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Acquisition of HubPages, Inc.

9 Months Ended

Sep. 30, 2018

3. Acquisition of HubPages, Inc.

On March 13, 2018, the Company and HubPages, together with HP Acquisition Co, Inc. (“HPAC”), a wholly-owned subsidiary of the Company incorporated in Delaware on March 13, 2018 in order to facilitate the acquisition of HubPages by the Company, entered into an Agreement and Plan of Merger, as amended (the “Merger Agreement”), pursuant to which HPAC would merge with and into HubPages, with HubPages continuing as the surviving corporation in the merger and as a wholly-owned subsidiary of the Company (the “Merger”). On June 1, 2018, the parties to the Merger Agreement entered into an amendment (the “Amendment”), pursuant to which the parties agreed, among other things, that on or before June 15, 2018 the Company would (i) pay directly to counsel for HubPages the legal fees and expenses incurred by HubPages in connection with the transactions contemplated by the Merger Agreement as of the date of such payment (the “Counsel Payment”); and (ii) deposit into escrow the sum of (x) $5,000,000 minus (y) the amount of the Counsel Payment. On June 15, 2018, the Company made the requisite payment of $5,000,000 under the Merger Agreement.

On August 23, 2018, the Company acquired all the outstanding shares of HubPages, a Delaware corporation, for total cash consideration of $10,569,904, pursuant to the Merger. The results of operation of the acquired business and the estimated fair market values of the assets acquired and liabilities assumed have been included in the condensed consolidated financial statements as of the acquisition date. The Company acquired HubPages to enhance the user’s experience by increasing content. HubPages is a digital media company that operates a network of 27 premium content channels that act as an open community for writers, explorers, knowledge seekers and conversation starters to connect in an interactive and informative online space. HubPages operates in the United States.

The Company uses the acquisition method of accounting which is based on ASC, Business Combinations (Topic 805), and uses the fair value concepts which requires, among other things, that most assets acquired and liabilities assumed be recognized at their fair values as of the acquisition date. Maven is the accounting acquirer and HubPages merged with Maven’s wholly owned subsidiary HPAC. The condensed consolidated financial statements of Maven for period prior to the Merger are considered to be the historical financial statements of the Company.

The Company paid cash consideration of $10,000,000 to the stockholders and holders of vested options of HubPages, including a $5,000,000 deposit paid on June 15, 2018, as well as additional cash consideration of $569,904, which consists of legal fees and costs incurred by HubPages, for total cash consideration of $10,569,904. The Company also issued a total of 2,399,997 shares of the Company’s common stock, subject to vesting and a true-up provision (as described in Note 14), to certain key personnel of HubPages who agreed to continue their employment with HubPages subsequent to the closing of the transaction. The shares issued are for post combination services (see Note 14).

The Company incurred $95,393 in transaction costs related to the acquisition, which primarily consisted of banking, legal, accounting and valuation-related expenses. The acquisition related expenses were recorded in general and administrative expenses in the condensed consolidated statements of operations.

The purchase price allocation resulted in the following amounts being allocated to the assets acquired (cash acquired of $1,537,308 is included in current assets) and liabilities assumed at the closing date of the acquisition based upon their respective fair values as summarized below:

Current assets	$	1,588,096
Accounts receivable and unbilled receivables		1,033,080
Other assets		25,812
Developed technology		6,740,000
Tradename		268,000
Goodwill		1,857,663
Current liabilities		(851,114	)
Deferred tax liability		(91,633	)
Net assets acquired	$	10,569,904

The Company funded the closing of the Merger from the net proceeds from the Series H Preferred Stock financing (as described in Note 13).

The fair value of the intangible assets were determined as follows: developed technology was determined under the income approach; and tradename was determined by employing the relief from royalty approach. The useful life for the intangible assets is five years.

The excess of purchase price over the fair value amounts assigned to the assets acquired and liabilities assumed represents goodwill from the acquisition. Goodwill is recorded as a non-current asset that is not amortized but is subject to an annual review for impairment. The Company believes the factors that contributed to goodwill include the acquisition of a talented workforce that expands the Company’s expertise and synergies that are specific to the Company’s consolidated business and not available to market participants. No portion of the goodwill will be deductible for tax purposes.

The amounts of HubPages revenue and earnings included in the Company’s condensed consolidated statements of operations for the period ended September 30, 2018, and the revenue and earnings of the combined entity had the acquisition date been January 1, 2018 and 2017, are as follows:

	Revenue		Earnings
Actual from August 23, 2018 to September 30, 2018	$	843,042	$	162,550
Supplemental pro forma from July 1, 2018 to September 30, 2018 (unaudited)		2,250,154		(8,854,343	)
Supplemental pro forma from July 1, 2017 to September 30, 2017 (unaudited)		1,296,903		(1,854,412	)
Supplemental pro forma from January 1, 2018 to September 30, 2018 (unaudited)		6,001,424		(18,003,676	)
Supplemental pro forma from January 1, 2017 to September 30, 2017 (unaudited)		3,095,570		(5,403,026	)

For the nine months ended September 30, 2018, supplemental pro forma earnings were adjusted to exclude $95,393 of acquisition-related costs. The supplemental pro forma earnings for the nine months ended September 30, 2018 and 2017 were adjusted for the vesting of restricted stocks awards to HubPages employees in connection with the Merger of $460,100 and $505,400, respectively, and the amortization of the acquired assets of $706,600 and $772,200, respectively.

For the three months ended September 30, 2018, supplemental pro forma earnings were adjusted to exclude $95,393 of acquisition-related costs. The supplemental pro forma earnings for three months ended September 30, 2018 and 2017 were adjusted for the vesting of restricted stocks awards to HubPages employees in connection with the Merger of $104,600 and $177,200, respectively, and the amortization of the acquired assets by $203,500 and $261,200, respectively.