet collected from Users. Management evaluates the ability to collect accrued revenue based on a combination of factors. All accrued revenue is short term in nature. A reserve for credit loss is maintained, as necessary, based on the length of time receivables are past due. An expected loss model is utilized to assess potential future credit loss based on historical payment trends. The Company writes off receivables when there is information that indicates the debtor is facing significant financial difficulty and there is no possibility of recovery. Management has determined that no allowance for credit loss is necessary as of December 31, 2023. Property and equipment – Property and equipment are stated at cost less accumulated depreciation. Property and equipment are recorded at cost and depreciated over the estimated useful lives ranging from 5 to 7 years using the straight-line method. Maintenance and repair costs are charged to operations as incurred and included within other general and administrative expenses in the consolidated statements of operations. Impairment of long-lived assets – The Company evaluates its long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Long-lived assets consist primarily of property and equipment. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset group to future net cash flows expected to be generated by the asset group. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets. Assets to be disposed of are reported at the lower of the carrying amount or fair value less cost to sell. The Company did not recognize any impairment charges for long- lived assets for the year ended December 31, 2023. Internally developed internal use software – Internally developed internal use software is capitalized when preliminary development efforts are successfully completed, it is probable that the project will be completed, and the software will be used as intended. Capitalized costs consist of salaries and compensation costs for employees, costs paid to third-party consultants who are directly involved in development efforts, and costs incurred for upgrades and enhancements to add functionality to the software. Other costs are expensed as incurred. In-process development costs consists of costs incurred on projects that are still in development and not been placed in service as of December 31, 2023.
Bridge It, Inc. and Subsidiaries Notes to the Consolidated Financial Statements (in thousands, except share and per share amounts) Year Ended December 31, 2023 See accompanying notes. 12 The Company evaluates impairment of its software whenever events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable. If the asset is not recoverable, measurement of an impairment loss is based on the fair value of the asset. When an impairment loss is recognized, the carrying amount of the asset is reduced to its estimated fair value. The Company does not believe there have been any other changes in circumstances that would indicate an impairment loss is necessary as of December 31, 2023. Amortization of internally developed internal use software commences when the software is ready for its intended use, i.e., after all substantial testing is complete. Internally developed internal use software is amortized over its estimated useful life of three years. Leases – The Company leases office space which is considered an operating lease. Options to extend or terminate the lease are considered as part of calculating the lease term to the extent that the option is reasonably certain of exercise. The lease does not include the option to purchase the leased property. The incremental borrowing rate (“IBR”) represents the rate of interest the Company would expect to pay on a collateralized basis to borrow an amount equal to the lease payments under similar terms. When determinable, the Company uses the rate implicit in the lease to determine the present value of lease payments. As the Company’s leases do not provide an implicit rate, the Company uses its IBR based on the information available at the lease commencement date in determining the present value of lease payments. Transactions give rise to leases when the Company receives substantially all the economic benefits from and has the ability to direct the use of specified property and equipment. The Company determines if an arrangement is a lease at inception. Right-of-use (“ROU”) assets represent the Company’s right to use, or control the use of, a specified asset for the lease term. Lease liabilities are the Company’s obligation to make lease payments arising from a lease and are measured on a discounted basis. Operating lease ROU assets and operating lease liabilities are recognized based on the present value of the future minimum lease payments over the lease term on the commencement date. The operating lease ROU asset includes any lease payments made and initial direct costs incurred and excludes lease incentives. The lease terms may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option. Lease expense for minimum lease payments continues to be recognized on a straight-line basis over the lease term. Advertising and marketing – Advertising and marketing costs are charged to operating expense as incurred and were $35,279 for the year ended December 31, 2023. Convertible debt – The Company accounts for the proceeds from the issuance of convertible promissory notes payable in accordance with ASC 470-20, Debt with Conversion and Other Options. The Company also considered the bifurcation guidance for embedded derivatives per ASC 815-15, Embedded Derivatives and ASC 815-40, Contracts in Entity’s Own Equity. Pursuant to ASC 470-20, the Company accounted for the entire convertible instrument (including the conversion option) as a single debt instrument.
Bridge It, Inc. and Subsidiaries Notes to the Consolidated Financial Statements (in thousands, except share and per share amounts) Year Ended December 31, 2023 See accompanying notes. 13 Simple agreements for future equity (SAFE) notes payable – The Company accounts for the proceeds from the issuance of SAFE notes payable in accordance with ASC 480-10, Distinguishing Liabilities from Equity. The Company has determined that as of December 31, 2023 fair value approximates the initial proceeds of the SAFE notes payable. Revenue recognition – Operating revenues consist of monthly subscription revenue, Expedited Transfer Fee revenue, and marketplace revenues. Expedited Transfer Fee revenue is recognized in connection with customer advances. Marketplace revenues are recognized in connection with customer traffic added to the MP Partners’ product/services. The Company accounts for its subscription and Marketplace revenue in accordance with ASC 606, Revenue from Contracts with Customers. The Company accounts for its Expedited Transfer Fee revenue in accordance with ASC 310 as a nonrefundable fee recognized over the expected cash advance term. To determine revenue recognition for subscriptions and Marketplace revenue that the Company determined are within the scope of ASC 606, the Company performed the following five steps: (i) identified the contract(s) with a customer, (ii) identified the performance obligations in the contract, (iii) determines the transaction price, (iv) allocated the transaction price to the performance obligations in the contract, and (v) recognized revenue when (or as) the entity satisfies a performance obligation. The Company only applied the five-step model to arrangements that met the definition of a contract under ASC 606, including when it is probable that the entity would collect the consideration it is entitled to in exchange for the services it transferred to the customer. At contract inception, once the contract was determined to be within the scope of ASC 606, the Company assessed the goods or services promised within each contract and determined those that were performance obligations, and assessed whether each promised service was distinct. The Company then recognized as revenue the amount of the transaction price that is allocated to the respective performance obligation when (or as) the performance obligation was satisfied. Subscription revenue – Subscription payments are received on a monthly basis from Users who upgrade to a subscription via the Company’s mobile application and/or web browser. Depending on the optional subscription tier, the User gains access to the following: Budgeting Tools, Credit Monitoring, Credit Builder, ID Theft Protection, and Instant Cash. This payment can range based on a variety of factors and higher cost tiers generally offer additional services. The Company continually fulfills its obligation to each User over the subscription term. The series of distinct services represents a single performance obligation that is satisfied over time. The Company recognizes revenue ratably as the User receives and consumes the benefits of the platform throughout the monthly contract period. Price concessions are a form of variable consideration and are granted to Users who have insufficient funds when subscription payments are due and not collected. The Company accounts for price concessions each month based on the actual amounts collected from Users. Expedited Transfer Fee revenue – The Company receives a payment from Users for routing a cash advance request via a faster delivery method. Expedited Transfer Fee payments from Users are recognized as revenue over the expected term of the associated customer cash advance.
Bridge It, Inc. and Subsidiaries Notes to the Consolidated Financial Statements (in thousands, except share and per share amounts) Year Ended December 31, 2023 See accompanying notes. 14 Marketplace revenues – The Company serves offers from the MP Partners’ products and services on its mobile application. The Company receives a payment based on contractual terms, generally on the basis of customer traffic brought to such products or services. Marketplace revenues are recognized over the expected term of the associated customer contract as the performance obligation is satisfied over time. Processing and service fees – The Company pays various fees to third parties to facilitate movement of funds such as disbursement and collection of cash advance, collection of subscription revenue, collection of Expedited Transfer Fee revenue, fees to connect to a User’s bank account, and other fees to fulfill services related to the Company’s products. These expenses are classified as a cost of revenue. Stock-based compensation – Compensation cost is estimated and recognized for stock options and restricted stock awards issued to employees based on the following: Stock options – ASC 718, Compensation-Stock Compensation (“ASC 718”), requires the estimate of the fair value of all stock-based payments to employees, including grants of stock options, to be recognized in the statement of operations over the requisite service period. Under ASC 718, employee option grants are generally valued at the grant date and those valuations do not change once they have been established. The fair value of each option award is estimated on the grant date using the Black-Scholes Option Pricing Model. As allowed by ASC 718, the Company’s estimate of expected volatility is based on its peer company average volatilities, including industry, stage of life cycle, size, and financial leverage. The risk-free rate for periods within the contractual life of the option is based on the U.S. Treasury yield curve in effect at the time of grant valuation. The Company recognizes forfeitures as they occur. Subsequent modifications to outstanding awards result in incremental cost if the fair value is increased as a result of the modification. Restricted stock awards – Restricted stock awards (“RSAs”) are valued on the grant date. The fair value of the RSAs is equal to the estimated fair value of the Company’s common stock on the grant date. This compensation cost is recognized over the requisite service period as a component of stock-based compensation expense, presented within compensation and benefits in the consolidated statements of operations. The Company recognizes forfeitures as they occur. Income Taxes – The Company follows ASC 740, Income Taxes, or ASC 740, which requires recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the consolidated financial statements or tax returns. Under this method, deferred tax assets and liabilities are based on the differences between the financial statement and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. Deferred tax assets are reduced by a valuation allowance to the extent management concludes it is more likely than not that the asset will not be realized. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled.
Bridge It, Inc. and Subsidiaries Notes to the Consolidated Financial Statements (in thousands, except share and per share amounts) Year Ended December 31, 2023 See accompanying notes. 15 ASC Topic 740, Income Taxes, provides that a tax benefit from an uncertain tax position may be recognized when it is more likely than not that the position will be sustained in a court of last resort, based on the technical merits. If it is more likely than not, the amount recognized is the largest amount of tax benefit that is greater than 50% likely of being realized on examination, including compromise settlements. For tax positions not meeting the more likely than not threshold, no tax benefit is recorded. The Company had no unrecognized tax benefits as of December 31, 2023. ASC 740 also provides guidance on de-recognition, classification, interest and penalties on income taxes, accounting in interim periods, and requires increased disclosures. The Company’s policy is to recognize interest and penalties accrued on any unrecognized tax benefits as a component of income tax expense. The Company did not recognize interest or penalties as a component of income tax expense during the years ended December 31, 2023. There is no accrued interest and penalties as of December 31, 2023. Recently Issued Accounting Pronouncements – In June 2016, the FASB issued ASU 2016-13, Financial Instruments–Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which introduced an expected credit loss methodology for the measurement and recognition of credit losses on most financial assets, including trade accounts receivables. The expected credit loss methodology under ASU 2016-13 is based on historical experience, current conditions, and reasonable and supportable forecasts over the life of a financial asset which replaces the probable and incurred loss model for measuring and recognizing expected losses under current GAAP. On January 1, 2023, the Company adopted Topic 326, resulting in no material impact on the Company’s consolidated financial statements. Subsequent Events – Subsequent events are events or transactions that occur after the consolidated balance sheet date, but before consolidated financial statements are available to be issued. The Company recognizes in the consolidated financial statements the effects of all subsequent events that provide additional evidence about conditions that existed at the date of the consolidated balance sheet, including the estimates inherent in the process of preparing the consolidated financial statements. The Company has evaluated subsequent events through September 20, 2024, which is the date the consolidated financial statements were available to be issued. From May 2024 through August 2024, the Company drew down on an additional $9,900 of debt from its credit facility (see Note 7) bringing the total principal to $47,800. In September 2024, the credit facility maturity was extened to March 31, 2025.
Bridge It, Inc. and Subsidiaries Notes to the Consolidated Financial Statements (in thousands, except share and per share amounts) Year Ended December 31, 2023 See accompanying notes. 16 Note 3 – Customer Cash Advances, Net Customer cash advances, net, represent outstanding cash advances less allowance for credit losses. Below is detail of customer cash advances, net as of December 31, 2023: Gross Customer Allowance for Customer Cash Days From Origination Cash Advances Credit Losses Advances, net 1-10 26,590$ (990)$ 25,600$ 11-30 8,249 (446) 7,803 31-60 2,371 (1,878) 493 61-90 109 (25) 84 91-120 - - - Total 37,319$ (3,339)$ 33,980$ The roll-forward of the allowance for credit losses is as follows: Beginning, allowance for credit losses at December 31, 2022 1,319$ Plus customer cash advance credit losses 23,384 Less amounts written-off (27,904) Plus amounts recovered 6,540 Ending, allowance for credit losses at December 31, 2023 3,339$ Note 4 – Property and Equipment, Net Property and equipment consisted of the following as of December 31, 2023: Machinery and equipment 244$ Less accumulated depreciation (105) Property and equipment, net 139$ Depreciation expense for the year ended December 31, 2023, was $40.
