|
Delaware
(State or other jurisdiction of
incorporation or organization) |
| |
7370
(Primary Standard Industrial
Classification Code Number) |
| |
83-0662116
(I.R.S. Employer Identification Number) |
|
|
Phyllis Young, Esq.
Stephen E. Older, Esq. Rakesh Gopalan, Esq. McGuireWoods LLP 1251 Avenue of the Americas, 20th Floor New York, New York 10020 (212) 548-2100 |
| |
Ben A. Stacke, Esq.
Jonathan R. Zimmerman, Esq. Faegre Drinker Biddle & Reath LLP 2200 Wells Fargo Center 90 South Seventh Street Minneapolis, Minnesota 55402 (612) 766-7000 |
|
|
Large accelerated filer
☐
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| |
Accelerated filer
☐
|
|
|
Non-accelerated filer
☒
|
| |
Smaller reporting company
☒
Emerging growth company
☒
|
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For the Three Months Ended
|
| ||||||||||||||||||||||||||||||||||||||||||
Revenue
|
| |
March 31,
2020 |
| |
June 30,
2020 |
| |
September 30,
2020 |
| |
December 31,
2020 |
| |
March 31,
2021 |
| |
June 30,
2021 |
| |
September 30,
2021 |
| | |||||||||||||||||||||||
DDH Historical | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | ||
Buy-side advertising
|
| | | $ | 1,444,533 | | | | | $ | 1,471,761 | | | | | $ | 1,461,414 | | | | | $ | 5,278,457 | | | | | $ | 4,828,047 | | | | | $ | 9,113,305 | | | | | $ | 6,033,883 | | | | ||
Sell-side advertising
|
| | | $ | 175,758 | | | | | $ | 537,832 | | | | | $ | 784,710 | | | | | $ | 1,323,054 | | | | | $ | 865,685 | | | | | $ | 2,068,588 | | | | | $ | 2,326,862 | | | | ||
Orange142 Historical
|
| | | $ | 5,264,746 | | | | | $ | 6,272,039 | | | | | $ | 6,401,296 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | |
Year Ended
December 31, 2020 |
| |
Nine Months Ended
September 30, 2021 |
| ||||||||||||||||||||||||
| | |
As Reported
|
| |
Pro forma
for the acquisition of Orange142, LLC (unaudited) |
| |
Pro Forma, as
adjusted, for the Orange142 acquisition and Organizational Transactions (unaudited) |
| |
As Reported
(unaudited) |
| |
Pro forma,
as adjusted for the Organizational Transactions (unaudited) |
| |||||||||||||||
Revenues | | | | | | | | | | | | | | | | | |||||||||||||||
Buy-side advertising
|
| | | $ | 9,656,165 | | | | | $ | 27,594,246 | | | | | $ | 27,594,246 | | | | | $ | 19,975,235 | | | | | $ | 19,975,235 | | |
Sell-side advertising
|
| | | | 2,821,354 | | | | | | 2,821,354 | | | | | | 2,821,354 | | | | | | 5,261,135 | | | | | | 5,261,135 | | |
Total revenues
|
| | | | 12,477,519 | | | | | | 30,415,600 | | | | | | 30,415,600 | | | | | | 25,236,370 | | | | | | 25,236,370 | | |
Cost of revenues
|
| | | | | | | | | | | | | | | | |||||||||||||||
Buy-side advertising
|
| | | | 4,864,234 | | | | | | 10,131,697 | | | | | | 10,131,697 | | | | | | 7,480,727 | | | | | | 7,480,727 | | |
Sell-side advertising
|
| | | | 2,440,975 | | | | | | 2,440,975 | | | | | | 2,440,975 | | | | | | 4,348,756 | | | | | | 4,348,756 | | |
Total cost of revenues
|
| | | | 7,305,209 | | | | | | 12,572,672 | | | | | | 12,572,672 | | | | | | 11,829,483 | | | | | | 11,829,483 | | |
Gross profit
|
| | | | 5,172,310 | | | | | | 17,842,928 | | | | | | 17,842,928 | | | | | | 13,406,887 | | | | | | 13,406,887 | | |
Operating expenses | | | | | | | | | | | | | | | | | |||||||||||||||
Compensation, taxes and benefits
|
| | | | 3,334,060 | | | | | | 7,095,086 | | | | | | 7,095,086 | | | | | | 6,131,930 | | | | | | 6,131,930 | | |
General and administrative
|
| | | | 1,848,407 | | | | | | 4,791,311 | | | | | | 4,791,311 | | | | | | 4,214,229 | | | | | | 4,214,229 | | |
