UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 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):
 
July 31, 2014
 
Geeknet, Inc.
(Exact name of registrant as specified in its charter)
 

Delaware
000-28369
77-0399299
(State or other jurisdiction of
incorporation)
(Commission File Number)
(IRS Employer
Identification No.)
 
11216 Waples Mill Road, Suite 100
Fairfax, VA 22030
(Address of principal executive offices, including zip code)
 

(877) 433-5638
(Registrant's telephone number, including area code)
 

(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 (see General Instruction A.2. below):

o       Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
 
o       Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
 
o       Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
 
o       Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))





Item 2.01 Completion of Acquisition or Disposition of Assets.
 
This Current Report on Form 8-K/A is being filed as an amendment to the Current Report on Form 8-K (the "Original Form 8-K") filed by Geeknet, Inc. (the "Company") with the Securities and Exchange Commission on August 6, 2014. The Original Form 8-K announced the completion of the Company's acquisition of substantially all the assets of Treehouse Brand Stores, LLC ("Treehouse") and the assumption of certain related liabilities, pursuant to an Asset Purchase Agreement (the "Asset Purchase Agreement") with Treehouse and Jed Seigle, the sole manager and 98% owner of Treehouse. At that time, the Company stated in the Original Form 8-K that it intended to file the required financial statements and pro forma financial information within 71 days from the date that such report was required to be filed. This Current Report on Form 8-K/A amends Item 9.01 of the Original Form 8-K to present certain financial statements of Treehouse and to present certain unaudited pro forma financial statements of the Company in connection with the acquisition. The financial statements and unaudited pro forma financial statements are filed as exhibits hereto and incorporated by reference. All of the other information in the Original Form 8-K remains the same and is hereby incorporated by reference into this Current Report on Form 8-K/A.

 
Item 9.01 Financial Statements and Exhibits.
 
(d) Exhibits.
 
The following exhibits are attached to this Current Report on Form 8-K:
  
Exhibit No.
Description
23.1
Consent of Independent Auditors
99.1
Treehouse Brand Stores, LLC Audited Financial Statements for the Year Ended December 31, 2013
99.2
Treehouse Brand Stores, LLC Unaudited Financial Statements for the Six Months Ended June 30, 2014

99.3
Unaudited Pro Forma Consolidated Financial Statements of Geeknet, Inc. as of June 30, 2014, for the Six Months Ended June 30, 2014, and for the Year Ended December 31, 2013






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.


 
 
 
 
GEEKNET, INC.
 
 
a Delaware corporation 

 
 
 
 
By:
/s/  Julie Pangelinan
 
 
Julie Pangelinan
 
 
Executive Vice President, Chief Financial Officer
 
Date:  October 15, 2014



Form 8-K/A_Exhibit 23.1


Exhibit 23.1


Consent of Independent Auditors



The Board of Directors
Geeknet, Inc:

We consent to the incorporation by reference in the registration statement No. 333‑110841 on Form S-3 and registration statements No. 333-92409, No. 333-92391, No. 333-38766, No. 333-38768, No. 333-38874, No. 333-59096, No. 333-71944, No. 333-101965, No. 333-116778, No. 333-148056, No. 333-171522, No. 333-173813, No. 333-175192, No. 333-176741, and No. 333-182702 on Form S-8 of Geeknet, Inc. and subsidiaries of our report dated April 17, 2014 (except for Notes 2, 7 and 12, as to which the date is October 10, 2014), with respect to the balance sheet of Treehouse Brand Stores, LLC as of December 31, 2013, and the related statements of income, changes in members’ equity, and cash flows for the year ended December 31, 2013, included in the Current Report on Form 8-K/A.

/s/ Kurtz Fargo LLP
Boulder, Colorado
October 15, 2014



Form 8-K/A_Exhibit 99.1


Exhibit 99.1






TREEHOUSE BRAND STORES, LLC

FINANCIAL STATEMENTS

YEAR ENDED DECEMBER 31, 2013

























1


Independent Auditors’ Report

To the Members

TREEHOUSE BRAND STORES, LLC

We have audited the accompanying financial statements of Treehouse Brand Stores, LLC (the “Company”), which comprise the balance sheet as of December 31, 2013, and the related statements of income, changes in members’ equity, and cash flows for the year ended December 31, 2013 and the related notes to the financial statements.

Management’s Responsibility for the Financial Statements

Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes 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.

Auditors’ Responsibility

Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements 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 the entity’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Opinion

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Treehouse Brand Stores, LLC as of December 31, 2013, and the results of its operations and its cash flows for the year ended December 31, 2013 in accordance with accounting principles generally accepted in the United States of America.

Correction of Error

As described in Note 12 to the financial statements, errors in the assessment of obsolete and abandoned inventory were discovered by management of the Company subsequent to the original issuance date of the financial statements. These errors resulted in the overstatement of amounts previously reported for Inventory and understatement of Cost of Revenue. Accordingly, amounts reported for Inventory and Cost of Revenue have been restated in the December 31, 2013 financial statements now presented. Our opinion is not modified with respect to the matter.

/s/ Kurtz Fargo LLP

April 17, 2014
(except for Notes 2, 7 and 12, as to which
the date is October 10, 2014)
Boulder, Colorado




2


TREEHOUSE BRAND STORES, LLC
BALANCE SHEET
DECEMBER 31, 2013

ASSETS
 
 
 
 
 
 
 
 
 
 
Current Assets
 
 
 
 
 
 
 
Cash and cash equivalents
 
 
 
 
$
            140,982

 
Accounts receivable, less allowance for
 
 
 
 
 
 
 
      doubtful accounts of $0
 
 
 
 
 
112,797

 
Inventories
 
 
 
 
 
1,116,527

 
Deposits for inventory
 
 
 
 
 
211,618

 
Prepaid expenses and other current assets
 
 
 
 
 
28,273

 
 
Total Current Assets
 
 
 
 
 
1,610,197

 
 
 
 
 
 
 
 
 
 
Property and equipment, net
 
 
 
 
 
210,254

 
 
 
 
 
 
 
 
 
 
Note receivable, related party
 
 
 
 
 
52,698

 
 
 
 
 
 
 
 
 
 
 
 
Total Assets
 
 
 
 
$
1,873,149

 
 
 
 
 
 
 
 
 
 
 LIABILITIES
 
 
 
 
 
 
 
 
Current Liabilities
 
 
 
 
 
 
 
Accounts payable
 
 
 
 
$
            516,118

 
Accrued expenses
 
 
 