Bridge It, Inc. and Subsidiaries Notes to the Consolidated Financial Statements (in thousands, except share and per share amounts) Year Ended December 31, 2023 See accompanying notes. 17 Note 5 – Internally Developed Internal Use Software The Company’s internally developed internal use software consisted of the following as of December 31, 2023: Gross carrying value 4,738$ Less accumulated amortization (1,940) Net book value 2,798 In-process development costs 1,377 Internally developed internal use software, net 4,175$ Future amortization consisted of the following as of December 31, 2023: 2024 1,387$ 2025 1,033 2026 378 Total future amortization 2,798$ Amortization expense for the year ended December 31, 2023 was $1,199. Note 6 – ROU Assets and Lease Liabilities The Company leases office space under a long-term operating lease. Operating lease expense for the year ended December 31, 2023 was $255. Cash paid for amounts included in the measurement of operating lease liabilities was $221 for the year ended December 31, 2023.
Bridge It, Inc. and Subsidiaries Notes to the Consolidated Financial Statements (in thousands, except share and per share amounts) Year Ended December 31, 2023 See accompanying notes. 18 Significant assumptions used by the Company in determining the fair value at lease inception are as follows: Weighted-average remaining lease term in years for operating leases 1.08 Weighted-average discount rate for operating leases 12.87% The undiscounted cash flows for future maturities of the Company’s operating lease liabilities and the reconciliation of the undiscounted cash flows to the operating lease liabilities recognized in the Company’s consolidated balance sheet as of December 31, 2023, are as follows: 2024 248$ 2025 21 Total undiscounted cash flows 269 Less present value discount (19) Total operating lease liabilities 250$ Note 7 – Credit Facility, Net On November 9, 2020, the Company entered into a credit facility agreement with a financial institution to provide a borrowing availability of $75,000 which can be increased to a maximum of $125,000 if certain conditions are met. The credit facility bears interest at the three-month average Secured Overnight Financing Rate (SOFR) for the most recent quarter plus an applicable margin. In September 2023, the applicable margin changed from 8% to 7% in accordance with the agreement. The revolving credit agreement is collateralized by the receivables of cash advances funded by the credit facility, as well as the payments collected from subscribers who took a cash advance funded by the credit facility. At December 31, 2023, the credit facility had an outstanding balance of $37,900 and bore an interest at 12.39%. The maturity date for the credit facility is September 10, 2024. Subsequent to December 31, 2023, the maturity date for the credit facility has been extended to March 31, 2025 with an automatic extension available to June 30, 2025. Credit facility, net of debt issuance costs consisted of the following as of December 31, 2023: Outstanding balance 37,900$ Less unamortized debt issuance costs (141) Credit facility, net of debt issuance costs 37,759$
Bridge It, Inc. and Subsidiaries Notes to the Consolidated Financial Statements (in thousands, except share and per share amounts) Year Ended December 31, 2023 See accompanying notes. 19 In conjunction with the credit facility, the Company entered into a warrant purchase agreement with the lender which allows the lender the right to purchase preferred shares equivalent to 0.20% of the Company’s then fully-diluted capitalization after the Company completes their next capital raise of preferred stock with minimum proceeds of $5 million at an exercise price of 80% of the share price paid by purchasers of the next round of preferred share issuance. The warrant expires on November 9, 2030. If prior to a qualified preferred capital raise the Company undergoes a change of control, initial public offering or sale of all or substantially all of the Company’s assets the Company will be required to make a cash payment in an amount sufficient to cause the lender to achieve an internal rate of return on the credit facility to increase by 1%. In addition, if the warrants are not fully exercised by the lender prior to expiration and the fair market value per share is greater than the exercise price the unexercised warrant will automatically be exercised. The fair value of the warrant agreement as of December 31, 2023 is not determinable until the next preferred capital raise therefore the entirety of the proceeds from issuance of the credit facility has been allocated to debt. Subsequent to December 31, 2023, the warrant agreement was amended to include (1) exercise price shall mean the lesser of 80% of the next capital raise share price or $531 (2) next capital raise of preferred equity shall have occurred prior to December 31, 2025 and (3) right to purchase preferred shares if a preferred capital raise occurred prior to December 31, 2025 is equivalent to 0.20% of the Company’s then fully-diluted capitalization or if preferred capital raise does not occur prior to December 31, 2025, 1,878 shares of the Company’s common stock. Note 8 – Convertible Debt From September 2020 through January 2021, the Company entered into various Convertible Note Purchase Agreements (“Note Purchase Agreement”) with various lenders providing for the purchase and sale of convertible notes in the aggregate initial principal of $8,225 (the “Notes”). The Notes bear interest at a rate of 4.00% per year (compounded annually). All unpaid principal and accrued interest is due and payable at any time after the maturity date. Effective October 31, 2022, the Note Purchase Agreement was amended to extend the maturity date to September 21, 2024, and providing the majority noteholders the option to extend the maturity date if the Notes have not been converted or fully paid prior to the maturity date.
Bridge It, Inc. and Subsidiaries Notes to the Consolidated Financial Statements (in thousands, except share and per share amounts) Year Ended December 31, 2023 See accompanying notes. 20 During the term of the Notes, the Notes will be convertible into shares of the Company’s preferred stock. In the event of a qualified equity financing event, the initial principal of each Note will automatically convert into shares of the securities issued in the financing event at a conversion price equal to the discounted price paid per share by the investors investing new money in the Company. A qualified equity financing event is an event from which the Company receives gross proceeds of not less than $10,000. In the event of a non-qualified equity financing event, the initial principal of each Note will convert at the option of the majority noteholders into shares of the securities issued in the financing event at a conversion price equal to the price paid per share by the investors investing new money in the Company. A non-qualified equity financing event is an event from which the Company receives gross proceeds of less than $10,000. If a qualified equity financing event has not occurred on or prior to the maturity date, the majority noteholders have the option to convert all outstanding principal into Series A-1 Preferred Stock at the original issue price or receive cash payment for all outstanding principal and unpaid accrued interest. In the event of conversion, the lenders waive the payment by the Company of any unpaid accrued interest due on each Note upon conversion. The Conversion Price of the Notes is subject to adjustment for stock splits, recapitalizations, combinations, or other similar transaction affecting the common stock or preferred stock underlying the conversion shares that occur prior to the conversion of the Notes. The Notes and the shares of common stock or preferred stock issuable upon conversion of the Note have not been registered under the Securities Act and may not be offered or sold absent registration or an applicable exemption from registration requirements. The effective interest rate as of December 31, 2023, was 4.00%. As of December 31, 2023, the outstanding balance of the Notes, including paid in-kind interest, was $9,371. Note 9 – Simple agreements for future equity (SAFE) notes payable From June 2022 through July 2022, the Company issued Simple Agreements for Future Equity (the “SAFE”) notes payable to investors for an aggregate amount of $8,652. The SAFEs are convertible into shares of common stock or preferred stock of the Company upon an equity financing, liquidity, or dissolution event with a valuation cap of $600,000. The investor has the option to convert the SAFE to a number of shares of common stock or preferred stock equal to the purchase amount divided by the price per share equal to the valuation cap divided by the Company Capitalization, as defined in the agreement, if an event has not occurred prior to a date specified within the SAFE agreement. This date ranges from June 16, 2024 through July 29, 2024 based on investor. In the event of a dissolution, the Company will pay in cash to the note holders an amount equal to $8,652, due and payable immediately prior to, or concurrent with, the consummation of the dissolution. In the event of liquidity the note holder at its option can receive a cash payment of $8,652 or number of common or preferred shares equal to $8,652 divided by the liquidity price as defined in the agreement.
Bridge It, Inc. and Subsidiaries Notes to the Consolidated Financial Statements (in thousands, except share and per share amounts) Year Ended December 31, 2023 See accompanying notes. 21 Note 10 – Related Party Transactions In September 2018, the Company entered into promissory note agreements with officers of the Company and various investors and lenders. As of December 31, 2023, four noteholders had their promissory note agreements amended in September 2020 to extend the maturity date through September 2022 and subsequently extended the maturity date through September 2024. The promissory note agreements bear interest at 10%. Payments of accrued, unpaid interest are due and payable on each anniversary of the closing date. As of December 31, 2023, the outstanding principal balance of the promissory note agreements was $844, of which $729 was related party. As of December 31, 2023, accrued interest was $22, of which $19 was related party and is included in accrued liabilities on the consolidated balance sheet. All outstanding principal and accrued, unpaid interest is due and payable on the maturity date. Note 11 – Commitments and Contingencies From time to time, the Company may be involved in various claims and litigation arising in the ordinary course of business. In management’s opinion, the resolution of such matters, if any, is not expected to have a material adverse effect on the Company’s financial position, results of operations, or cash flows. On October 19, 2023, the Company executed a settlement agreement with the Federal Trade Commission (“FTC”), without admitting fault, to settle the FTC’s complaints regarding certain marketing, advertising, or promotional practices, as well as claims regarding violations of the Restore Online Shoppers’ Confidence Act (ROSCA). As part of this agreement, the Company agreed to pay $18,000. The Company recorded this as a settlement expense in the consolidated statement of operations, and paid the full amount on November 13, 2023. Note 12 – Stockholders’ Equity Preferred Stock – Series Seed – As of December 31, 2023, the Company has 122,702 authorized, issued, and outstanding shares of Series Seed Preferred Stock (Series Seed) with a par value of $0.00001 per share. Series Seed are entitled to stockholder voting rights that equal to the number of common shares into which Series Seed are convertible. The Series Seed original issue price is $14.975 per share and is subject to appropriate adjustment in the event of any stock dividend, stock split, combination, or other similar recapitalization with respect to the Series Seed. Series Seed have special preferred protective voting rights to approve, by majority vote, certain corporate events and changes including merger, consolidation, liquidation, increase in the amount of authorized preferred or common stock shares, and payment of dividends. Series A-1 – As of December 31, 2023, the Company has 139,391 authorized issued and outstanding Series A-1 preferred stock shares (Series A-1) with a par value of $0.00001 per share.
Bridge It, Inc. and Subsidiaries Notes to the Consolidated Financial Statements (in thousands, except share and per share amounts) Year Ended December 31, 2023 See accompanying notes. 22 Series A-1 are entitled to stockholder voting rights that equal to the number of common shares into which Series A-1 are convertible. The Series A-1 original issue price is $166.267 per share and is subject to appropriate adjustment in the event of any stock dividend, stock split, combination, or other similar recapitalization with respect to the Series A-1. The Series A-1 have special preferred protective voting rights to approve, by majority vote, certain corporate events and changes including merger, consolidation, liquidation, increase in the amount of authorized preferred or common stock shares, and payment of dividends. Series A-2 – As of December 31, 2023, the Company has 10,644 authorized issued and outstanding Series A-2 preferred stock shares (Series A-2) with a par value of $0.00001 per share. Series A-2 are entitled to stockholder voting rights that equal to the number of common shares into which Series A-2 are convertible. The Series A-2 original issue price is $151.716 per share and is subject to appropriate adjustment in the event of any stock dividend, stock split, combination, or other similar recapitalization with respect to the Series A-2. Series A-2 have special preferred protective voting rights to approve, by majority vote, certain corporate events and changes including merger, consolidation, liquidation, increase in the amount of authorized preferred or common stock shares, and payment of dividends. Holders of Series Seed, Series A-1, and Series A-2 are entitled to preferential, ratable payment in the event of voluntary or involuntary liquidation, winding up the Company, or defined deemed liquidation event, including change of control or transfer of substantially all assets. The preferential, ratable payment is made to preferred shareholders out of available assets before any other stockholders are paid and determined as the greater of (a) one times the original issue price, plus any dividends declared but unpaid, or (b) amount that would have been payable if all shares of such series of preferred stock were converted into common stock in accordance with the stated conversion rights. No dividends have been declared as of December 31, 2023. After holders of Series Seed, Series A-1 and Series A-2 receive their preferential, ratable payment, the remaining assets shall be distributed among common stockholders, ratably, according to number of shares owned. A holder of Series Seed, Seed A-1, and Series A-2 with at least 12,029 shares of common stock issuable or issued upon conversion of the preferred stock or any other securities are a Major Investor (Major Investor). A Major Investor has the right to receive financial statements, the right of first offer on new securities issued by the Company, and the secondary refusal right to purchase up to its pro rata portion of certain restricted stock transfers not purchased pursuant to the Company’s right of first refusal. Series Seed, Series A-1, and Series A-2 are convertible at the option of the holder into such number of fully paid and non-assessable shares of common stock as is determined by dividing the applicable original issue price by the applicable conversion price. The conversion price is initially equal to the applicable original issue price. Common Stock – As of December 31, 2023, the Company has 950,000 of authorized shares of common stock with par value $0.00001 per share. As of December 31, 2023, there were 560,383 shares of common stock issued and outstanding. During 2023, 2,548 shares of common stock were issued in connection with the exercise of stock options.