Total operating expenses
|
| | | | 6,016,874 | | | | | | 11,886,397 | | | | | | 11,886,397 | | | | | | 10,346,159 | | | | | | 10,346,159 | | |
(Loss) income from operations
|
| | | | (844,564) | | | | | | 5,956,531 | | | | | | 5,956,531 | | | | | | 3,060,728 | | | | | | 3,060,728 | | |
Other (expense) income | | | | | | | | | | | | | | | | | |||||||||||||||
Other income
|
| | | | 134,776 | | | | | | 146,676 | | | | | | 146,676 | | | | | | 19,186 | | | | | | 19,186 | | |
Forgiveness of Paycheck Protection Program loan
|
| | | | 277,100 | | | | | | 277,100 | | | | | | 277,100 | | | | | | 10,000 | | | | | | 10,000 | | |
Gain from revaluation and settlement of seller notes and earnout liability
|
| | | | 401,677 | | | | | | 401,677 | | | | | | 401,677 | | | | | | 21,232 | | | | | | 21,232 | | |
Loss on redemption of preferred units
|
| | | | — | | | | | | — | | | | | | (590,689) | | | | | | — | | | | | | (590,689) | | |
Interest expense
|
| | | | (865,055) | | | | | | (2,937,006) | | | | | | (2,937,006) | | | | | | (2,432,567) | | | | | | (2,432,567) | | |
Total other (expense) income
|
| | | | (51,502) | | | | | | (2,111,553) | | | | | | (2,702,242) | | | | | | (2,382,149) | | | | | | (2,972,838) | | |
Tax expense
|
| | | | (12,124) | | | | | | (61,095) | | | | | | (61,095) | | | | | | (54,878) | | | | | | (54,878) | | |
Net income (loss)
|
| | | $ | (908,190) | | | | | $ | 3,783,883 | | | | | $ | 3,193,194 | | | | | $ | 623,701 | | | | | $ | 33,012 | | |
Net income (loss) per common unit/common stock:
|
| | | | | | | | | | | | | | | | |||||||||||||||
Basic
|
| | | $ | (30.32) | | | | | $ | (92.02) | | | | | $ | 0.23 | | | | | $ | 18.25 | | | | | $ | nm | | |
Diluted
|
| | | $ | (30.32) | | | | | $ | (92.02) | | | | | $ | 0.19 | | | | | $ | 18.25 | | | | | $ | nm | | |
Weighted-average common units/
common stock outstanding: |
| | | | | | | | | | | | | | | | |||||||||||||||
Basic
|
| | | | 29,954 | | | | | | 34,182 | | | | | | 14,128,000 | | | | | | 34,182 | | | | | | 14,128,000 | | |
Diluted
|
| | | | 29,954 | | | | | | 34,182 | | | | | | 16,878,000 | | | | | | 34,182 | | | | | | 16,878,000 | | |
| | |
As of
September 30, 2021 |
| |||||||||
| | |
Actual
(unaudited) |
| |
Pro Forma
for the Organizational Transactions (unaudited) |
| ||||||
ASSETS | | | | ||||||||||
CURRENT ASSETS | | | | ||||||||||
Cash and cash equivalents
|
| | | $ | 2,603,152 | | | | | $ | 3,269,778 | | |
Accounts receivable, net
|
| | | | 3,903,809 | | | | | | 3,903,809 | | |
Prepaid expenses and other current assets
|
| | | | 727,075 | | | | | | 727,075 | | |
Total current assets
|
| | | | 7,234,036 | | | | | | 7,900,662 | | |
Goodwill
|
| | | | 6,519,636 | | | | | | 6,519,636 | | |
Intangible assets, net
|
| | | | 16,080,032 | | | | | | 16,080,032 | | |
Deferred financing costs, net
|
| | | | 51,775 | | | | | | 51,775 | | |
Other long-term assets
|
| | | | 12,948 | | | | | | 12,948 | | |
Total assets
|
| | | $ | 29,898,427 | | | | | $ | 30,565,053 | | |
LIABILITIES AND MEMBERS’ EQUITY/STOCKHOLDERS’ EQUITY | | | | | | | | | |||||
CURRENT LIABILITIES | | | | | | | | | |||||
Accounts payable
|
| | | $ | 3,110,281 | | | | | $ | 3,110,281 | | |
Accrued liabilities
|
| | | | 1,510,563 | | | | | | 1,510,563 | | |
Notes payable, current portion
|
| | | | 2,611,685 | | | | | | 2,611,685 | | |
Deferred revenues
|
| | | | 684,303 | | | | | | 684,303 | | |
Related party payables
|
| | | | 69,837 | | | | | | 69,837 | | |
Seller notes payable
|
| | | | — | | | | | | — | | |
Seller earnout payable
|