 
 
              39,043

 
Deferred revenue
 
 
 
 
 
            273,835

 
Royalties payable
 
 
 
 
 
            475,357

 
Short-term notes payable, related parties
 
 
 
 
 
            150,000

 
Line of credit
 
 
 
 
 
            150,000

 
 
Total Current Liabilities
 
 
 
 
 
         1,604,353

 
 
 
 
 
 
 
 
 
 
Deferred rent
 
 
 
 
 
              22,191

Long-term note payable, related party
 
 
 
 
 
            155,870

 
 
 
 
 
 
 
 
 
 
 
 
Total Liabilities
 
 
 
 
 
         1,782,414

 
 
 
 
 
 
 
 
 
 
MEMBERS' EQUITY
 
 
 
 
 
 
 
 
 
 
Members' Equity
 
 
 
 
 
90,735

 
 
 
 
 
 
 
 
 
 
 
 
Total Liabilities and Members' Equity
 
 
 
 
$
1,873,149






See Notes to Financial Statements

3


TREEHOUSE BRAND STORES, LLC
STATEMENT OF INCOME
YEAR ENDED DECEMBER 31, 2013

Net revenue
 
 
 
 
 $
9,431,516

 
 
 
 
 
 
 
 
 
Cost of revenue
 
 
 
 
 
7,157,037

 
 
 
 
 
 
 
 
 
Gross margin
 
 
 
 
 
2,274,479

 
 
 
 
 
 
 
 
 
Operating expenses
 
 
 
 
 
 
 
Selling, general and administrative expenses
 
 
 
 
2,158,850

 
 
Total operating expenses
 
 
 
 
 
             2,158,850

 
 
 
 
 
 
 
 
 
 
 
Operating income
 
 
 
 
 
115,629

 
 
 
 
 
 
 
 
 
Other income (expense)
 
 
 
 
 
 
 
Interest income
 
 
 
 
 
311

 
Other income
 
 
 
 
 
7,775

 
Interest expense
 
 
 
 
 
(22,481)

 
Other expense
 
 
 
 
 
(2,883)

 
 
Total other income (expense)
 
 
 
 
 
                (17,278)

 
 
 
 
 
 
 
 
 
 
 
Net income
 
 
 
 
 $
98,351



























See Notes to Financial Statements

4


TREEHOUSE BRAND STORES, LLC
STATEMENT OF CHANGES IN MEMBERS’ EQUITY
YEAR ENDED DECEMBER 31, 2013

Balance, January 1, 2013
 
 
 
 
 
 
 
$
88,481

 
 
 
 
 
 
 
 
 
 
 
 
Net income, as restated
 
 
 
 
 
 
 
 
98,351

 
 
 
 
 
 
 
 
 
 
 
 
Contributions
 
 
 
 
 
 
 
 
                  2,052

 
 
 
 
 
 
 
 
 
 
 
 
Distributions
 
 
 
 
 
 
 
 
(98,149)

 
 
 
 
 
 
 
 
 
 
 
 
Balance, December 31, 2013
 
 
 
 
 
 
 
$
90,735








































See Notes to Financial Statements

5


TREEHOUSE BRAND STORES, LLC
STATEMENT OF CASH FLOWS
YEAR ENDED DECEMBER 31, 2013

Cash flow from operating activities:
 
 
 
 
 
 
 
 
 
 
Net income
 
 
 
 
 
 
 
$
98,351

 
Adjustments to reconcile net income to net cash
 
 
 
 
 
 
 
 
 
 
flows from operating activities:
 
 
 
 
 
 
 
 
 
 
 
Depreciation and amortization
 
 
 
 
 
 
 
 
              73,718

 
Decrease (increase) in operating assets:
 
 
 
 
 
 
 
 
 
 
 
Accounts receivable
 
 
 
 
 
 
 
 
             (76,775)

 
 
Inventories
 
 
 
 
 
 
 
 
(466,500
)
 
 
Deposits for inventory
 
 
 
 
 
 
 
 
           (180,049)

 
 
Prepaid expenses and other current assets
 
 
 
 
 
 
 
 
              21,378

 
Increase (decrease) in operating liabilities:
 
 
 
 
 
 
 
 
 
 
 
Accounts payable
 
 
 
 
 
 
 
 
            266,926

 
 
Accrued expenses
 
 
 
 
 
 
 
 
             (25,525)

 
 
Deferred revenue
 
 
 
 
 
 
 
 
              77,483

 
 
Royalties payable
 
 
 
 
 
 
 
 
            267,422

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net cash flows from operating activities
 
 
 
 
 
 
 
              56,429

 
 
 
 
 
 
 
 
 
 
 
 
 
Cash flows from investing activities:
 
 
 
 
 
 
 
 
 
 
 
Loan to related party
 
 
 
 
 
 
 
 
             (52,698)

 
 
Purchase of property and equipment
 
 
 
 
 
 
 
 
             (56,069)

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net cash flows from investing activities
 
 
 
 
 
 
 
           (108,767)

 
 
 
 
 
 
 
 
 
 
 
 
 
Cash flows from financing activities:
 
 
 
 
 
 
 
 
 
 
 
Members' distributions
 
 
 
 
 
 
 
 
             (98,149)

 
 
Members' contributions
 
 
 
 
 
 
 
 
                2,052

 
 
Proceeds from line of credit
 
 
 
 
 
 
 
 
              95,000

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net cash flows from financing activities
 
 
 
 
 
 
 
              (1,097)

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net change in cash and cash equivalents
 
 
 
 
 
 
 
             (53,435)

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and cash equivalents, beginning of year
 
 
 
 
 
 
            194,417

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and cash equivalents, end of year
 
 
 
 
 
 
 
$
            140,982












See Notes to Financial Statements

6


TREEHOUSE BRAND STORES, LLC
NOTES TO FINANCIAL STATEMENTS

( 1 ) Summary of Significant Accounting Policies

Nature of Operations - Treehouse Brand Stores, LLC (the “Company”) was organized as a limited liability company under the laws of Colorado in October 2009. The Company distributes a wide variety of video game themed merchandise to its customer base through internet stores built for the gaming community.

Use of Estimates - The preparation of the financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Cash and Cash Equivalents - The Company considers all highly liquid investments with original maturities of three months or less, at the time of purchase, to be cash and cash equivalents. The Company places its temporary cash investments with high credit quality institutions. At times, such investments may be in excess of the Federal Deposit Insurance Corporation (FDIC) insurance limit.