Bridge It, Inc. and Subsidiaries Notes to the Consolidated Financial Statements (in thousands, except share and per share amounts) Year Ended December 31, 2023 See accompanying notes. 23 Employee Stock-Based Compensation – In 2017, Company’s Board of Directors adopted the Bridge It, Inc. 2017 Stock Plan (“the Plan”). The Plan authorizes the award of stock options and restricted stock awards. There were no restricted stock awards outstanding for the year ended December 31, 2023. Options granted under the Plan vest over the requisite service period, which is generally four years as follows: 25% of option shares vest on the first anniversary of the vesting commencement and 1/48th of the shares vest monthly over the remaining three years. Options expire ten years from the date of grant. The Plan provides for the issuance of both incentive stock options, expected to qualify within the meaning of Section 422 of the U.S. Tax Code and non-statutory stock options. The total number of shares reserved and available for grants under the Plan are 2,702. Stock Options – Management has valued stock options at their date of grant utilizing the Black Scholes Option pricing model. The fair value of the underlying shares was determined by using a number of inputs including recent arm’s length transactions involving the sale of the Company’s common stock. The following table presents the assumptions used to value options granted during the years ended December 31, 2023: Term 7 years Risk-free interest rate 4.26% Dividend yield 0.00% Volatility 70.00% To determine expected volatility, the Company identified a group of peer companies and considered their historical stock prices. In finding similar companies, the Company considered the industry, stage of life cycle, size, and financial leverage of such other entities. The risk free interest rate is based on the implied yield available on U.S. Treasury issues with an equivalent term approximating the expected life of the options depending on the date of the grant and expected life of the options.
Bridge It, Inc. and Subsidiaries Notes to the Consolidated Financial Statements (in thousands, except share and per share amounts) Year Ended December 31, 2023 See accompanying notes. 24 Activity with respect to options granted under the 2017 Stock Plan is summarized as follows for the year ended December 31, 2023: Shares Weighted Average Exercise Price Weighted Average Remaining Contractual Term (years) Weighted Average Grant- Date Fair Value Options outstanding, December 31, 2022 66,291 23.83 8.66 14.51 Granted 11,398 27.32 - 19.02 Exercised (2,548) 26.01 - 15.90 Cancelled or forfeited (1,922) 27.07 - 16.45 Options outstanding, December 31, 2023 73,219 24.21 7.96 15.11 Nonvested at December 31, 2023 25,588 Exercisable at December 31, 2023 47,631 22.76 The Company recognized $253 of stock based compensation expense arising from stock option grants which is recorded as a component of wages and benefits in the statements of operations for the year ended December 31, 2023. There was $454 of total unrecognized compensation cost related to unvested stock options granted under the Plan as of December 31, 2023, the cost is expected to be recognized over the weighted-average remaining period of 2.27 years. Note 13 – Income Taxes The components of income tax expense for the year ended December 31, 2023 were as follows: Current Federal 180$ State 48 Total current 228 Deferred Federal - State - Total deferred - Income tax expense 228$
Bridge It, Inc. and Subsidiaries Notes to the Consolidated Financial Statements (in thousands, except share and per share amounts) Year Ended December 31, 2023 See accompanying notes. 25 A reconciliation between the Company’s federal statutory tax rate and its effective tax rate for the year ended December 31, 2023 is as follows: Federal statutory tax rate 21.0% State taxes, net of federal benefit 2.9% Change in valuation allowance -27.3% Nondeductible items -1.1% Effective tax rate -4.5% The major components of the Company’s deferred tax assets and liabilities as of December 31, 2023: Deferred income tax assets: Net operating loss carryforwards 2,990$ Research and experimentation costs 2,023 Stock compensation 50 Accrued expenses 320 Interest limitation carryforward 283 Operating lease liabilities 61 Allowance for credit losses 822 Total deferred income tax assets 6,549 Deferred income tax liabilities: Operating right-of-use assets (61) Property and equipment (23) Total deferred income tax liabilities (84) Total deferred tax assets 6,465 Less: valuation allowance (6,465) Total net deferred income tax assets -$ At December 31, 2023, the Company had estimated federal and state net operating loss carryforwards of $12,518 and $5,914, respectively. There were insufficient federal and state deferred tax liabilities to offset the federal and state deferred tax assets at December 31, 2023; therefore, based on this and other available evidence, management believes it is more likely than not that the net federal and state deferred assets will not be fully realized and has recorded valuation allowances in the amounts of $6,465, as of December 31, 2023. The valuation allowance increased by $1,375 during the year ended December 31, 2023.
Bridge It, Inc. and Subsidiaries Notes to the Consolidated Financial Statements (in thousands, except share and per share amounts) Year Ended December 31, 2023 See accompanying notes. 26 The U.S. Internal Revenue Code of 1986, as amended, generally imposes an annual limitation on a corporation’s ability to utilize net operating loss carryovers (NOLs) if it experiences an ownership change as defined in Section 382. In general terms, an ownership change may result from transactions increasing the ownership of certain stockholders in the stock of a corporation by more than 50% over a three-year period. In the event that an ownership change has occurred, or were to occur, utilization of the Company’s NOLs would be subject to an annual limitation under Section 382 as determined by multiplying the value of the Company’s stock at the time of the ownership change by the applicable long- term tax-exempt rate as defined in the Internal Revenue Code (IRC). Any unused annual limitation may be carried over to later years. The Company could experience an ownership change under Section 382 as a result of events in the past in combination with events in the future. If so, the use of the Company’s NOLs, or a portion thereof, against future taxable income may be subject to an annual limitation under Section 382, which may result in expiration of a portion of the NOLs before utilization. As of December 31, 2023, the Company has not completed an IRC Section 382 study to determine if a limitation exists. The Company is subject to examination by taxing authorities in the jurisdictions in which it files tax returns, including federal, New York, and various other state jurisdictions. The federal and New York statute of limitations remains open for the tax periods December 31, 2018, and thereafter. The statute of limitations for the various other state jurisdictions remains open for the tax periods December 31, 2018, and thereafter. Note 14 – 401(k) Savings Plan: The Company maintains a 401(k) savings plan for the benefit of its employees. The Company currently does not make matching contributions to the 401(k) savings plan. All current employees, except for collectively bargained, nonresident alien, leased, interns, and temporary employees, are eligible to participate in the 401(k) savings plan.
Consolidated Financial Statements Bridge It, Inc. and Subsidiaries September 30, 2024 EXHIBIT 99.2
Table of Contents Page Consolidated Financial Statements Consolidated Balance Sheet 1 Consolidated Statement of Income 2 Consolidated Statement of Stockholders’ Equity 3 Consolidated Statement of Cash Flows 4 Notes to the Consolidated Financial Statements 5
Consolidated Financial Statements
Bridge It, Inc. and Subsidiaries See accompanying notes. 1 Consolidated Balance Sheet (in thousands, except share and per share amounts) September 30, 2024 (unaudited) CURRENT ASSETS Cash $ 33,561 Restricted cash 6,016 Customer cash advances, net of allowance for credit losses of $5,624 43,727 Accounts receivable, net of allowance for credit losses of $0 2,535 Accrued revenue, net of allowance for credit losses of $0 1,576 Operating lease right-of-use assets 20 Prepaid expenses and other current assets 2,044 Total current assets 89,479 Property and equipment, net 148 Internally developed internal use software, net 5,441 Other long-term assets 165 Total assets $ 95,233 CURRENT LIABILITIES Accounts payable $ 3,325 Accrued liabilities 1,920 Credit facility, net of debt issuance costs 49,300 Simple agreements for future equity notes payable 8,652 Loans payable, related party and other lenders 539 Operating lease liabilities, short-term 21 Other current liabilities 1,500 Total current liabilities 65,257 Total liabilities 65,257 Commitments and contingencies (Note 11) Series Seed preferred stock, par value per share $0.00001, 122,702 shares authorized, issued and outstanding at September 30, 2024 - Series A-1 preferred stock, par value per share $0.00001, 139,391 shares authorized, issued and outstanding at September 30, 2024 - Series A-2 preferred stock, par value per share $0.00001, 10,644 shares authorized, issued and outstanding at September 30, 2024 - Series A-3 preferred stock, par value per share $0.00001, 33,229 shares authorized, issued and outstanding at September 30, 2024 - Common stock, par value per share $0.00001, 1,000,000 shares authorized, 564,322 shares issued and outstanding at September 30, 2024 - Additional paid-in capital 50,654 Accumulated deficit (20,678) Total stockholders’ equity 29,976 Total liabilities and stockholders’ equity $ 95,233 STOCKHOLDERS’ EQUITY ASSETS LIABILITIES
Bridge It, Inc. and Subsidiaries See accompanying notes. 2 Consolidated Statement of Income (in thousands) Nine Months Ended September 30, 2024 (unaudited) OPERATING REVENUES Subscription revenue $ 86,532 Expedited Transfer Fee revenue 19,275 Marketplace revenue 7,260 Total operating revenues 113,067 COST OF REVENUE Customer cash advance credit losses 25,419 Processing and service fees 13,972 Total cost of revenue 39,391 OPERATING EXPENSES Advertising and marketing 37,242 Wages and benefits 9,486 Technology and infrastructure 4,279 Professional fees 1,768 Depreciation and amortization 1,570 Other general and administrative expenses 1,330 Total operating expenses 55,675 OTHER INCOME (EXPENSE) Interest income 352 Interest expense (4,388) Other miscellaneous income 2,488 Total other expenses, net (1,548) NET INCOME BEFORE PROVISION FOR INCOME TAXES 16,453 Provision for income taxes 831 Net income $ 15,622
Bridge It, Inc. and Subsidiaries See accompanying notes. 3 Consolidated Statement of Stockholders’ Equity (in thousands, except share amounts) Nine Months Ended September 30, 2024 (unaudited) Additional Accumulated Total Shares Amount Shares Amount Shares Amount Shares Amount Shares Amount Paid-in Capital Deficit Equity Balance at December 31, 2023 122,702 -$ 139,391 -$ 10,644 -$ - -$ 560,383 -$ 40,754$ (36,300)$ 4,454$ Issuance of common stock - - - - - - - - 3,939 - 125 - 125 Series A-3 financing - - - - - - 33,229 - - - 9,627 - 9,627 Stock-based compensation - - - - - - - - - - 148 - 148 Net income - - - - - - - - - - - 15,622 15,622 Balance at September 30, 2024 122,702 $ - 139,391 $ - 10,644 $ - 33,229 $ - 564,322 $ - 50,654 $ (20,678) 29,976 Common StockPreferred A-1 StockPreferred Seed Stock Preferred A-2 Stock Preferred A-3 Stock
Bridge It, Inc. and Subsidiaries See accompanying notes. 4 Consolidated Statement of Cash Flows (in thousands) Nine Months Ended September 30, 2024 (unaudited) CASH FLOWS FROM OPERATING ACTIVITIES Net income 15,622$ Adjustments to reconcile net income to net cash provided by operating activities Depreciation and amortization 1,570 Customer cash advance credit losses 25,419 Stock-based compensation 148 Amortization of debt issuance costs 141 Non-cash interest 256 Non-cash operating lease expense 226 Changes in operating assets and liabilities Accounts receivable (960) Accrued revenue (434) Prepaid expenses and other current assets (1,152) Accounts payable (254) Operating lease liabilities (229) Accrued liabilities and other current liabilities 272 Net cash provided by operating activities 40,625 CASH FLOWS FROM INVESTING ACTIVITIES Net disbursements and collections of customer cash advances (35,166) Capitalization of internally developed internal use software (2,799) Purchase of property and equipment (46) Net cash used in investing activities (38,011) CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from stock options exercised 125 Proceeds from credit facility 11,400 Payments on loans payable, related party and other lenders (305) Net cash provided by financing activities 11,220 NET INCREASE IN CASH AND RESTRICTED CASH 13,834 CASH AND RESTRICTED CASH, beginning of year 25,743 CASH AND RESTRICTED CASH, end of year 39,577$ The following table provides a reconciliation of cash and restricted cash reported within the consolidated balance sheet with the same as shown in the consolidated statement of cash flows: Cash 33,561$ Restricted cash 6,016 Total cash and restricted cash, end of year 39,577$ SUPPLEMENTAL DISCLOSURE OF NON-CASH INFORMATION Conversion of convertible debt from Series A-3 financing 9,627$ SUPPLEMENTAL CASH FLOW INFORMATION Cash paid during the year for Income taxes 1,610$ Interest 3,587$
Bridge It, Inc. and Subsidiaries 5 Notes to the Consolidated Financial Statements (unaudited) (in thousands, except share and per share amounts) Note 1 – Nature of Operations Organization and business – Bridge It, Inc. (the Company, Brigit, or Bridge It), is a Delaware corporation founded in October 2017 and headquartered in New York, New York. The Company owns 100% of its subsidiary, Brigit – Kala SPV, LLC. The Company also owns 100% of its four dormant subsidiaries: Brigit SPV1, LLC; Brigit – Lowell SPV, LLC; Brigit SPV3, LLC; and Brigit SPV4, LLC. The Company, through its mobile and web application, offers various financial health products and tools including Finance Helper, Earn and Save, Instant Cash, Credit Builder, Identity Theft Protection, and more. The Company offers the following features for free: Finance Helper – Finance Helper helps members (User or Users) improve money habits through budgeting tools, personalized real-time recommendations, providing an overview of their expenses, overdraft prediction, and bill forecasting. Brigit also creates financial literacy content that helps Users budget more effectively. Earn and Save – The Company hosts third-party offers for Users to increase their income, save money, and get access to credit. Users can explore available full-time jobs, find additional part-time work to supplement their existing income, and perform other tasks to earn money (i.e. take surveys, etc.). Additionally, Users can apply to get access to credit, such as personal loans and car loans, from third- party partners. Brigit earns a commission from the third-party partners for referring Brigit’s customers to utilize the partner’s services (Marketplace Partners, MP Partners). The paid subscription versions offers all the features of the free version, plus additional features: Instant Cash – Brigit provides earned wage access advances between $50 and $250 dollars when needed. By leveraging cash flow information from the User’s bank account as well as user verified income information, Brigit’s algorithm assesses their earned income and ability to repay, with no FICO needed and no impact on credit scores. Brigit’s algorithms also predict when a user may fall short and can automatically send advances to the User’s account if they choose (this is an opt in feature). Brigit offers an optional expedited delivery of the cash advance for a small payment (Expedited Transfer Fee). Credit Builder – Credit Builder helps Users establish or improve their credit scores. The loans are originated by and held with the Company’s bank partner. Unlike traditional loans, the primary goal of Credit Builder is not to provide immediate access to funds, but to allow Users to demonstrate creditworthiness through consistent payments. When a User opens a Credit Builder loan, the entire proceeds of the loan are moved into a secured deposit account (the User does not have access to these proceeds). The Credit Builder loan forms a new tradeline on the borrower’s credit report. The User then makes installment payments over a period typically set at 24 months. These payments are reported to the three largest credit reporting agencies. Credit Builder promotes savings because the User’s payments accumulate in a deposit account, to be withdrawn by the User. The activities related to Credit Builder are not recorded on the Company’s consolidated balance sheet.