| | | | — | | | | | | — | | |
Total current liabilities
|
| | | | 7,986,669 | | | | | | 7,986,669 | | |
Notes payable, net of short-term portion and
$286,741 of deferred financing cost as of and September 30, 2021 |
| | | | 9,086,328 | | | | | | 9,086,328 | | |
Mandatorily redeemable non-participating
preferred units |
| | | | 9,913,940 | | | | | | 3,458,378 | | |
Line of credit
|
| | | | 407,051 | | | | | | 407,051 | | |
Paycheck Protection Program loan
|
| | | | 287,143 | | | | | | 287,143 | | |
Economic Injury Disaster Loan
|
| | | | 150,000 | | | | | | 150,000 | | |
Total liabilities
|
| | | | 27,831,131 | | | | | | 21,375,569 | | |
MEMBERS’/STOCKHOLDERS’ EQUITY | | | | | | | | | |||||
Units, 1,000,000 units authorized as of September 30, 2021; 34,182 units issued and outstanding as of September 30, 2021
|
| | | | 4,294,241 | | | | | | — | | |
Accumulated deficit
|
| | | | (2,226,945) | | | | | | (2,817,634) | | |
Class A common stock, $0.001 par value per share; no shares authorized, issued or outstanding as of September 30, 2021, actual; 160,000,000 shares authorized, 2,750,000 shares issued and outstanding as of September 30, 2021, pro forma
|
| | | | — | | | | | | 2,750 | | |
| | |
As of
September 30, 2021 |
| |||||||||
| | |
Actual
(unaudited) |
| |
Pro Forma
for the Organizational Transactions (unaudited) |
| ||||||
Class B common stock, $0.001 par value per share; no shares authorized, issued or outstanding as of September 30, 2021, actual; 20,000,000 shares authorized, 11,378,000 shares issued and outstanding as of September 30, 2021, pro forma
|
| | | | — | | | | | | 11,378 | | |
Additional paid-in capital
|
| | | | — | | | | | | 11,992,990 | | |
Total members’/stockholders’ equity
|
| | | | 2,067,296 | | | | | | 9,189,484 | | |
Total liabilities and members’/stockholders’ equity
|
| | | $ | 29,898,427 | | | | | $ | 30,565,053 | | |
|
| | |
For the Nine Months Ended
September 30, |
| |
For the Year Ended
December 31, |
| ||||||||||||||||||
| | |
2021
|
| |
2020
|
| |
2020
|
| |
2019
|
| ||||||||||||
Net income (loss)
|
| | | $ | 623,701 | | | | | $ | (380,490) | | | | | $ | (908,190) | | | | | $ | (883,768) | | |
Add back (deduct): | | | | | | | | | | | | | | | | | | | | | | | | | |
Amortization of intangible assets
|
| | | | 1,465,364 | | | | | | — | | | | | | 488,454 | | | | | | — | | |
Acquisition transaction costs
|
| | | | — | | | | | | 650,000 | | | | | | 834,407 | | | | | | — | | |
Interest expense
|
| | | | 2,432,567 | | | | | | 19,925 | | | | | | 865,055 | | | | | | 57,105 | | |
Tax expense
|
| | | | 54,878 | | | | | | 12,154 | | | | | | 12,124 | | | | | | 39,137 | | |
Forgiveness of Paycheck Protection Program loan
|
| | | | (10,000) | | | | | | — | | | | | | (277,100) | | | | | | — | | |
Gain from revaluation and settlement of seller notes and earnout liability
|
| | | | (21,232) | | | | | | (401,677) | | | | | | (401,677) | | | | | | (79,091) | | |
Adjusted EBITDA
|
| | | $ | 4,545,278 | | | | | $ | (100,088) | | | | | $ | 613,073 | | | | | $ | (866,617) | | |
| | |
As of September 30, 2021
|
| |||||||||||||||
| | |
Actual
(unaudited) |
| |
Pro Forma for the
Organizational Transactions excluding the offering (unaudited) |
| |
Pro Forma for the
Organizational Transactions and the offering (unaudited)(1) |
| |||||||||
Cash and cash equivalents
|
| | | $ | 2,603,152 | | | | | $ | (11,443,299) | | | | | $ | 3,269,778 | | |
Long-term debt
|
| | | | 19,844,462 | | | | | | 13,388,900 | | | | | | 13,388,900 | | |
Members’/stockholders’ (deficit) equity: | | | | | | | | | | | | | | | | | | | |