Accounts Receivable - The Company grants credit to all qualified customers. Accounts receivable are carried at cost less an allowance for losses, if an allowance is deemed necessary. The Company does not accrue finance or interest charges. On a periodic basis, the Company evaluates its receivables and determines the requirement for an allowance for losses, based on history of past write-offs, collections and current credit conditions. An accounts receivable balance is written off when it is determined that all reasonable collection efforts have been exhausted.

Inventories - Inventories consist of consumer products and inventory blanks that are valued at the lower of cost, using the weighted average cost method, or market. Inventories are presented net of an allowance for excess and/or obsolete inventory, which reduces inventories to their estimated net realizable values. At December 31, 2013, the allowance for excess and/or obsolete inventory was $0.

Internal-use Software and Website Development - Costs incurred to develop software for internal use and the Company’s websites are capitalized and amortized over the estimated useful life. Costs related to design or maintenance of internal-use software and website development are expensed as incurred. For the year ended 2013, the Company capitalized $38,000 of costs associated with internal-use software and website development. Amortization of capitalized amounts was $37,224 for 2013.

Property and Equipment - Property and equipment are stated at cost. Depreciation and amortization are computed using the straight-line method over the following estimated useful lives:

Assets
   Useful Lives 
 
Furniture and fixtures    
7 years
 
Computer and office equipment
  5 years
 
Internal-use software and website development
    3 years
 
Leasehold improvements
 4.5 years
 
    
Expenditures for renewals or betterments that materially extend the useful life of an asset or increase its productivity are capitalized in the property and equipment accounts. Expenditures for maintenance and





7


TREEHOUSE BRAND STORES, LLC
NOTES TO FINANCIAL STATEMENTS

( 1 ) Summary of Significant Accounting Policies (continued)

Property and Equipment (continued) - repairs that do not extend asset lives or improve productivity are charged to the appropriate expense accounts as incurred. When assets are sold, retired or otherwise disposed of, the cost and related accumulated depreciation are eliminated from the accounts and a gain or loss is recognized.

Long-lived Assets - The Company evaluates long-lived assets, including property and equipment, whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. An impairment loss exists when estimated undiscounted net cash flows expected to be generated by the use of the asset, including eventual disposition, are less than its carrying value. The excess of the asset’s carrying value as compared to its estimated fair value would result in the need to recognize an impairment loss. The Company did not identify any events or circumstances that require the recognition of an impairment loss for the year ended December 31, 2013.
  
Net Revenue - Net revenue is derived primarily from the online sale of consumer goods. Net revenues are presented net of sales tax. The Company recognizes revenue from sales of consumer goods or products when persuasive evidence of an arrangement exists, shipment has occurred, the sale price is fixed or determinable, and collectability is reasonably assured. The Company records a provision for returns based on historical activity, if deemed necessary. Revenue is deferred for orders not shipped before the end of the period. As of December 31, 2013, $273,835 was recognized as deferred revenue for orders placed at the end of the reporting period, but not yet shipped.

Income Taxes - As a limited liability company, the Company is not a taxpaying entity for federal income tax purposes. Accordingly, the Company’s taxable income or loss is allocated to its members in accordance with their respective percentage ownership. Therefore, no provision or liability for income taxes has been included in the accompanying financial statements. The Company’s federal and state income tax returns are subject to examination by the Internal Revenue Service and state departments of revenue, generally for three years after they are filed.
Advertising - The Company charges all advertising costs to operations when incurred. Advertising costs for the year ended December 31, 2013 were $7,159.

Lease Commitment - The Company recognizes rent expense for its facility on the straight-line basis over the term of the related lease.

Cost of Revenue - The Company includes the purchase price of consumer products, inbound and outbound shipping charges, warehouse fees and royalty expense in cost of revenue. Shipping charges to receive products from suppliers are included in inventory and recognized as cost of revenue upon shipment to customers. Payment processing and related transaction costs are classified as selling, general and administrative costs.
 
( 2 ) Inventory

Inventory at December 31, 2013 consists of the following:
 
Consumer products
 
 
 
 
 
1,046,135

 
Inventory blanks
 
 
 
 
 
 
70,392

 
 
Total inventory
 
 
 
 
$
1,116,527







8


TREEHOUSE BRAND STORES, LLC
NOTES TO FINANCIAL STATEMENTS

( 3 ) Property and Equipment

Property and equipment at December 31, 2013 consists of the following:

    
Cost:
 
 
 
 
 
 
 
 
 
Furniture and fixtures
 
 
 
 
 
13,002
 
Computer and office equipment
 
 
 
 
56,928
 
Internal-use software and website development
 
 
 
236,045
 
Leasehold improvements
 
 
 
 
 
5,526
 
 
Total cost
 
 
 
 
 
 
311,501
 
Less accumulated depreciation and amortization
 
 
 
(101,247)
 
 
Property and equipment, net
 
 
 
$
210,254

Total depreciation and amortization expense for the year ended December 31, 2013 was $73,718.

( 4 ) Line of Credit

On September 5, 2012, the Company entered into an agreement with a bank for a revolving line of credit in an amount not to exceed $155,000. Interest on the line is due monthly at 1% above the prime rate. The line of credit is collateralized by substantially all of the assets of the Company and is guaranteed by a member of the Company. The Company’s outstanding balance under this line of credit was $150,000 at December 31, 2013. The credit agreement with the bank contains certain financial covenants that require, among other things, maintenance of working capital and minimum income and cash flow requirements. The line of credit is due on demand and was paid in full in February 2014.

( 5 ) Notes Payable, Related Parties

Notes payable, related parties consist of the following:

    
Note payable - member; interest at 8%; unsecured; due May 2014
 
$
     50,000
Note payable - relative of members; interest at 8%; unsecured; due May 2014
 
    100,000
Note payable - member; interest at 2.5%; unsecured; due January 2021
 
 
    155,870
      Total Notes payable, related parties
 
 
    305,870
      Less current portion
 
 
    150,000
      Non-current portion
 
$
    155,870

For the year ended December 31, 2013, the Company incurred interest expense of $15,897, on these notes.

( 6 ) Members’ Equity

Allocation of Profits and Losses - The Company allocates profits or losses to the members in accordance with the terms of the Operating agreement.