Bridge It, Inc. and Subsidiaries Notes to the Consolidated Financial Statements (unaudited) (in thousands, except share and per share amounts) 6 Note 2 – Summary of Significant Accounting Policies Basis of accounting – The accounting and reporting policies of the Company are prepared on the accrual basis of accounting in conformity with accounting principles generally accepted in the United States of America (GAAP). Principles of consolidation – The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All intercompany transactions and balances have been eliminated upon consolidation. Use of estimates – The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosures of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenue and expenses during the reporting periods. Actual results could differ from those estimates. Management’s significant estimates include the allowance for credit losses, the capitalization of internally developed internal use software and useful life, the determination of the fair value of the Company’s common stock used in the calculation of stock-based compensation, and the valuation allowance for deferred tax assets. Cash – The Company’s cash is held in various financial institutions. At times throughout the year, balances can exceed Federal Deposit Insurance Corporation (FDIC) insurance limits. The Company has not experienced any historical losses associated with balances maintained with financial institutions in excess of FDIC insurance limits, and management continues to monitor the financial condition of the financial institutions where these funds are held. Restricted cash – Restricted cash primarily represents cash held at financial institutions to meet prefunding obligations of cash advance, as well as cash that is pledged as collateral for specific accounts that may become overdrawn, and minimums required by financial institutions to keep the bank account open. As of September 30, 2024, the Company had $6,016 in restricted cash required to be held for potential overspend with processors, bank account minimums, and prefunding obligations. Customer cash advances, net of allowance for credit losses – Customer cash advances are recorded at their original advance amount and reduced by an allowance for credit losses. Customer cash advances are treated as finance receivables under Accounting Standards Codification (ASC) 310, Receivables. The Company pools its customer advances, all of which are short-term in nature, based on similar risk characteristics to assess their risk of credit loss. The Company uses an aging method and historical loss rates as a basis for estimating the allowance for credit losses. The Company considers whether reasonable and supportable forecasts about future conditions warrant an adjustment to its historical loss experience. The Company evaluates current economic conditions, changes in customer payment terms, and cash collections subsequent to the balance sheet date to assess for such adjustments. The allowance for credit losses is recognized upon the origination of customer cash advances. Any changes in the estimate of lifetime expected credit losses are recognized in customer cash advance losses in the consolidated statement of income.
Bridge It, Inc. and Subsidiaries Notes to the Consolidated Financial Statements (unaudited) (in thousands, except share and per share amounts) 7 Customer cash advances are deemed not collectible after 45 days beyond the due date and are written- off as a reduction to the allowance for credit losses and gross customer cash advance balance. Subsequent recoveries of written-off customer cash advances are recorded when received as a recovery to the allowance for credit losses. Accounts receivable – The Company’s accounts receivable consist of trade receivables derived primarily from its contracts with Marketplace Partners. At each consolidated balance sheet date, the Company evaluates an expected allowance for credit losses. Management evaluates the ability to collect accounts receivable based on a combination of factors. All trade receivables are short-term in nature, and most of the Company’s clients are recurring customers with established payment histories. An allowance for credit loss is maintained, as necessary, based on the length of time receivables are past due or the status of a partner’s financial position. An expected loss model is utilized to assess potential future credit loss based on historical payment trends and a reasonable and supportable forecast. The Company writes off receivables when there is information that indicates the debtor is facing significant financial difficulty and there is no possibility of recovery. Management has determined that no allowance for credit loss is necessary as of September 30, 2024. Accrued revenue – The Company’s accrued revenue consists of subscription revenue and Expedited Transfer Fee revenue earned but not yet collected from Users. Management evaluates the ability to collect accrued revenue based on a combination of factors. All accrued revenue is short-term in nature. A reserve for credit loss is maintained, as necessary, based on the length of time receivables are past due. An expected loss model is utilized to assess potential future credit loss based on historical payment trends. The Company writes off receivables when there is information that indicates the debtor is facing significant financial difficulty and there is no possibility of recovery. Management has determined that no allowance for credit loss is necessary as of September 30, 2024. Property and equipment – Property and equipment are stated at cost less accumulated depreciation. Property and equipment are recorded at cost and depreciated over the estimated useful lives ranging from 5 to 7 years using the straight-line method. Maintenance and repair costs are charged to operations as incurred and included within other general and administrative expenses in the consolidated statement of income. Impairment of long-lived assets – The Company evaluates its long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Long-lived assets consist primarily of property and equipment and internally developed internal use software. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset group to future net cash flows expected to be generated by the asset group. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets. Assets to be disposed of are reported at the lower of the carrying amount or fair value less cost to sell. The Company did not recognize any impairment charges for long-lived assets for the nine months ended September 30, 2024.
Bridge It, Inc. and Subsidiaries Notes to the Consolidated Financial Statements (unaudited) (in thousands, except share and per share amounts) 8 Internally developed internal use software – Internally developed internal use software is capitalized when preliminary development efforts are successfully completed, it is probable that the project will be completed, and the software will be used as intended. Capitalized costs consist of salaries and compensation costs for employees, costs paid to third-party consultants who are directly involved in development efforts, and costs incurred for upgrades and enhancements to add functionality to the software. Other costs are expensed as incurred. In-process development costs consists of costs incurred on projects that are still in development and not been placed in service as of September 30, 2024. The Company evaluates impairment of its internal-use software whenever events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable. If the asset is not recoverable, measurement of an impairment loss is based on the fair value of the asset. When an impairment loss is recognized, the carrying amount of the asset is reduced to its estimated fair value. The Company does not believe there have been any other changes in circumstances that would indicate an impairment loss is necessary as of September 30, 2024. Amortization of internally developed internal use software commences when the software is ready for its intended use, i.e., after all substantial testing is complete. Internally developed internal use software is amortized over its estimated useful life of three years. Leases – The Company leases office space which is considered an operating lease. Options to extend or terminate the lease are considered as part of calculating the lease term to the extent that the option is reasonably certain of exercise. The lease does not include the option to purchase the leased property. The incremental borrowing rate (IBR) represents the rate of interest the Company would expect to pay on a collateralized basis to borrow an amount equal to the lease payments under similar terms. When determinable, the Company uses the rate implicit in the lease to determine the present value of lease payments. As the Company’s leases do not provide an implicit rate, the Company uses its IBR based on the information available at the lease commencement date in determining the present value of lease payments. Transactions give rise to leases when the Company receives substantially all the economic benefits from and has the ability to direct the use of specified property and equipment. The Company determines if an arrangement is a lease at inception. Right-of-use (ROU) assets represent the Company’s right to use, or control the use of, a specified asset for the lease term. Lease liabilities are the Company’s obligation to make lease payments arising from a lease and are measured on a discounted basis. Operating lease ROU assets and operating lease liabilities are recognized based on the present value of the future minimum lease payments over the lease term on the commencement date. The operating lease ROU asset includes any lease payments made and initial direct costs incurred and excludes lease incentives. The lease terms may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option. Lease expense for minimum lease payments continues to be recognized on a straight-line basis over the lease term. Advertising and marketing – Advertising and marketing costs are charged to operating expense as incurred and were $37,242 for the nine months ended September 30, 2024.
Bridge It, Inc. and Subsidiaries Notes to the Consolidated Financial Statements (unaudited) (in thousands, except share and per share amounts) 9 Convertible debt – The Company accounts for the proceeds from the issuance of convertible promissory notes payable in accordance with ASC 470-20, Debt with Conversion and Other Options. The Company also considered the bifurcation guidance for embedded derivatives per ASC 815-15, Embedded Derivatives, and ASC 815-40, Contracts in Entity’s Own Equity. Pursuant to ASC 470-20, the Company accounted for the entire convertible instrument (including the conversion option) as a single debt instrument. Simple agreements for future equity (SAFE) notes payable – The Company accounts for the proceeds from the issuance of SAFE notes payable in accordance with ASC 480-10, Distinguishing Liabilities from Equity. The Company has determined that as of September 30, 2024, fair value approximates the initial proceeds of the SAFE notes payable. Revenue recognition – Operating revenues consist of monthly subscription revenue, Expedited Transfer Fee revenue, and marketplace revenues. Expedited Transfer Fee revenue is recognized in connection with customer advances. Marketplace revenues are recognized in connection with customer traffic added and/or conversions to the MP Partners’ product/services. The Company accounts for its subscription and marketplace revenue in accordance with ASC 606, Revenue from Contracts with Customers. The Company accounts for its Expedited Transfer Fee revenue in accordance with ASC 310 as a nonrefundable fee recognized over the expected cash advance term. To determine revenue recognition for subscriptions and Marketplace revenue that the Company determined are within the scope of ASC 606, the Company performed the following five steps: (i) identified the contract(s) with a customer, (ii) identified the performance obligations in the contract, (iii) determined the transaction price, (iv) allocated the transaction price to the performance obligations in the contract, and (v) recognized revenue when (or as) the entity satisfies a performance obligation. The Company only applied the five-step model to arrangements that met the definition of a contract under ASC 606, including when it is probable that the entity would collect the consideration it is entitled to in exchange for the services it transferred to the customer. At contract inception, once the contract was determined to be within the scope of ASC 606, the Company assessed the goods or services promised within each contract, determined those that were performance obligations, and assessed whether each promised service was distinct. The Company then recognized as revenue the amount of the transaction price that is allocated to the respective performance obligation when (or as) the performance obligation was satisfied. Subscription revenue – Subscription payments are received on a monthly basis from Users who upgrade to a subscription via the Company’s mobile application and/or web browser. Depending on the optional subscription tier, the User gains access to the following: Budgeting Tools, Credit Monitoring, Credit Builder, Identity Theft Protection, and Instant Cash. This payment can range based on a variety of factors and higher cost tiers generally offer additional services. The Company continually fulfills its obligation to each User over the subscription term. The series of distinct services represents a single performance obligation that is satisfied over time. The Company recognizes revenue ratably as the User receives and consumes the benefits of the platform throughout the monthly contract period. Price concessions are a form of variable consideration and are granted to Users who have insufficient funds when subscription payments are due and not collected. The Company accounts for price concessions each month based on the actual amounts collected from Users.