Members’ (deficit) equity attributable to Direct Digital Holdings, LLC
|
| | | | (2,226,945) | | | | | | (2,817,634) | | | | | | (2,817,634) | | |
Units, 1,000,000 units authorized; 34,182 issued and outstanding
|
| | | | 4,294,241 | | | | | | — | | | | | | — | | |
Class A common stock, $0.001 par value per share; no
shares authorized, issued and outstanding, actual; no shares authorized, issued and outstanding, pro forma; and 160,000,000 shares shares authorized, 2,750,000 issued and outstanding, pro forma for the offering |
| | | | — | | | | | | — | | | | | | 2,750 | | |
Class B common stock, $0.001 par value per share; no
shares authorized, issued and outstanding, actual; no shares authorized, issued and outstanding, pro forma; and 20,000,000 shares shares authorized, 11,378,000 issued and outstanding, pro forma for the offering |
| | | | — | | | | | | — | | | | | | 11,378 | | |
Additional paid-in capital
|
| | | | — | | | | | | 2,705,959 | | | | | | 11,992,990 | | |
Total members’/stockholder’s equity
|
| | | | 2,067,296 | | | | | | (111,675) | | | | | | 9,189,484 | | |
Total capitalization
|
| | | $ | 21,911,758 | | | | | $ | 13,277,225 | | | | | $ | 22,578,384 | | |
|
Assumed initial public offering price per share (attributing no value to the warrants)
|
| | | | | | | | | $ | 6.50 | | |
|
Pro forma net tangible book value (deficit) per share as of September 30, 2021(1)(2)
|
| | | $ | (1.80) | | | |
|
| |||
|
Increase (decrease) in pro forma as adjusted net tangible book value (deficit) per share attributable to new investors purchasing shares in this offering
|
| | | $ | 0.86 | | | | | | | | |
|
Pro forma as adjusted net tangible book value (deficit) per share after giving effect to this offering
|
| | | | | | | | | $ | (0.95) | | |
|
Dilution per share to new investors in this offering
|
| | | | | | | | | $ | 7.45 | | |
| Numerator: | | | | |
|
Book value of tangible assets
|
| |
$7.3 million
|
|
|
Less: total liabilities
|
| |
(27.8) million
|
|
|
Pro forma net tangible book value (deficit)(a)
|
| |
$(20.5) million
|
|
| Denominator: | | | | |
|
Shares of Class A common stock outstanding immediately prior to this offering and after the Assumed Redemption
|
| |
11,378,000
|
|
|
Pro forma net tangible book value (deficit) per share
|
| |
$(1.80)
|
|
| Numerator: | | | | |
|
Book value of tangible assets
|
| |
$8.0 million
|
|
|
Less: total liabilities
|
| |
(21.4) million
|
|
|
Pro forma net tangible book value (deficit)
|
| |
$(13.4) million
|
|
| Denominator: | | | | |
|
Shares of Class A common stock outstanding immediately after this offering and after the Assumed Redemption
|
| |
14,128,000
|
|
|
Pro forma net tangible book value (deficit) per share
|
| |
$(0.95)
|
|
| | |
Shares of Class A
Common Stock Purchased |
| |
Total Consideration
|
| |
Average Price
Per Unit |
| |||||||||||||||||||||
| | |
Number
|
| |
Percent
|
| |
Amount
|
| |
Percent
|
| ||||||||||||||||||
Continuing LLC Owner
|
| | | | — | | | | | | —% | | | | | $ | — | | | | | | —% | | | | | $ | — | | |
New investors in this offering
|
| | | | 2,750,000 | | | | | | 100 | | | | | | 17,875,000 | | | | | | 100 | | | | | | 6.50 | | |
Total
|
| | | | 2,750,000 | | | | | | 100% | | | | | $ | 17,875,000 | | | | | | 100% | | | | | $ | 6.50 | | |
| | |
Year Ended
December 31, 2020 |
| |
Nine Months Ended
September 30, 2021 |
| ||||||||||||||||||||||||||||||||||||
| | |
Direct Digital
Holdings, LLC |
| |
Orange142, LLC
|
| |
Pro forma
adjustments for the Orange142 acquisition (unaudited) |