9


TREEHOUSE BRAND STORES, LLC
NOTES TO FINANCIAL STATEMENTS

( 7 ) Phantom Unit Agreement

In September 2010, the Company adopted a phantom unit plan (the “Plan”) designed to attract and retain employees. Under the Plan, employees may receive phantom units that entitle employees to receive a cash or stock bonus upon the occurrence of certain events (“Payout Events”). Upon the occurrence of a payout event, a vested unit holder is entitled to receive a payment, in excess of a base value, that a holder of one unit of membership would receive if all vested phantom unit holders were included as members in the Company. An aggregate of 100,000 units were reserved under this plan. In January 2013, the Company amended this Plan and increased the number of reserved units to 200,000. As of December 31, 2013, the Company granted 179,167 units, of which 140,167 were outstanding and 62,448 were vested.

Phantom unit awards vest 25% on the first anniversary of the vesting commencement date and incrementally vest monthly for a three year period thereafter. Phantom units expire at the termination date of the Plan, September 22, 2020.

Payout Events are defined as follows: 1) the participant’s death; 2) the participant’s disability; 3) the termination of participant’s continuous service other than for cause; and 4) a change in control.

No expense was charged to operations for the year ended December 31, 2013.

( 8 ) Commitments and Contingencies

Lease activities - The Company leases furniture and its office facility under non-cancellable operating leases which expire in 2016 and 2017, respectively. The future minimum lease payments required under these leases are as follows:

Years Ending December 31,
 
 
 
 
 
 
 
2014
 
$
              93,236
2015
 
 
              95,199
2016
 
 
              92,352
2017
 
 
              82,573
Total
 
$
            363,360

Total expense charged to operations under these leases for the year ended December 31, 2013 was $87,565.

( 9 ) Concentrations
            
The Company maintains its cash at highly-rated financial institutions. For the period from January 1, 2013 through December 31, 2013, the FDIC insurance coverage was $250,000 on the aggregate of interest bearing and non-interest bearing accounts. During 2013, the account balances have not exceeded this amount.

At December 31, 2013, approximately 81% of the outstanding accounts receivable balance was due from three customers. For the year ended December 31, 2013, no one customer represented 10% or greater of net revenue.







10


TREEHOUSE BRAND STORES, LLC
NOTES TO FINANCIAL STATEMENTS

( 9 ) Concentrations (continued)

While no supplier concentration exists in the Company’s e-Commerce business, certain suppliers that the Company uses to manufacture its unique products are located outside of the United States, most of which are located in China. The Company’s ability to receive inbound inventory and ship completed orders to its customers is substantially dependent on a single third-party contract-fulfillment and warehouse provider.

( 10 ) Supplemental Cash Flow Information

    
Cash paid for interest
 
 
 
 
 
 
 $
                 15,128


( 11 ) Related Party Transactions

During 2013, the Company entered into a note receivable agreement with a company, owned in part by a member of the Company, to provide cash advances in an amount not to exceed $100,000. The note is unsecured and interest is accrued at a rate of 3% on the outstanding balance. At December 31, 2013, principal and interest receivable on this note was $52,498 and $200, respectively. Interest income earned during the year ended December 31, 2013 from this note was $200.

During 2013, the Company entered into two note payable arrangements, one with an employee and one with a business advisor, totaling $72,365. The notes were unsecured and interest accrued at a rate of 10%. These borrowings and all accrued interest were paid in full as of December 31, 2013. Total interest charged to operations for the year ended December 31, 2013 on these notes was $1,705.

The Company rents a furnished residential property from one of its members. The property was used to provide temporary housing for newly recruited employees and a business advisor. The Company rents the property on a month to month basis. Total rent expense charged to operations for the year ended December 31, 2013 related to this property was $20,212.

( 12 ) Correction of an Error

The Company has restated its previously issued 2013 financial statements for errors in the assessment of obsolete and abandoned inventory that were discovered by management of the Company subsequent to the original issuance date of the financial statements. These errors resulted in the overstatement of amounts previously reported for Inventory and understatement of Cost of Revenue. The accompanying financial statements for 2013 have been restated to reflect the corrections.
    
The following is a summary of the restatements for 2013:

Inventory cost adjustment
 
 
 
 
 
 
 
 
$
80,865









11


TREEHOUSE BRAND STORES, LLC
NOTES TO FINANCIAL STATEMENTS

( 12 ) Correction of an Error (continued)

The effect on the Company’s previously issued 2013 financial statements is summarized as follows:

Balance Sheet as of December 31, 2013:
    
 
 
 
 
 
 
Previously Reported
 
Increase (Decrease)
 
Restated
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Inventories
 
 
 
$
1,197,392
 
$
(80,865)
 
$
1,116,527
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total Current Assets
 
 
$
           1,691,062
 
$
              (80,865)
 
$
1,610,197
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total Assets
 
 
 
$
           1,954,014
 
$
              (80,865)
 
$
1,873,149
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Members' Equity
 
 
 
$
             171,600
 
$
              (80,865)
 
$
               90,735
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total Liabilities and
 
 
 
 
 
 
 
 
 
 
 
Members' Equity
 
 
 
$
           1,954,014
 
$
              (80,865)
 
$
           1,873,149


Statement of Income for the Year Ended December 31, 2013:
    
 
 
 
 
 
 
Previously Reported
 
Increase (Decrease)
 
Restated
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cost of revenue
 
 
 
$
7,076,172
 
$
80,865
 
$
7,157,037
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Gross margin
 
 
 
 
2,355,344
 
 
(80,865)
 
 
2,274,479
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Operating income
 
 
 
 
196,494
 
 
(80,865)
 
 
115,629
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income
 
 
 
$
179,216
 
$
(80,865)
 
$
98,351



















12


TREEHOUSE BRAND STORES, LLC
NOTES TO FINANCIAL STATEMENTS

( 14 ) Subsequent Events

In February 2014, the Company obtained a promissory note from an institutional lender in the amount of $500,000. The note has a one year term and is due in February 2015. Interest on the note is due monthly at prime plus 2%, with a minimum monthly rate of 5.5%. The Company used proceeds from this loan to payoff the line of credit that existed at December 31, 2013.

On August 1, 2014, the Company entered into an Asset Purchase Agreement (the “Asset Purchase Agreement”) with Geeknet, Inc. (“Geeknet”), pursuant to which Geeknet purchased substantially all the assets of the Company and assumed certain related liabilities. In accordance with the terms of the Asset Purchase Agreement, Geeknet paid the Company $1.5 million in initial cash consideration on the closing date. In addition, Geeknet will pay the Company up to an additional $2.0 million in cash earn-out payments based on the achievement of certain specified performance metrics through 2015.