Bridge It, Inc. and Subsidiaries Notes to the Consolidated Financial Statements (unaudited) (in thousands, except share and per share amounts) 10 Expedited Transfer Fee revenue – The Company receives a payment from Users for routing a cash advance request via a faster delivery method. Expedited Transfer Fee payments from Users are recognized as revenue over the expected term of the associated customer cash advance. Marketplace revenues – The Company serves offers from the MP Partners’ products and services on its mobile application. The Company receives a payment based on contractual terms, generally on the basis of customer traffic and/or conversions brought to such products or services. Marketplace revenues are recognized over the expected term of the associated customer contract as the performance obligation is satisfied over time. Processing and service fees – The Company pays various fees to third parties to facilitate movement of funds such as disbursement and collection of cash advance, collection of subscription revenue, collection of Expedited Transfer Fee revenue, fees to connect to a User’s bank account, and other fees to fulfill services related to the Company’s products. These expenses are classified as a cost of revenue. Stock-based compensation – Compensation cost is estimated and recognized for stock options and restricted stock awards issued to employees based on the following: Stock options – ASC 718, Compensation – Stock Compensation (ASC 718), requires the estimate of the fair value of all stock-based payments to employees, including grants of stock options, to be recognized in the statement of income over the requisite service period. Under ASC 718, employee option grants are generally valued at the grant date and those valuations do not change once they have been established. The fair value of each option award is estimated on the grant date using the Black-Scholes Option Pricing Model. As allowed by ASC 718, the Company’s estimate of expected volatility is based on its peer company average volatilities, including industry, stage of life cycle, size, and financial leverage. The risk- free rate for periods within the contractual life of the option is based on the U.S. Treasury yield curve in effect at the time of grant valuation. The Company recognizes forfeitures as they occur. Subsequent modifications to outstanding awards result in incremental cost if the fair value is increased as a result of the modification. Restricted stock awards – Restricted stock awards (RSAs) are valued on the grant date. The fair value of the RSAs is equal to the estimated fair value of the Company’s common stock on the grant date. This compensation cost is recognized over the requisite service period as a component of stock-based compensation expense, presented within compensation and benefits in the consolidated statement of income. The Company recognizes forfeitures as they occur. Income taxes – The Company follows ASC 740, Income Taxes, which requires recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the consolidated financial statements or tax returns. Under this method, deferred tax assets and liabilities are based on the differences between the financial statement and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. Deferred tax assets are reduced by a valuation allowance to the extent management concludes it is more likely than not that the asset will not be realized. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled.
Bridge It, Inc. and Subsidiaries Notes to the Consolidated Financial Statements (unaudited) (in thousands, except share and per share amounts) 11 ASC 740 provides that a tax benefit from an uncertain tax position may be recognized when it is more likely than not that the position will be sustained in a court of last resort, based on the technical merits. If it is more likely than not, the amount recognized is the largest amount of tax benefit that is greater than 50% likely of being realized on examination, including compromise settlements. For tax positions not meeting the more likely than not threshold, no tax benefit is recorded. The Company had no unrecognized tax benefits as of September 30, 2024. ASC 740 also provides guidance on de-recognition, classification, interest and penalties on income taxes, accounting in interim periods, and requires increased disclosures. The Company’s policy is to recognize interest and penalties accrued on any unrecognized tax benefits as a component of income tax expense. The Company did not recognize interest or penalties as a component of income tax expense during the nine months ended September 30, 2024. There are no accrued interest and penalties as of September 30, 2024. Subsequent events – Subsequent events are events or transactions that occur after the consolidated balance sheet date but before consolidated financial statements are available to be issued. The Company recognizes in the consolidated financial statements the effects of all subsequent events that provide additional evidence about conditions that existed at the date of the consolidated balance sheet, including the estimates inherent in the process of preparing the consolidated financial statements. The Company has evaluated subsequent events through April 17, 2025, which is the date the consolidated financial statements were available to be issued. On January 31, 2025 (Closing Date), the Company was acquired by Upbound Group, Inc. (Upbound). Pursuant to the Merger Agreement, Upbound issued to the stockholders of the Company an aggregate of approximately 2.7 million shares of Upbound’s common stock, par value $0.01 per share and aggregate closing cash consideration equal to approximately $278.7 million, subject to customary post-closing working capital adjustments. In addition, Upbound will pay the Company’s stockholders $75 million in deferred consideration, payable in multiple installments, $37.5 million of which will be payable 30 days following the first anniversary of the Closing Date and the remainder of which will be payable no later than 30 days following the second anniversary of the Closing Date. The payment of the deferred consideration is subject to acceleration if certain acceleration events specified in the Merger Agreement occur prior to the payment of the deferred consideration. The Company stockholders may also receive up to $60 million in earnout payments based on the achievement of certain financial performance metrics for the business in 2026. The earnout payments are subject to acceleration if certain acceleration events specified in the Merger Agreement occur prior to the final calculation and payment of the earnout payments. Note 3 – Customer Cash Advances, Net Customer cash advances, net, represent outstanding cash advances less allowance for credit losses.
Bridge It, Inc. and Subsidiaries Notes to the Consolidated Financial Statements (unaudited) (in thousands, except share and per share amounts) 12 Below is detail of customer cash advances, net as of September 30, 2024: Gross Customer Allowance for Customer Cash Days From Origination Cash Advances Credit Losses Advances, net 1-10 33,011$ (1,324)$ 31,687$ 11-30 12,655 (1,945) 10,710 31-60 3,628 (2,355) 1,273 61-90 57 - 57 91-120 - - - Total 49,351$ (5,624)$ 43,727$ As of September 30, 2024 The roll-forward of the allowance for credit losses is as follows: Beginning, allowance for credit losses at December 31, 2023 3,339$ Plus customer cash advance credit losses 25,419 Less amounts written-off (24,850) Plus amounts recovered 1,716 Ending, allowance for credit losses at September 30, 2024 5,624$ Note 4 – Property and Equipment, Net Property and equipment consisted of the following as of September 30, 2024: Machinery and equipment 290$ Less accumulated depreciation (142) Property and equipment, net 148$ Depreciation expense for the nine months ended September 30, 2024, was $37.
Bridge It, Inc. and Subsidiaries Notes to the Consolidated Financial Statements (unaudited) (in thousands, except share and per share amounts) 13 Note 5 – Internally Developed Internal Use Software The Company’s internally developed internal use software consisted of the following as of September 30, 2024: Gross carrying value 8,240$ Less accumulated amortization (3,474) Net book value 4,766 In-process development costs 675 Internally developed internal use software, net 5,441$ Future amortization consisted of the following as of September 30, 2024: 2024 662$ 2025 2,425 2026 1,770 2027 584 Total future amortization 5,441$ Amortization expense for the nine months ended September 30, 2024, was $1,533. Note 6 – ROU Assets and Lease Liabilities The Company leases office space under a long-term operating lease with a lease term through January 2025. Subsequent to September 30, 2024, the Company modified the lease term through January 2027 and entered into a new lease for additional office space. Operating lease expense for the nine months ended September 30, 2024, was $194. Cash paid for amounts included in the measurement of operating lease liabilities was $185 for the nine months ended September 30, 2024. Significant assumptions used by the Company in determining the fair value at lease inception are as follows: Weighted-average remaining lease term in years for operating leases - Weighted-average discount rate for operating leases 12.87%
Bridge It, Inc. and Subsidiaries Notes to the Consolidated Financial Statements (unaudited) (in thousands, except share and per share amounts) 14 The undiscounted cash flows for future maturities of the Company’s operating lease liabilities and the reconciliation of the undiscounted cash flows to the operating lease liabilities recognized in the Company’s consolidated balance sheet as of September 30, 2024, are as follows: 2024 (excluding the nine months ended September 30, 2024) 21$ Total undiscounted cash flows 21 Less present value discount - Total operating lease liabilities 21$ Note 7 – Credit Facility, Net On November 9, 2020, the Company entered into a credit facility agreement with a financial institution to provide a borrowing availability of $75,000 which can be increased to a maximum of $125,000 if certain conditions are met. The credit facility bears interest at the three-month average Secured Overnight Financing Rate (SOFR) for the most recent quarter plus an applicable margin of 7% and had a maturity date of September 10, 2024. The credit facility is collateralized by the receivables of cash advances funded by the credit facility, as well as the payments collected from subscribers who took a cash advance funded by the credit facility. On September 11, 2024, the second amendment to the agreement was executed extending the maturity date to March 31, 2025, with an automatic extension available to June 30, 2025, and the applicable margin changed from 7% to 6.75%. At September 30, 2024, the credit facility had an outstanding balance of $49,300 and bore an interest at 12.07%. Subsequent to September 30, 2024, the credit facility was fully repaid on January 31, 2025 following the acquisition of the Company by Upbound. In conjunction with the credit facility, the Company entered into a warrant purchase agreement, on November 9, 2020, with the lender which allows the lender the right to purchase preferred shares equivalent to 0.20% of the Company’s then fully diluted capitalization after the Company completes its next capital raise of preferred stock with minimum proceeds of $5 million at an exercise price of 80% of the share price paid by purchasers of the next round of preferred share issuance. The warrant expires on November 9, 2030. If, prior to a qualified preferred capital raise, the Company undergoes a change of control, initial public offering or sale of all or substantially all of the Company’s assets, the Company will be required to make a cash payment in an amount sufficient to cause the lender to achieve an internal rate of return on the credit facility to increase by 1% (Lender Return Payment). In addition, if the warrants are not fully exercised by the lender prior to expiration and the fair market value per share is greater than the exercise price, the unexercised warrant will automatically be exercised. The fair value of the warrant agreement was determined to be immaterial, therefore, the entirety of the proceeds from issuance of the credit facility has been allocated to debt.
Bridge It, Inc. and Subsidiaries Notes to the Consolidated Financial Statements (unaudited) (in thousands, except share and per share amounts) 15 On September 11, 2024, the warrant agreement was amended to include (1) exercise price shall mean the lesser of 80% of the next capital raise share price or $531, (2) next capital raise of preferred equity shall have occurred prior to December 31, 2025, and (3) right to purchase preferred shares if a preferred capital raise occurred prior to December 31, 2025, is equivalent to 0.20% of the Company’s then fully diluted capitalization, or if preferred capital raise does not occur prior to December 31, 2025, 1,878 shares of the Company’s common stock. The fair value of the warrant agreement was determined to be immaterial as of September 30, 2024. Subsequent to September 30, 2024, the Company was acquired by Upbound (change of control) on January 31, 2025 and therefore a Lender Return Payment of $877 was made to terminate the outstanding warrants. Note 8 – Convertible Debt From September 2020 through January 2021, the Company entered into various Convertible Note Purchase Agreements (Note Purchase Agreement) with various lenders providing for the purchase and sale of convertible notes in the aggregate initial principal of $8,225 (the Notes). The Notes bear interest at a rate of 4.00% per year (compounded annually). All unpaid principal and accrued interest is due and payable at any time after the maturity date. Effective October 31, 2022, the Note Purchase Agreement was amended to extend the maturity date to September 21, 2024. Effective September 17, 2024, the Note Purchase Agreement was further amended to revise the maturity date to September 20, 2024. As of September 30, 2024, all convertible debt has been converted into 33,229 Series A-3 Preferred Stock. As part of the Note Conversion Agreements, the lenders waived the payment by the Company of any unpaid accrued interest due on each Note upon conversion. As such, on September 20, 2024, $1,402 of accrued interest was waived and recognized as additional paid-in capital for Series A-3 financing. Note 9 – Simple Agreement for Future Equity (SAFE) Notes Payable From June 2022 through July 2022, the Company issued SAFE notes payable to investors for an aggregate amount of $8,652. The SAFEs are convertible into shares of common stock or preferred stock of the Company upon an equity financing, liquidity, or dissolution event with a valuation cap of $600,000. The investor has the option to convert the SAFE to a number of shares of common stock or preferred stock equal to the purchase amount divided by the price per share equal to the valuation cap divided by the Company Capitalization, as defined in the agreement, if an event has not occurred prior to a date specified within the SAFE agreement. This date ranges from June 16, 2024 through July 29, 2024, based on investor. As of September 30, 2024, no investors have exercised their option to convert. In the event of a dissolution, the Company will pay in cash to the note holders an amount equal to $8,652, due and payable immediately prior to, or concurrent with, the consummation of the dissolution. In the event of liquidity, the note holder at its option can receive a cash payment of $8,652 or number of common or preferred shares equal to $8,652 divided by the liquidity price as defined in the agreement. Subsequent to September 30, 2024, in connection with the Company’s acquisition by Upbound, all the SAFE notes were repaid in full by cash on January 31, 2025.