| |
Notes
|
| |
Pro Forma, as
adjusted, for the Orange142 acquisition and Organizational Transactions (unaudited) |
| |
Direct Digital
Holdings, LLC (unaudited) |
| |
Pro Forma
for the Organizational Transactions and the offering (unaudited) |
| |||||||||||||||||||||
Revenues | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |||||
Buy-side advertising
|
| | | $ | 9,656,165 | | | | | $ | 17,938,081 | | | | | $ | — | | | | | | | | | | | $ | 27,594,246 | | | | | $ | 19,975,235 | | | | | $ | 19,975,235 | | |
Sell-side advertising
|
| | | | 2,821,354 | | | | | | — | | | | | | — | | | | | | | | | | | | 2,821,354 | | | | | | 5,261,135 | | | | | | 5,261,135 | | |
Total revenues
|
| | | | 12,477,519 | | | | | | 17,938,081 | | | | | | — | | | | | | | | | | | | 30,415,600 | | | | | | 25,236,370 | | | | | | 25,236,370 | | |
Cost of revenues | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |||||||||||||||
Buy-side advertising
|
| | | | 4,864,234 | | | | | | 5,267,463 | | | | | | — | | | | | | | | | | | | 10,131,697 | | | | | | 7,480,727 | | | | | | 7,480,727 | | |
Sell-side advertising
|
| | | | 2,440,975 | | | | | | — | | | | | | — | | | | | | | | | | | | 2,440,975 | | | | | | 4,348,756 | | | | | | 4,348,756 | | |
Total cost of revenues
|
| | | | 7,305,209 | | | | | | 5,267,463 | | | | | | — | | | | | | | | | | | | 12,572,672 | | | | | | 11,829,483 | | | | | | 11,829,483 | | |
Gross profit
|
| | | | 5,172,310 | | | | | | 12,670,618 | | | | | | — | | | | | | | | | | | | 17,842,928 | | | | | | 13,406,887 | | | | | | 13,406,887 | | |
Operating expenses | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |||||||||||||||
Compensation, taxes and benefits
|
| | | | 3,334,060 | | | | | | 4,038,610 | | | | | | (277,584) | | | | | | (1) | | | | | | 7,095,086 | | | | | | 6,131,930 | | | | | | 6,131,930 | | |
General and administrative
|
| | | | 1,848,407 | | | | | | 757,540 | | | | | | 2,185,364 | | | | | | (2),(3) | | | | | | 4,791,311 | | | | | | 4,214,229 | | | | | | 4,214,229 | | |
Acquisition transaction
costs |
| | | | 834,407 | | | | | | — | | | | | | (834,407) | | | | | | (4) | | | | | | — | | | | | | — | | | | | | — | | |
Total operating expenses
|
| | | | 6,016,874 | | | | | | 4,796,150 | | | | | | 1,073,373 | | | | | | | | | | | | 11,886,397 | | | | | | 10,346,159 | | | | | | 10,346,159 | | |
Income (loss) from operations
|
| | | | (844,564) | | | | | | 7,874,468 | | | | | | (1,073,373) | | | | | | | | | | | | 5,956,531 | | | | | | 3,060,728 | | | | | | 3,060,728 | | |
Other income (expense) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |||||
Other income
|
| | | | 134,776 | | | | | | 11,900 | | | | | | — | | | | | | | | | | | | 146,676 | | | | | | 19,186 | | | | | | 19,186 | | |
Forgiveness of Paycheck Protection Program
loan |
| | | | 277,100 | | | | | | — | | | | | | — | | | | | | | | | | | | 277,100 | | | | | | 10,000 | | | | | | 10,000 | | |
Gain from revaluation and settlement of seller
notes and earnout liability |
| | | | 401,677 | | | | | | — | | | | | | — | | | | | | | | | | | | 401,677 | | | | | | 21,232 | | | | | | 21,232 | | |
Loss on redemption of preferred units
|
| | | | — | | | | | | — | | | | | | — | | | | | | | | | | | | (590,689) | | | | | | — | | | | | | (590,689) | | |
Interest expense
|
| | | | (865,055) | | | | | | — | | | | | | (2,071,951) | | | | | | (5) | | | | | | (2,937,006) | | | | | | (2,432,567) | | | | | | (2,432,567) | | |
Total other income (expense)
|
| | | | (51,502) | | | | | | 11,900 | | | | | | (2,071,951) | | | |