Management has evaluated subsequent events through October 10, 2014 which is the date the financial statements were available to be issued.


13
Form 8-K/A_Exhibit 99.2


Exhibit 99.2





TREEHOUSE BRAND STORES, LLC

FINANCIAL STATEMENTS

SIX MONTH PERIOD ENDED JUNE 30, 2014












































1


TREEHOUSE BRAND STORES, LLC
BALANCE SHEET
JUNE 30, 2014

ASSETS
 
 
 
 
 
 
 
 
 
 
Current Assets
 
 
 
 
 
 
 
Cash and cash equivalents
 
 
 
 
$
              82,625
 
Accounts receivable, less allowance for
 
 
 
 
 
 
 
      doubtful accounts of $0
 
 
 
 
 
131,731
 
Inventories
 
 
 
 
 
1,194,790
 
Deposits for inventory
 
 
 
 
 
18,916
 
Prepaid expenses and other current assets
 
 
 
 
 
13,279
 
 
Total Current Assets
 
 
 
 
 
         1,441,341
 
 
 
 
 
 
 
 
 
 
Property and equipment, net
 
 
 
 
 
175,994
 
 
 
 
 
 
 
 
 
 
Note and interest receivable, related party
 
 
 
 
 
105,176
 
 
 
 
 
 
 
 
 
 
 
 
Total Assets
 
 
 
 
$
         1,722,511
 
 
 
 
 
 
 
 
 
 
 LIABILITIES
 
 
 
 
 
 
 
 
Current Liabilities
 
 
 
 
 
 
 
Accounts payable
 
 
 
 
 $
            862,406
 
Accrued expenses
 
 
 
 
 
            195,669
 
Deferred revenue
 
 
 
 
 
            242,584
 
Royalties payable
 
 
 
 
 
            540,751
 
Line of credit
 
 
 
 
 
              77,080
 
Short-term notes payable, related parties
 
 
 
 
 
            150,000
 
 
Total Current Liabilities
 
 
 
 
 
         2,068,490
 
 
 
 
 
 
 
 
 
 
Deferred rent
 
 
 
 
 
              20,451
Long-term note payable, related party
 
 
 
 
 
            155,870
 
 
 
 
 
 
 
 
 
 
 
 
Total Liabilities
 
 
 
 
 
         2,244,811
 
 
 
 
 
 
 
 
 
 
MEMBERS' EQUITY
 
 
 
 
 
 
 
 
 
 
Members' Equity
 
 
 
 
 
          (522,300)
 
 
 
 
 
 
 
 
 
 
 
 
Total Liabilities and Members' Equity
 
 
 
 
$
         1,722,511





See Accompanying Notes to the Financial Statements

2


TREEHOUSE BRAND STORES, LLC
STATEMENT OF OPERATIONS
SIX MONTH PERIOD ENDED JUNE 30, 2014

Net revenue
 
 
 
 
 $
4,322,316
 
 
 
 
 
 
 
 
 
Cost of revenue
 
 
 
 
 
3,304,667
 
 
 
 
 
 
 
 
 
Gross margin
 
 
 
 
 
             1,017,649
 
 
 
 
 
 
 
 
 
Operating expenses
 
 
 
 
 
 
 
Selling, general and administrative expenses
 
 
 
 
1,613,982
 
 
Total operating expenses
 
 
 
 
 
             1,613,982
 
 
 
 
 
 
 
 
 
 
 
Operating loss
 
 
 
 
 
              (596,333)
 
 
 
 
 
 
 
 
 
Other income (expense)
 
 
 
 
 
 
 
Interest income
 
 
 
 
 
1,348
 
Other income
 
 
 
 
 
10,705
 
Interest expense
 
 
 
 
 
(14,275)
 
Loss on disposition of inventory
 
 
 
 
 
                  (5,588)
 
 
Total other income (expense)
 
 
 
 
 
                  (7,810)
 
 
 
 
 
 
 
 
 
 
 
Net loss
 
 
 
 
 $
              (604,143)

























See Accompanying Notes to the Financial Statements


3


TREEHOUSE BRAND STORES, LLC
STATEMENT OF CHANGES IN MEMBERS’ EQUITY
SIX MONTH PERIOD ENDED JUNE 30, 2014

Balance, January 1, 2014
 
 
 
 
 
 
 
$
90,735

 
 
 
 
 
 
 
 
 
 
 
 
Net loss
 
 
 
 
 
 
 
 
 
(604,143)

 
 
 
 
 
 
 
 
 
 
 
 
Contributions
 
 
 
 
 
 
 
 
—

 
 
 
 
 
 
 
 
 
 
 
 
Distributions
 
 
 
 
 
 
 
 
(8,892)

 
 
 
 
 
 
 
 
 
 
 
 
Balance, June 30, 2014
 
 
 
 
 
 
 
$
             (522,300)








































See Accompanying Notes to the Financial Statements

4


TREEHOUSE BRAND STORES, LLC
STATEMENT OF CASH FLOWS
SIX MONTH PERIOD ENDED JUNE 30, 2014

Cash flow from operating activities:
 
 
 
 
 
 
 
 
 
 
Net loss
 
 
 
 
 
 
 
$
           (604,143)
 
Adjustments to reconcile net loss to net cash
 
 
 
 
 
 
 
 
 
 
 
flows from operating activities:
 
 
 
 
 
 
 
 
 
 
 
Depreciation and amortization
 
 
 
 
 
 
 
 
              46,200
 
 
Loss on disposition of inventory
 
 
 
 
 
 
 
 
                5,588
 
Decrease (increase) in operating assets:
 
 
 
 
 
 
 
 
 
 
 
Accounts receivable
 
 
 
 
 
 
 
 
             (18,934)
 
 
Inventories
 
 
 
 
 
 
 
 
             (83,851)
 
 
Deposits for inventory
 
 
 
 
 
 
 
 
            192,702
 
 
Prepaid expenses and other current assets
 
 
 
 
 
 
 
 
              14,994
 
Increase (decrease) in operating liabilities:
 
 
 
 
 
 
 
 
 
 
 
Accounts payable
 
 
 
 
 
 
 
 
            346,288
 
 
Accrued expenses and deferred rent
 
 
 
 
 
 
 
 
            154,886
 
 
Deferred revenue
 
 
 
 
 
 
 
 
             (31,251)
 
 
Royalties payable
 
 
 
 
 
 
 