Bridge It, Inc. and Subsidiaries Notes to the Consolidated Financial Statements (unaudited) (in thousands, except share and per share amounts) 16 Note 10 – Related-Party Transactions In September 2018, the Company entered into promissory note agreements with officers of the Company and various investors and lenders. The promissory note agreements bear interest at 10%. Payments of accrued, unpaid interest are due and payable on each anniversary of the closing date. As of September 30, 2024, the outstanding principal balance of the promissory note agreements was $539, of which $425 was related party. As of September 30, 2024, two noteholders had promissory note agreements with the Company which matured in September 2024 and were fully paid subsequent to September 30, 2024. Note 11 – Commitments and Contingencies From time to time, the Company may be involved in various claims and litigation arising in the ordinary course of business. In management’s opinion, the resolution of such matters, if any, is not expected to have a material adverse effect on the Company’s financial position, results of operations, or cash flows. Note 12 – Stockholders’ Equity Preferred stock Series Seed – As of September 30, 2024, the Company has 122,702 authorized, issued, and outstanding shares of Series Seed Preferred Stock (Series Seed) with a par value of $0.00001 per share. Series Seed are entitled to stockholder voting rights that are equal to the number of common shares into which Series Seed are convertible. The Series Seed original issue price is $14.975 per share and is subject to appropriate adjustment in the event of any stock dividend, stock split, combination, or other similar recapitalization with respect to the Series Seed. Series Seed have special preferred protective voting rights to approve, by majority vote, certain corporate events and changes including merger, consolidation, liquidation, increase in the amount of authorized preferred or common stock shares, and payment of dividends. Series A-1 – As of September 30, 2024, the Company has 139,391 authorized, issued, and outstanding Series A-1 preferred stock shares (Series A-1) with a par value of $0.00001 per share. Series A-1 are entitled to stockholder voting rights that are equal to the number of common shares into which Series A-1 are convertible. The Series A-1 original issue price is $166.267 per share and is subject to appropriate adjustment in the event of any stock dividend, stock split, combination, or other similar recapitalization with respect to the Series A-1. The Series A-1 have special preferred protective voting rights to approve, by majority vote, certain corporate events and changes including merger, consolidation, liquidation, increase in the amount of authorized preferred or common stock shares, and payment of dividends. Series A-2 – As of September 30, 2024, the Company has 10,644 authorized, issued, and outstanding Series A-2 preferred stock shares (Series A-2) with a par value of $0.00001 per share.
Bridge It, Inc. and Subsidiaries Notes to the Consolidated Financial Statements (unaudited) (in thousands, except share and per share amounts) 17 Series A-2 are entitled to stockholder voting rights that are equal to the number of common shares into which Series A-2 are convertible. The Series A-2 original issue price is $151.716 per share and is subject to appropriate adjustment in the event of any stock dividend, stock split, combination, or other similar recapitalization with respect to the Series A-2. Series A-2 have special preferred protective voting rights to approve, by majority vote, certain corporate events and changes including merger, consolidation, liquidation, increase in the amount of authorized preferred or common stock shares, and payment of dividends. Series A-3 – As of September 30, 2024, the Company has 33,229 authorized, issued, and outstanding Series A-3 preferred stock shares (Series A-3) with a par value of $0.00001 per share. Series A-3 are entitled to stockholder voting rights that are equal to the number of common shares into which Series A-3 are convertible. The Series A-3 original issue price is $247.514 per share and is subject to appropriate adjustment in the event of any stock dividend, stock split, combination, or other similar recapitalization with respect to the Series A-3. Series A-3 have special preferred protective voting rights to approve, by majority vote, certain corporate events and changes including merger, consolidation, liquidation, increase in the amount of authorized preferred or common stock shares, and payment of dividends. Holders of Series Seed, Series A-1, Series A-2, and Series A-3 are entitled to preferential, ratable payment in the event of voluntary or involuntary liquidation, winding up the Company, or defined deemed liquidation event, including change of control or transfer of substantially all assets. The preferential, ratable payment is made to preferred shareholders out of available assets before any other stockholders are paid and determined as the greater of (a) one times the original issue price, plus any dividends declared but unpaid, or (b) amount that would have been payable if all shares of such series of preferred stock were converted into common stock in accordance with the stated conversion rights. No dividends have been declared as of September 30, 2024. After holders of Series Seed, Series A-1, Series A-2, and Series A-3 receive their preferential, ratable payment, the remaining assets shall be distributed among common stockholders, ratably, according to number of shares owned. A holder of Series Seed, Seed A-1, Series A-2, and Series A-3 with at least 7,342 shares of common stock issuable or issued upon conversion of the preferred stock or any other securities are a Major Investor (Major Investor). A Major Investor has the right to receive financial statements, the right of first offer on new securities issued by the Company, and the secondary refusal right to purchase up to its pro rata portion of certain restricted stock transfers not purchased pursuant to the Company’s right of first refusal. Series Seed, Series A-1, Series A-2, and Series A-3 are convertible at the option of the holder into such number of fully paid and non-assessable shares of common stock as is determined by dividing the applicable original issue price by the applicable conversion price. The conversion price is initially equal to the applicable original issue price. Common stock – As of September 30, 2024, the Company has 1,000,000 of authorized shares of common stock with par value $0.00001 per share. As of September 30, 2024, there were 564,322 shares of common stock issued and outstanding. During the nine months ended September 30, 2024, 3,939 shares of common stock were issued in connection with the exercise of stock options.
Bridge It, Inc. and Subsidiaries Notes to the Consolidated Financial Statements (unaudited) (in thousands, except share and per share amounts) 18 Employee stock-based compensation – In 2017, Company’s Board of Directors adopted the Bridge It, Inc. 2017 Stock Plan (the Plan). The Plan authorizes the award of stock options and restricted stock awards. There were no restricted stock awards outstanding for the nine months ended September 30, 2024. Options granted under the Plan vest over the requisite service period, which is generally four years as follows: 25% of option shares vest on the first anniversary of the vesting commencement and 1/48th of the shares vest monthly over the remaining three years. Options expire ten years from the date of grant. The Plan provides for the issuance of both incentive stock options, expected to qualify within the meaning of Section 422 of the U.S. Tax Code and non-statutory stock options. The total number of shares reserved and available for grants under the Plan are 9,182, as of September 30, 2024. Stock options – Management has valued stock options at their date of grant utilizing the Black-Scholes option pricing model. The fair value of the underlying shares was determined by using a number of inputs including recent arm’s length transactions involving the sale of the Company’s common stock. The following table presents the assumptions used to value options granted during the nine months ended September 30, 2024: Term 7 years Risk-free interest rate 3.74% Dividend yield 0.00% Volatility 65.00% To determine expected volatility, the Company identified a group of peer companies and considered their historical stock prices. In finding similar companies, the Company considered the industry, stage of life cycle, size, and financial leverage of such other entities. The risk-free interest rate is based on the implied yield available on U.S. Treasury issues with an equivalent term approximating the expected life of the options depending on the date of the grant and expected life of the options. Activity with respect to options granted under the 2017 Stock Plan is summarized as follows for the nine months ended September 30, 2024: Shares Weighted- Average Exercise Price Weighted- Average Remaining Contractual Term (years) Weighted- Average Grant- Date Fair Value Options outstanding, December 31, 2023 73,219 24.21 7.96 15.11 Granted 11,940 28.25 - 18.64 Exercised (3,939) 27.14 - 16.77 Cancelled or forfeited (2,420) 27.18 - 17.62 Options outstanding, September 30, 2024 78,800 24.59 7.57 15.49 Nonvested at September 30, 2024 77,447 Exercisable at September 30, 2024 54,723 23.24
Bridge It, Inc. and Subsidiaries Notes to the Consolidated Financial Statements (unaudited) (in thousands, except share and per share amounts) 19 The Company recognized $148 of stock based compensation expense arising from stock option grants, which is recorded as a component of other general and administrative expenses in the statement of income for the nine months ended September 30, 2024. There was $441 of total unrecognized compensation cost related to unvested stock options granted under the Plan as of September 30, 2024; the cost is expected to be recognized over the weighted-average remaining period of 2.37 years. Note 13 – Income Taxes In determining the provision for income taxes, the Company uses the estimated annual effective tax rate applied to the actual year-to-date income, adjusted for discrete items arising during the period. In addition, the effect of changes in enacted tax laws or rates and tax status is recognized in the interim period in which the change occurs. For the nine months ended September 30, 2024, the Company recorded an income tax provision of $831. The Company’s annual estimated effective tax rate of 5.05% differs from the U.S. federal statutory rate of 21% primarily due to the nondeductible expenses, change in valuation allowance, and research and development tax credits. Note 14 – 401(k) Savings Plan The Company maintains a 401(k) savings plan for the benefit of its employees. The Company currently does not make matching contributions to the 401(k) savings plan. All current employees, except for collectively bargained, nonresident alien, leased, interns, and temporary employees, are eligible to participate in the 401(k) savings plan.
Exhibit 99.3 Page 1 of 10 UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION On January 31, 2025 (the “Closing Date”), Upbound Group, Inc. (the “Company”) completed its acquisition of Bridge IT, Inc., a Delaware corporation (“Brigit”), in accordance with the Agreement and Plan of Merger (the “Merger Agreement”) dated December 12, 2024. Pursuant to the Merger Agreement, on the Closing Date, Fortuna Merger Sub, Inc., a Delaware corporation and wholly owned subsidiary of the Company (“Merger Sub”), merged with and into Brigit, with Brigit surviving the Merger as a wholly owned subsidiary of the Company (the “Acquisition” or the “Merger”). As a result of the Merger, each share of Brigit stock outstanding immediately prior to the effective time of the Merger (other than certain dissenting shares) was cancelled and converted into the right to receive a pro rata portion of approximately 2.6 million shares of the Company’s common stock (the “Closing Stock Consideration”) and aggregate closing cash consideration of approximately $281.1 million (the “Closing Cash Consideration” and together with the Closing Stock Consideration, the “Closing Merger Consideration”). In addition, the Company will pay the former Brigit stockholders $75.0 million in deferred consideration, payable in multiple installments, $37.5 million of which will be payable 30 days following the first anniversary of the Closing Date and the remainder of which will be payable no later than 30 days following the second anniversary of the Closing Date. The former Brigit stockholders may also receive up to $60.0 million in earnout payments based on the achievement of certain financial performance metrics for the Brigit business in 2026. The following unaudited pro forma condensed combined financial information combines the historical consolidated financial position and results of operations of the Company and the historical consolidated financial position and results of operations of Brigit after giving effect to the Merger as further described in Note 1 – Description of the Transactions and Basis of Presentation and the pro forma effects of certain assumptions and adjustments described in “Notes to the Unaudited Pro Forma Condensed Combined Financial Information” below. The unaudited pro forma condensed combined financial information has been prepared to give effect to the following (collectively, the “Transactions”): ● Application of the acquisition method of accounting under the provisions of the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 805, Business Combinations (“ASC 805”) where the assets acquired and liabilities assumed of Brigit will be recorded by the Company at their respective fair values as of the Closing Date of the Merger; ● Adjustments to conform the accounting policies and financial statement presentation of Brigit to those of the Company; and ● Adjustments to reflect estimated post-combination impacts, including the estimated transaction costs of the Merger. The unaudited pro forma condensed combined financial information and the accompanying notes should be read in conjunction with: ● The historical unaudited condensed consolidated financial statements of the Company and the related notes included in the Company’s Quarterly Report on Form 10-Q as of and for the nine months ended September 30, 2024; ● The historical unaudited condensed consolidated financial statements of Brigit and the related notes as of and for the nine months ended September 30, 2024, included in this Current Report on Form 8-K/A; ● The historical audited consolidated financial statements of the Company and the related notes included in the Company’s Annual Report on Form 10-K as of and for the year ended December 31, 2023; and ● The historical audited consolidated financial statements of Brigit and the related notes as of December 31, 2023, included in this Current Report on Form 8-K/A. The unaudited pro forma condensed combined balance sheet as of September 30, 2024 gives pro forma effect to the Transactions as if they had occurred on September 30, 2024. The unaudited pro forma condensed combined statement of operations for the nine months ended September 30, 2024, and for the year ended December 31, 2023, give pro forma effect to the Transactions as if they had occurred on January 1, 2023.
Exhibit 99.3 Page 2 of 10 The unaudited pro forma condensed combined financial information has been prepared by the Company and is provided for informational purposes only. The unaudited pro forma condensed combined financial information is not necessarily, and should not be assumed to be, an indication of the actual results that would have been achieved had the Transactions been completed as of the dates indicated or that may be achieved in the future. The unaudited pro forma condensed combined financial information has been prepared in accordance with Article 11 of Regulation S-X, as amended by the final rule, Release No. 33-10786 “Amendments to Financial Disclosures about Acquired and Disposed Businesses” using the assumptions set forth in the notes to the unaudited pro forma condensed combined financial information. Pro forma adjustments reflected in the unaudited pro forma condensed combined financial information are based upon available information and reflect estimates and certain assumptions that the Company believes are reasonable under the circumstances, and do not reflect any potential cost savings, operating efficiencies or synergies that may result from the Merger. The unaudited pro forma condensed combined financial information has been prepared using the acquisition method of accounting pursuant to the provisions of ASC 805, whereby the Company is considered the accounting acquirer. The consideration transferred will be allocated to the identifiable assets acquired and liabilities assumed based upon their estimated fair values as of the Closing Date, and any excess value of the consideration over the acquired net assets will be recognized as goodwill. The assets acquired and liabilities assumed of Brigit have been measured based on various preliminary estimates using assumptions that the Company believes are reasonable, based on information that is currently available. As the unaudited pro forma condensed combined financial information is prepared based on preliminary estimates of the net assets acquired and balances as of September 30, 2024, the final purchase price allocation and the resulting effect on financial position and results of operations may differ significantly from the pro forma amounts included herein. As a result of the foregoing, the pro forma adjustments are preliminary and are subject to change as additional information becomes available and as additional analysis is performed. Accordingly, actual adjustments may differ from the amounts reflected in the unaudited pro forma condensed combined financial information and the differences may be material.
Exhibit 99.3 Page 3 of 10 UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET As of September 30, 2024 (in thousands) Upbound Historical Brigit Historical Reclassification Adjustments Notes Transaction Accounting Adjustments Notes Pro Forma Combined ASSETS Cash and cash equivalents $ 85,054 $ 33,561 $ - $ (502) 4(a)(b) $ 118,113 Restricted cash - 6,016 - - 6,016 Receivables, net of allowance for doubtful accounts 121,645 2,535 45,303 2(a) - 169,483 Accrued revenue, net of allowance for credit losses - 1,576 (1,576) 2(a) - - Customer cash advances, net of allowance for credit losses - 43,727 (43,727) 2(a) - - Prepaid expenses and other assets 74,442 2,044 165 2(b) 7,774 4(b) 84,425 Rental merchandise, net On rent 1,016,716 - - - 1,016,716 Held for rent 123,055 - - - 123,055 Merchandise held for installment sale 5,572 - - - 5,572 Property assets, net of accumulated depreciation 258,075 148 5,441 2(c) 59,659 4(c) 323,323 Internally developed internal use software, net - 5,441 (5,441) 2(c) - - Operating lease right-of-use assets 269,307 20 - - 269,327 Deferred tax assets 68,702 - - - 68,702 Goodwill 289,750 - - 199,297 4(d) 489,047 Other intangible assets, net 266,172 - - 152,300 4(e) 418,472 Other long term assets - 165 (165) 2(b) - - Total assets $ 2,578,490 $ 95,233 $ - $ 418,528 $ 3,092,251 LIABILITIES Accounts payable - trade $ 124,805 $ 3,325 $ - $ - $ 128,130 Accrued liabilities 281,985 1,920 1,500 2(d) 97,745 4(f)(g) 383,150 Credit facility, net of debt issuance costs - 49,300 - (49,300) 4(g) - Simple agreements for future equity notes payable - 8,652 - (8,652) 4(h) - Loans payable, related party and other lenders - 539 (539) 4(h) - Other current liabilities - 1,500 (1,500) 2(d) - - Operating lease liabilities 277,318 21 - - 277,339 Deferred tax liability 46,910 - - 46,719 4(i) 93,629 Senior debt, net 794,257 - - 344,000 4(j) 1,138,257 Senior notes, net 441,395 - - - 441,395 Total liabilities 1,966,670 65,257 - 429,973 2,461,900 STOCKHOLDERS' EQUITY Common stock 1,107 - - 27 4(k) 1,134 Series Seed preferred stock - - - - - Series A-1 preferred stock - - - - - Series A-2 preferred stock - - - - - Series A-3 preferred stock - - - - - Additional paid-in-capital 1,485,165 50,654 - (9,624) 4(k) 1,526,195 Retained earnings (Accumulated deficit) 1,026,580 (20,678) - (1,848) 4(k) 1,004,054 Treasury stock at cost (1,890,966) - - - (1,890,966) Accumulated other comprehensive loss (10,066) - - - (10,066) Total stockholders' equity 611,820 29,976 - (11,445) 630,351 Total liabilities and stockholders' equity $ 2,578,490 $ 95,233 $ - $ 418,528 $ 3,092,251 See the accompanying notes to the Unaudited Pro Forma Condensed Combined Financial Information.
Exhibit 99.3 Page 4 of 10 UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS For the nine months ended September 30, 2024 (in thousands, except per share data) Upbound Historical Brigit Historical Reclassification Adjustments Notes Transaction Accounting Adjustments Notes Pro Forma Combined Revenues Rental and fees $ 2,636,347 $ - $ - $ - $ 2,636,347 Merchandise sales 476,690 - - - 476,690 Installment sales 44,333 - - - 44,333 Franchise merchandise sales 60,136 - - - 60,136 Royalty income and fees 18,539 - - - 18,539 Subscription revenue - 86,532 (86,532) 2(e) - - Expedited Transfer Fee revenue - 19,275 (19,275) 2(e) - - Marketplace revenue - 7,260 (7,260) 2(e) - - Subscription and fees revenue - - 113,067 2(e) - 113,067 Other 5,291 - - - 5,291 Total revenues 3,241,336 113,067 - - 3,354,403 Cost of revenues Cost of rentals and fees 1,008,094 - - - 1,008,094 Cost of merchandise sold 584,816 - - - 584,816 Cost of installment sales 16,056 - - - 16,056 Franchise cost of merchandise sold 60,257 - - - 60,257 Customer cash advance credit losses - 25,419 (25,419) 2(f) - - Processing and service fees - 13,972 (13,972) 2(g) - - Cost of subscriptions and fees - - 13,972 2(g) - 13,972 Total cost of revenues 1,669,223 39,391 (25,419) - 1,683,195 Gross profit 1,572,113 73,676 25,419 - 1,671,208 Operating expenses Operating labor 466,952 - 2,641 2(h) - 469,593 Non-labor operating expenses 613,757 - 66,940 2(f) - 680,697 General and administrative expenses 160,201 1,330 8,613 2(h)(i) 14,672 5(a) 184,816 Advertising and marketing - 37,242 (37,242) 2(f) - - Depreciation and amortization 38,861 1,570 - 17,113 5(b) 57,544 Wages and benefits - 9,486 (9,486) 2(h) - - Technology and infrastructure - 4,279 (4,279) 2(f) - - Professional fees - 1,768 (1,768) 2(i) - - Other gains and charges 79,866 - (2,488) 2(j) - 77,378 Total operating expenses 1,359,637 55,675 22,931 31,785 1,470,028 Operating profit 212,476 18,001 2,488 (31,785) 201,180 Debt refinancing charges 6,604 - - - 6,604 Interest expense 85,163 4,388 - 15,993 5(c) 105,544 Interest income (2,453) (352) - - (2,805) Other miscellaneous income - (2,488) 2,488 2(j) - - Earnings before income taxes 123,162 16,453 - (47,778) 91,837 Income tax expense 30,666 831 - (8,538) 5(d) 22,959 Net earnings $ 92,496 $ 15,622 $ - $ (39,240) $ 68,878 Basic earnings per common share $ 1.69 5(f) $ 1.20 Diluted earnings per common share $ 1.66 5(f) $ 1.18 Weighted average number of shares outstanding Basic 54,631 2,694 5(f) 57,325 Diluted 55,873 2,694 5(f) 58,567 See the accompanying notes to the Unaudited Pro Forma Condensed Combined Financial Information.
Exhibit 99.3 Page 5 of 10 UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS For the Year Ended December 31, 2023 (in thousands, except per share data) Upbound Historical Brigit Historical Reclassification Adjustments Notes Transaction Accounting Adjustments Notes Pro Forma Combined Revenues Store Rental and fees $ 3,261,678 $ - $ - $ - $ 3,261,678 Merchandise sales 541,766 - - - 541,766 Installment sales 63,630 - - - 63,630 Other 5,869 - - - 5,869 Total store revenues 3,872,943 - - - 3,872,943 Franchise Merchandise sales 95,054 - - - 95,054 Royalty income and fees 24,416 - - - 24,416 Subscription revenue - 85,717 (85,717) 2(e) - - Expedited transfer fee revenue - 14,820 (14,820) 2(e) - - Marketplace revenue - 5,691 (5,691) 2(e) - - Subscription and fees revenue - - 106,228 2(e) - 106,228 Total revenues 3,992,413 106,228 - - 4,098,641 Cost of revenues Store Cost of rentals and fees 1,199,161 - - - 1,199,161 Cost of merchandise sold 652,894 - - - 652,894 Cost of installment sales 22,997 - - - 22,997 Total cost of store revenues 1,875,052 - - - 1,875,052 Franchise cost of merchandise sold 95,103 - - - 95,103 Customer cash advance credit losses - 23,384 (23,384) 2(f) - - Processing and service fees - 13,710 (13,710) 2(g) - - Cost of subscriptions and fees - - 13,710 2(g) - 13,710 Total cost of revenues 1,970,155 37,094 (23,384) - 1,983,865 Gross profit 2,022,258 69,134 23,384 - 2,114,776 Operating Expenses Store expenses Labor 613,538 - 2,044 2(h) - 615,582 Other store expenses 775,919 - 62,795 2(f) - 838,714 General and administrative expenses 201,706 1,552 8,891 2(h)(i) 47,133 5(a)(e) 259,282 Advertising and marketing - 35,279 (35,279) 2(f) - - Depreciation, amortization and write-down of intangibles 51,321 1,239 - 23,665 5(b) 76,225 Wages and benefits - 9,010 (9,010) 2(h) - - Technology and infrastructure - 4,132 (4,132) 2(f) - - Professional fees - 1,925 (1,925) 2(i) - - Other charges 216,909 - 17,458 2(j)(k) - 234,367 Total operating expenses 1,859,393 53,137 40,842 70,798 2,024,170 Operating profit 162,865 15,997 (17,458) (70,798) 90,606 Interest expense 113,418 4,019 - 23,100 5(c) 140,537 Interest income (3,420) (443) - - (3,863) Settlement expense - 18,000 (18,000) 2(k) - - Other miscellaneous income - (542) 542 2(j) - - Earnings before income taxes 52,867 (5,037) - (93,898) (46,068) Income tax expense (benefit) 58,046 228 - (69,791) 5(d) (11,517) Net (loss) earnings $ (5,179) $ (5,265) $ - $ (24,107) $ (34,551) Basic earnings per share $ (0.09) 5(f) $ (0.60) Diluted earnings per share $ (0.09) 5(f) $ (0.60) Weighted average number of shares outstanding Basic 54,978 2,694 5(f) 57,672 Diluted 54,978 2,694 5(f) 57,672 See the accompanying notes to the Unaudited Pro Forma Condensed Combined Financial Information.