 
              65,394
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net cash flows from operating activities
 
 
 
 
 
 
 
              87,873
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash flows from investing activities:
 
 
 
 
 
 
 
 
 
 
 
Loan to related party
 
 
 
 
 
 
 
 
             (52,478)
 
 
Purchase of property and equipment
 
 
 
 
 
 
 
 
             (11,940)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net cash flows from investing activities
 
 
 
 
 
 
 
             (64,418)
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash flows from financing activities:
 
 
 
 
 
 
 
 
 
 
 
Proceeds from line of credit
 
 
 
 
 
 
 
 
            157,080
 
 
Members' distributions
 
 
 
 
 
 
 
 
              (8,892)
 
 
Repayments on lines of credit
 
 
 
 
 
 
 
 
           (230,000)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net cash flows from financing activities
 
 
 
 
 
 
 
             (81,812)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net change in cash and cash equivalents
 
 
 
 
 
 
 
             (58,357)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and cash equivalents, beginning of year
 
 
 
 
 
 
            140,982
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and cash equivalents, end of year
 
 
 
 
 
 
 
$
              82,625









See Accompanying Notes to the Financial Statements

5


TREEHOUSE BRAND STORES, LLC
NOTES TO FINANCIAL STATEMENTS

( 1 ) Summary of Significant Accounting Policies

Nature of Operations - Treehouse Brand Stores, LLC (the “Company”) was organized as a limited liability company under the laws of Colorado in October 2009. The Company distributes a wide variety of video game themed merchandise to its customer base through internet stores built for the gaming community.

Use of Estimates - The preparation of the financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Cash and Cash Equivalents - The Company considers all highly liquid investments with original maturities of three months or less, at the time of purchase, to be cash and cash equivalents. The Company places its temporary cash investments with high credit quality institutions. At times, such investments may be in excess of the Federal Deposit Insurance Corporation (FDIC) insurance limit.

Accounts Receivable - The Company grants credit to all qualified customers. Accounts receivable are carried at cost less an allowance for losses, if an allowance is deemed necessary. The Company does not accrue finance or interest charges. On a periodic basis, the Company evaluates its receivables and determines the requirement for an allowance for losses, based on history of past write-offs, collections and current credit conditions. An accounts receivable balance is written off when it is determined that all reasonable collection efforts have been exhausted.

Inventories - Inventories consist of consumer products and inventory blanks that are valued at the lower of cost, using the weighted average cost method, or market. Inventories are presented net of an allowance for excess and/or obsolete inventory, which reduces inventories to their estimated net realizable values. At June 30, 2014, the allowance for excess and/or obsolete inventory was $0.

Internal-use Software and Website Development - Costs incurred to develop software for internal use and the Company’s websites are capitalized and amortized over the estimated useful life. Costs related to design or maintenance of internal-use software and website development are expensed as incurred.

Property and Equipment - Property and equipment are stated at cost. Depreciation and amortization are computed using the straight-line method over the following estimated useful lives:

Assets
   Useful Lives 
 
Furniture and fixtures    
7 years
 
Computer and office equipment
  5 years
 
Internal-use software and website development
    3 years
 
Leasehold improvements
 4.5 years
 
    
Expenditures for renewals or betterments that materially extend the useful life of an asset or increase its productivity are capitalized in the property and equipment accounts. Expenditures for maintenance and repairs that do not extend asset lives or improve productivity are charged to the appropriate expense accounts as incurred. When assets are sold, retired or otherwise disposed of, the cost and related accumulated depreciation are eliminated from the accounts and a gain or loss is recognized.



6


TREEHOUSE BRAND STORES, LLC
NOTES TO FINANCIAL STATEMENTS

( 1 ) Summary of Significant Accounting Policies (continued)

Long-lived Assets - The Company evaluates long-lived assets, including property and equipment, whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. An impairment loss exists when estimated undiscounted net cash flows expected to be generated by the use of the asset, including eventual disposition, are less than its carrying value. The excess of the asset’s carrying value as compared to its estimated fair value would result in the need to recognize an impairment loss. The Company did not identify any events or circumstances that require the recognition of an impairment loss for the six month period ended June 30, 2014.
  
Net Revenue - Net revenue is derived primarily from the online sale of consumer goods. Net revenues are presented net of sales tax. The Company recognizes revenue from sales of consumer goods or products when persuasive evidence of an arrangement exists, shipment has occurred, the sale price is fixed or determinable, and collectability is reasonably assured. The Company records a provision for returns based on historical activity, if deemed necessary. Revenue is deferred for orders not shipped before the end of the period. As of June 30, 2014, $242,584 was recognized as deferred revenue for orders placed at the end of the reporting period, but not yet shipped.

Income Taxes - As a limited liability company, the Company is not a taxpaying entity for federal income tax purposes. Accordingly, the Company’s taxable income or loss is allocated to its members in accordance with their respective percentage ownership. Therefore, no provision or liability for income taxes has been included in the accompanying financial statements. The Company’s federal and state income tax returns are subject to examination by the Internal Revenue Services and the state departments of revenue, generally three years after they are filed.
Advertising - The Company charges all advertising costs to operations when incurred. Advertising costs for the six month period ended June 30, 2014 were $15,208.

Lease Commitment - The Company recognizes rent expense for its facility on the straight-line basis over the term of the related leases.

Cost of Revenue - The Company includes the purchase price of consumer products, inbound and outbound shipping charges, warehouse fees and royalty expense in cost of revenue. Shipping charges to receive products from suppliers are included in inventory and recognized as cost of revenue upon shipment to customers. Payment processing and related transaction costs are classified as selling, general and administrative costs.
 
( 2 ) Inventories

Inventories at June 30, 2014 consists of the following:

Consumer products
 
 
 
 
 
1,099,565
Inventory blanks
 
 
 
 
 
 
67,408
FOB inventory
 
 
 
 
 
 
27,817
 
Total inventories
 
 
 
 
$
1,194,790








7


TREEHOUSE BRAND STORES, LLC
NOTES TO FINANCIAL STATEMENTS

( 3 ) Property and Equipment

Property and equipment at June 30, 2014 consists of the following:

    
Cost:
 
 
 
 
 
 
 
 
 
Furniture and fixtures
 
 
 
 
 
13,002
 
Computer and office equipment
 
 
 
 
64,104
 
Internal-use software and website development
 
 
 
240,809
 
Leasehold improvements
 
 
 
 
 
5,526
 
 
Total cost
 
 
 
 
 
 
323,441
 
Less accumulated depreciation and amortization
 
 
 
(147,447)
 
 
Property and equipment, net
 
 
 
$
175,994

Total depreciation and amortization expense for the six month period ended June 30, 2014 was $46,200.