Exhibit 99.3 Page 6 of 10 NOTES TO THE UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION Note 1 – Description of the Transactions and Basis of Presentation Acquisition of Brigit On January 31, 2025, the Company completed its acquisition of Brigit in accordance with the Merger Agreement. Pursuant to the Merger Agreement, Merger Sub merged with and into Brigit, with Brigit surviving the Merger as a wholly owned subsidiary of the Company. As a result of the Merger, each share of Brigit stock outstanding immediately prior to the effective time of the Merger was cancelled and converted into the right to receive a pro rata portion of the Closing Merger Consideration. In addition to the Closing Merger Consideration, the Company will pay the previous security holders of Brigit (the “Brigit Securityholders”) $75.0 million, payable in multiple installments (“Deferred Consideration”), $37.5 million of which will be payable 30 days following the first anniversary of the Closing Date (“First Anniversary Deferred Consideration”) and the remainder no later than 30 days following the second anniversary of the Closing Date. The Brigit Securityholders may also receive up to $60.0 million in earnout payments based on the achievement of certain financial performance metrics for the Brigit business in 2026 (“Earnout Amount”). Payments of the Deferred Consideration and Earnout Amount are subject to acceleration if certain acceleration events specified in the Merger Agreement occur prior to payments. Concurrent with the Merger, the Company and certain Brigit Securityholders (“Key Employees”) entered into employee agreements and restricted stock agreements (“Restricted Stock Agreements”) whereby 1.3 million shares of the Closing Merger Consideration are subject to certain vesting restrictions over a two-year period. All in-the-money unvested stock options were replaced with cash-settled awards (“Replacement Awards”), each entitling the holder to receive an amount in cash equal to the excess of the merger consideration per common share over the exercise price of the corresponding option. The Replacement Awards are subject to vesting conditions that are substantially similar to those of the original awards. As these shares and cash payments are tied to the continual employment of the Key Employees over the vesting period, they are excluded from consideration transferred. Additionally, on January 28, 2025, the Company entered into a borrowing request under its credit facility (“ABL Credit Facility”) with JPMorgan Chase Bank, N.A., as administrative agent, and the lenders party thereto. The Company borrowed $344.0 million in incremental principal to fund the acquisition of Brigit. Basis of Presentation The accompanying unaudited pro forma condensed combined financial information has been prepared in accordance with Article 11 of Regulation S-X, as amended by the final rule, Release No. 33-10786 “Amendments to Financial Disclosures about Acquired and Disposed Businesses” using the assumptions set forth in these notes to the unaudited pro forma condensed combined financial information. The unaudited pro forma condensed combined balance sheet as of September 30, 2024, combines the historical condensed consolidated balance sheets of the Company and Brigit, giving effect to the Transactions as if they had occurred on September 30, 2024. The unaudited pro forma condensed combined statements of operations for the nine months ended September 30, 2024, and for the year ended December 31, 2023, combines the historical consolidated statements of operations of the Company and Brigit, giving effect to the Transactions as if they had occurred on January 1, 2023. The unaudited pro forma condensed combined financial information and explanatory notes have been prepared to illustrate the effects of the Merger in accordance with ASC 805 whereby the Company is considered the accounting acquirer. The consideration transferred will be allocated to the identifiable assets acquired and liabilities assumed based upon their estimated fair values and any excess of consideration transferred over the estimated fair value of Brigit’s net assets will be allocated to goodwill. The pro forma allocation of consideration transferred reflected in the unaudited pro forma condensed combined financial information is subject to adjustment and may vary materially from the actual allocation that will be recorded as of the close date. Note 2 – Significant Accounting Policy and Reclassifications Adjustments During the preparation of the unaudited pro forma condensed combined financial information, the Company performed a preliminary analysis of Brigit’s historical financial information to identify differences in accounting policies and financial statement presentation as compared to those of the Company. The Company has not identified any material differences that would require adjustment to conform to the accounting policies of the Company in the preparation of these pro forma
Exhibit 99.3 Page 7 of 10 financial statements. However, as part of the ongoing integration process, management will continue to assess the accounting policies of Brigit, and any required adjustments will be reflected in future financial reporting, if necessary. Certain reclassification adjustments have been made to conform Brigit’s historical financial statements to the presentation used by the Company. The following reclassification adjustments were made to conform the presentation of Brigit’s historical consolidated balance sheet as of September 30, 2024, to the Company’s presentation: (a) Represents a reclassification of “Accrued revenue, net of allowance for credit losses” and “Customer cash advances, net of allowance for credit losses” to “Receivables, net of allowance for doubtful accounts”. (b) Represents a reclassification of “Other long term assets” to “Prepaid expenses and other assets”. (c) Represents a reclassification of “Internally developed internal use software, net” to “Property assets, net of accumulated depreciation”. (d) Represents a reclassification of “Other current liabilities” to “Accrued liabilities”. The following reclassification adjustments were made to conform the presentation of Brigit’s historical consolidated statements of operations for the nine months ended September 30, 2024, and for the year ended December 31, 2023, to the Company’s presentation: (e) Represents a reclassification of “Subscription revenue”, “Expedited Transfer Fee revenue”, and “Marketplace revenue” to “Subscription and fees revenue”. (f) Represents a reclassification of “Customer cash advance credit losses”, “Advertising and marketing”, and “Technology and infrastructure” expenses to “Non-labor operating expenses” for September 30, 2024, and to “Store expenses, Other store expenses” for December 31, 2023. (g) Represents a reclassification of and “Processing and service fees” to “Cost of subscriptions and fees”. (h) Represents a reclassification of “Wages and benefits” to “Operating labor” and “General and administrative expenses” for September 30, 2024, and to “Store expenses, Labor” and “General and administrative expenses” for December 31, 2023. (i) Represents a reclassification of “Professional fees” to “General and administrative expenses”. (j) Represents a reclassification of “Other miscellaneous income” to “Other gains and charges” for September 30, 2024, and to “Other charges” for December 31, 2023. (k) Represents a reclassification of “Settlement expense” to “Other charges” for December 31, 2023. Note 3 – Preliminary Purchase Price Allocation The total preliminary consideration transferred is calculated as follows: (in thousands) As of September 30, 2024 Closing Cash Consideration $ 281,118 Closing Stock Consideration(1) 41,057 Deferred Consideration(2) 66,126 Earnout Amount(3) 10,566 Other Cash Consideration(4) 55,071 Total preliminary consideration transferred $ 453,938 (1) The estimated fair value of the Closing Stock Consideration has been determined based on the volume-weighted average price of the Company’s common stock over the ten consecutive trading days ending on (and including) the trading day immediately prior to the Closing Date of $29.75 per share. (2) The Deferred Consideration has been discounted to present value to reflect the scheduled payments over a two- year period. (3) The estimated fair value of the Earnout Amount was established using a Monte Carlo simulation model and the maximum potential cash payment for the earnout is $60.0 million. (4) Other Cash Consideration represents the proceeds for the settlement of Brigit's credit facility (“Brigit Credit Facility”) and certain other liabilities as of the Closing Date.
Exhibit 99.3 Page 8 of 10 Preliminary Purchase Price Allocation The preliminary consideration transferred as shown in the table above is allocated to the identifiable tangible and intangible assets acquired and liabilities assumed of Brigit based on their preliminary estimated fair values. The fair value assessments are preliminary and are based on available information and certain assumptions, which the Company believes are reasonable. The following table sets forth a preliminary allocation of the preliminary consideration transferred to the fair value of the identifiable tangible and intangible assets acquired and liabilities assumed of Brigit using Brigit’s balance sheet as of September 30, 2024, adjusted for reclassifications and presentational alignment to that of the Company’s historical financial information, with the excess allocated to goodwill: (in thousands) Assets acquired: Cash and cash equivalents $ 33,022 Restricted cash 6,016 Receivables 47,838 Prepaid expenses and other assets 2,209 Property assets 65,248 Operating lease right-of-use assets 20 Other intangible assets 152,300 Total assets acquired 306,653 Liabilities assumed: Accounts payable – trade 3,325 Accrued liabilities 1,947 Operating lease liabilities 21 Deferred tax liability 46,719 Total liabilities assumed 52,012 Net assets acquired, excluding goodwill 254,641 Goodwill (consideration transferred above net assets acquired) $ 199,297 Note 4 – Adjustments to the Unaudited Pro Forma Condensed Combined Balance Sheet Transaction Accounting Adjustments include the following adjustments related to the unaudited pro forma condensed combined balance sheet as of September 30, 2024, as follows: (a) Reflects a net adjustment of $7.3 million to “Cash and cash equivalents” primarily for the cash portion of the consideration transferred in connection with the acquisition, offset by the proceeds received from the ABL Credit Facility used to finance the transaction. The following table presents the components of this pro forma adjustment related to cash and cash equivalents: (in thousands) Proceeds received from ABL Credit Facility $ 344,000 Payment of Closing Cash Consideration (281,118) Payments of Other Cash Consideration (55,071) Payment of Loans payable (539) Total $ 7,272 (b) Represents an adjustment to reclass $7.8 million from “Cash and cash equivalents” to “Prepaid expenses and other assets” to reflect the amounts held in escrow pursuant to the Merger Agreement for Replacement Awards that will be paid to award holders upon vesting.
Exhibit 99.3 Page 9 of 10 (c) Represents an adjustment of $59.7 million to the carrying value of Brigit’s internally developed internal use software from the recorded net book value to the preliminary estimated fair values. The assets will be depreciated over a 7-year useful life. (d) Represents the recognition of the preliminary goodwill associated with the Merger. Goodwill represents the preliminary consideration transferred in excess of the fair value of the underlying net assets acquired. (e) Represents an adjustment of $152.3 million to “Other intangible assets, net”, acquired from Brigit expected to be recognized in connection with the Merger, consisting of the following: (in thousands) Estimated Fair Value Estimated Remaining Useful Life (in years) Customer relationships $ 144,500 10 Trade names 7,800 7 Estimated fair value of Other intangible assets $ 152,300 (f) Represents an adjustment to increase “Accrued liabilities” for Deferred Consideration of $66.1 million, estimated transaction costs of $22.5 million, and the fair value of the Earnout Amount of $10.6 million. (g) Represents the elimination of $49.3 million of “Credit facility, net of debt issuance costs” and $1.5 million of “Accrued liabilities” relating to accrued interest expense following the repayment of the Brigit Credit Facility at the Closing Date. (h) Represents the elimination of Brigit’s “Simple agreements for future equity notes payable” of $8.7 million that was settled upon the consummation of the Merger and the elimination of $0.5 million in “Loans payable, related party and other lenders” that was settled in cash by Brigit before the Closing Date. (i) Represents a net adjustment of $46.7 million to increase “Deferred tax liability” for temporary differences between the book and tax basis primarily related to the increase in the fair value of intangible assets and transaction fees. A blended federal and state statutory rate of 25% was used in establishing the deferred tax liability. (j) Represents an adjustment of $344.0 million to “Senior debt, net” in connection with the financing arrangement with ABL Credit Facility used to pay the aggregate cash component of the Merger consideration. (k) The following table summarizes the transaction accounting adjustments impacting the historical equity balances of Brigit as of September 30,2024, as well as new equity issued as consideration for the Merger. (in thousands) Elimination of Brigit's Historical Balance Closing Stock Consideration Transaction Adjustments Total Transaction Accounting Adjustments Common stock $ - $ 27 $ - $ 27 Additional paid-in-capital (50,654) 41,030 - (9,624) Retained earnings (accumulated deficit) 20,678 - (22,526) (1,848) Pro forma net adjustment to equity $ (29,976) $ 41,057 $ (22,526) $ (11,445) Note 5 – Adjustments to the Unaudited Pro Forma Condensed Combined Statement of Operations Transaction Accounting Adjustments include the following adjustments related to the unaudited pro forma condensed combined statements of operations for the nine months ended September 30, 2024, and for the year ended December 31, 2023, as follows: (a) Represents an adjustment to record estimated post-combination expense to be incurred by the Company related to stock-based compensation expense for the Replacement Awards granted by the Company to certain Brigit employees and the issuance of the Company’s common stock to Key Employees based on the Restricted Stock Agreements.
Exhibit 99.3 Page 10 of 10 (b) Represents a net adjustment to reflect depreciation and amortization expense of $17.1 million and $23.7 million for the nine months ended September 30, 2024, and for the year ended December 31, 2023, respectively, for the estimated fair value adjustment of acquired property and intangible assets on a straight-line basis over their estimated useful lives. (c) Represents a net adjustment to interest expense for the elimination of Brigit’s historical interest expense associated with the Brigit Credit Facility and the addition of interest expense associated with the borrowings under the ABL Credit Facility. A 1/8% change in the assumed interest rate would result in a change of approximately $0.4 million in annual interest expense. Additional interest expense relates to the accretion of Deferred Consideration, which was initially recognized at its fair value. The following table presents the components of this pro forma adjustment related to interest expense: (in thousands) Nine Months Ended September 30, 2024 Year Ended December 31, 2023 Extinguishment of Brigit Credit Facility $ (3,874) $ (3,389) Additional borrowing on ABL Credit Facility 16,539 22,052 Deferred Consideration accretion 3,328 4,437 Net adjustment to Interest expense $ 15,993 $ 23,100 (d) Represents tax effect of the pro forma adjustments above at the blended federal and state statutory rate of approximately 25%. (e) Represents an adjustment to record $22.5 million of estimated transaction costs related to the Merger for the year ended December 31, 2023. These non-recurring costs include fees paid for financial advisors, legal services and other professional services and are not expected to have a continuing impact on the combined company’s operating results in future periods. (f) The unaudited pro forma combined basic and diluted earnings per share calculations are based on the weighted average basic and diluted shares of the Company. The following table summarizes the computation of the unaudited pro forma basic and diluted net income per share: (in thousands, except per share data) Nine Months Ended September 30, 2024 Year Ended December 31, 2023 Numerator Basic and diluted pro forma net income (loss) available to Company common stockholders $ 68,878 $ (34,551) Denominator Basic: Historical basic weighted average Company shares outstanding 54,631 54,978 Shares of Company common stock issued 2,694 2,694 Pro forma basic weighted average Company shares outstanding 57,325 57,672 Pro forma basic net income (loss) per share $ 1.20 $ (0.60) Diluted: Historical diluted weighted average Company shares outstanding 55,873 54,978 Shares of Company common stock issued 2,694 2,694 Pro forma diluted weighted average Company shares outstanding 58,567 57,672 Pro forma diluted net income (loss) per share $ 1.18 $ (0.60)