( 4 ) Line of Credit

In September 2012, the Company entered into an agreement with a bank for a revolving line of credit in an amount not to exceed $155,000. Interest on the line is due monthly at 1% above the prime rate. The line of credit is collateralized by substantially all of the assets of the Company and is guaranteed by a member of the Company. The credit agreement with the bank contains certain financial covenants that require, among other things, maintenance of working capital and minimum income and cash flow requirements. The Company closed this loan in March 2014.

In February 2014, the Company entered into an agreement with a bank for a revolving line of credit in an amount not to exceed $500,000. Interest on the line is due monthly at 2% above the prime rate. The line of credit is collateralized by substantially all of the assets of the Company and is guaranteed by a member of the Company. The company’s outstanding balance under this line of credit was $77,080 at June 30, 2014. The credit agreement with the bank contains certain financial covenants that require, among other things, maintenance of a debt service ratio. At June 30, 2014, the Company was not in compliance with these covenants, as such, they did not have access to borrowing additional funds on this line.

( 5 ) Notes Payable, Related Parties

Notes payable, related parties consists of the following:

    
Note payable - member; interest at 8%; unsecured; due on demand
 
$
       50,000
Note payable - relative of members; interest at 8%; unsecured; due on demand
 
     100,000
Note payable - member; interest at 2.5%; unsecured; due January 2021
 
 
     155,870
      Total Notes payable, related parties
 
 
     305,870
      Less current portion
 
 
    (150,000)
      Non-current portion
 
$
     155,870

For the six month period ended June 30, 2014, the Company incurred interest expense of $7,948 on these notes. As of June 30, 2014, accrued interest payable on these notes was $17,639.



8


TREEHOUSE BRAND STORES, LLC
NOTES TO FINANCIAL STATEMENTS

( 6 ) Members’ Equity

Allocation of profits and losses - The Company allocates profits or losses to the members in accordance with the terms of the Operating agreement.

( 7 ) Phantom Unit Agreement

In September 2010, the Company adopted a phantom unit plan (the “Plan”) designed to attract and retain employees. Under the Plan, employees may receive phantom units that entitle employees to receive a cash or stock bonus upon the occurrence of certain events (“Payout Events”). Upon the occurrence of a payout event, a vested unit holder is entitled to receive a payment, in excess of a base value, that a holder of one unit of membership would receive if all vested phantom unit holders were included as members in the Company. An aggregate of 100,000 units were reserved under this plan. In January 2013, the Company amended this Plan and increased the number of reserved units to 200,000.

Phantom unit awards vest 25% on the first anniversary of the vesting commencement date and incrementally vest monthly for a three year period thereafter. Phantom units expire at the termination date of the Plan, September 22, 2020.

Payout Events are defined as follows: 1) the participant’s death; 2) the participant’s disability; 3) the termination of participant’s continuous service other than for cause; and 4) a change in control.

As of June 30, 2014, the Company granted 199,167 units, of which 140,167 were outstanding.

In August 2014, the Company entered into a transaction that would meet the criteria of a payout event, due to a change in control, at which time it paid out $99,050 for the outstanding units. For the six month period ended June 30, 2014, the Company accrued $99,050 of compensation expense for these unit awards.

( 8 ) Commitments and Contingencies

Lease activities - The Company leases furniture and its office facility under non-cancellable operating leases which expire in 2016 and 2017, respectively. The future minimum lease payments required under these leases are as follows:    
Years Ending December 31,
 
 
 
 
 
 
 
 
2014
 (for the remaining 6 months)
 
$
              46,707
2015
 
 
 
              95,199
2016
 
 
 
              92,352
2017
 
 
 
              82,573
Total
 
 
$
            316,831

Total expense charged to operations under these leases for the six month period ended June 30, 2014 was $46,529.






9


TREEHOUSE BRAND STORES, LLC
NOTES TO FINANCIAL STATEMENTS

( 8 ) Commitments and Contingencies (continued)

Royalty payments - In November 2013, the Company entered into a royalty payment agreement with a licensor whereby the Company is committed to minimum guaranteed payments. In 2014, the payment terms of the agreement were modified. As of June 30, 2014, the following minimum payments are due:

July 2014
 
$
              17,500
August 2014
 
 
              17,500
2015
 
 
              40,000
Total
 
$
              75,000

( 9 ) Concentrations
            
The Company maintains its cash at highly-rated financial institutions. For the period from January 1, 2014 through June 30, 2014, the FDIC insurance coverage was $250,000 on the aggregate of interest bearing and non-interest bearing accounts. During 2014, the account balances have not exceeded this amount.

At June 30, 2014, approximately 82% of the outstanding accounts receivable balance was due from 4 customers. For the six month period ended June 30, 2014, no one customer represented 10% or greater of net revenue.

While no supplier concentration exists in the Company’s e-Commerce business, certain suppliers that the Company uses to manufacture its unique products are located outside of the United States, most of which are located in China. The Company’s ability to receive inbound inventory and ship completed orders to its customers is substantially dependent on a single third-party contract-fulfillment and warehouse provider.


( 10 ) Supplemental Cash Flow Information

    
Cash paid for interest
 
 
 
 
 
 
 $
                  8,457


( 11 ) Related Party Transactions

During 2013, the Company entered into a note receivable agreement with a company, owned in part by a member of the Company, to provide cash advances in an amount not to exceed $100,000. During the six month period ended June 30, 2014, the Company agreed to increase the borrowing limit to $200,000. The note is unsecured, and interest is accrued at a rate of 3% on the outstanding balance. At June 30, 2014, principal and interest receivable on this note was $103,628 and $1,548, respectively. Interest income earned during the six month period ended June 30, 2014 from this note was $1,348.

The Company rents a furnished residential property from one of its members. The property was used to provide temporary housing for newly recruited employees and a business advisor. The Company rents the property on a month to month basis. Total rent expense charged to operations for the six month period ended June 30, 2014 related to this property was approximately $9,700.





10


TREEHOUSE BRAND STORES, LLC
NOTES TO FINANCIAL STATEMENTS

( 12 ) Subsequent Events

On August 1, 2014, the Company entered into an Asset Purchase Agreement (the “Asset Purchase Agreement”) with Geeknet, Inc. (“Geeknet”), pursuant to which Geeknet purchased substantially all the assets of the Company and assumed certain related liabilities. In accordance with the terms of the Asset Purchase Agreement, Geeknet paid the Company $1.5 million in initial cash consideration on the closing date. In addition, Geeknet will pay the Company up to an additional $2.0 million in cash earn-out payments based on the achievement of certain specified performance metrics through 2015.

Management has evaluated subsequent events through October 10, 2014 which is the date the financial statements were available to be issued.



11
Form 8-K/A_Exhibit 99.3


Exhibit 99.3


GEEKNET, INC.

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


The following unaudited pro forma condensed consolidated financial statements of Geeknet, Inc. (the “Company”) and Treehouse Brand Stores, LLC ("Treehouse") have been prepared to give effect to the acquisition of substantially all the assets and the assumption of certain related liabilities of Treehouse by the Company pursuant to an Asset Purchase Agreement (the “Asset Purchase Agreement”), with Treehouse and Jed Seigle, the sole manager and 98% owner of Treehouse. On August 1, 2014, the Company completed its previously announced acquisition of substantially all the assets and certain liabilities of Treehouse in exchange for initial cash consideration of $1.5 million. In addition, the Company will pay Treehouse up to an additional $2.0 million in cash earn-out payments based on the achievement of certain specified performance metrics through 2015. The unaudited pro forma condensed consolidated balance sheet as of June 30, 2014, and the unaudited pro forma condensed consolidated statements of operations for the six months ended June 30, 2014, and for the year ended December 31, 2013 are presented herein to reflect the acquisition.

The unaudited pro forma condensed consolidated balance sheet combines the consolidated balance sheet of the Company and the balance sheet of Treehouse as of June 30, 2014 and gives effect to the acquisition as if it had been completed on June 30, 2014, including any adjustments to fair value required. The unaudited pro forma condensed consolidated statements of operations for the six months ended June 30, 2014 and the year ended December 31, 2013 combines the historical results of the Company and the historical results of Treehouse and gives effect to the acquisition as if it had occurred on January 1, 2013.
 
The historical consolidated financial information of the Company and Treehouse has been adjusted in the unaudited pro forma condensed consolidated financial statements to give effect to pro forma events that are (1) directly attributable to the acquisition, (2) factually supportable, and (3) with respect to the statements of operations, expected to have a continuing impact on the consolidated results. The unaudited pro forma condensed consolidated financial statements presented are based on the assumptions and adjustments described in the accompanying notes. The actual financial position or results of operations reported by the consolidated company in periods following the acquisition may differ significantly from those reflected in these unaudited pro forma condensed consolidated financial statements for a number of reasons, including but not limited to the impact and benefits of the acquisition, cost savings from operating efficiencies, synergies and the incremental costs incurred in successfully integrating and operating the Treehouse business. The unaudited pro forma condensed consolidated financial statements presented are based upon available information and assumptions that the Company believes are reasonable. The unaudited pro forma condensed consolidated financial statements are based upon the respective historical financial information of the Company and Treehouse, and should be read in conjunction with:

•
the accompanying notes to the unaudited pro forma condensed consolidated financial statements;
•
the separate historical audited consolidated financial statements of the Company as of December 31, 2013 and 2012 and for the years ended December 31, 2013, 2012, and 2011 included in the Company's Annual Report on Form 10-K filed with the Securities and Exchange Commission on February 26, 2014;
•
the separate historical unaudited consolidated financial statements of the Company as of June 30, 2014 and December 31, 2013 and for the three and six months ended June 30, 2014 and June 30, 2013 included in the Company's Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on August 1, 2014;
•
the separate historical audited financial statements of Treehouse as of December 31, 2013, and for the year then ended, and the unaudited financial statements as of and for the six months ended June 30, 2014 included in Exhibits 99.1 and 99.2, respectively, of this Current Report on Form 8-K/A.
 
These unaudited pro forma condensed consolidated financial statements are presented for informational purposes only and do not purport to represent what the financial position or results of operations would actually have been if the acquisition had occurred as of the dates indicated or what such financial position or results will be for any future periods.

 

1


The unaudited pro forma condensed consolidated financial statements were prepared using the purchase method of accounting, whereby the Company is treated as the acquiring entity. Accordingly, consideration paid by the Company to complete the acquisition was allocated to Treehouse’s assets and liabilities based upon their estimated fair values as of June 30, 2014. The pro forma purchase price adjustments are preliminary, subject to further adjustments as additional information becomes available along with the completion of the independent appraisal, and have been made solely for the purpose of providing the unaudited pro forma condensed consolidated financial information presented below. Differences between these preliminary estimates and the final purchase accounting will occur and these differences could be material.
 
The Company expects to incur additional costs associated with integrating the businesses of the Company and Treehouse. The unaudited pro forma condensed consolidated financial statements do not reflect the cost of any integration activities or benefits that may result from synergies that may be derived from any integration activities.
 
Based on the Company’s preliminary review of Treehouse’s summary of significant accounting policies disclosed in Treehouse’s financial statements, the nature and amount of any adjustments to the historical financial statements of Treehouse to conform Treehouse’s accounting policies to those of the Company are not expected to be significant. Further review of Treehouse’s accounting policies and financial statements may result in required revisions to Treehouse's policies and classifications to conform to those of the Company.


2


UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEETS
As of June 30, 2014
(In thousands)
 
Historical
 
 
 
 
 
Geeknet, Inc.
 
Treehouse
 
Pro Forma Adjustments
 
Pro Forma Consolidated
ASSETS
 
 
 
 
Current assets:
 
 
 
 
 
 
 
Cash and cash equivalents
$
45,277

 
$
83

 
$
(1,541
)
(a)
$
43,736

 
 
 
 
 
(83
)
(b)
 
Accounts receivable, net
4,074

 
132

 
(11
)
(c)
4,195

Inventories, net
17,738

 
1,195

 
1

(c)
18,934

Prepaid expenses and other current assets
3,708

 
32

 



3,740

Total current assets
70,797

 
1,442

 
(1,634
)
 
70,605

Property and equipment, net
1,952

 
176

 
(176
)
(d)
2,010

 
 
 
 
 
58

(d)
 
Goodwill
 
 
—

 
1,703

(e)
1,703

Intangible assets
 
 
—

 
1,303

(f)
1,303

Other long-term assets
84

 
105

 
(105
)
(b)
84

Total assets
$
72,833

 
$
1,723

 
$
1,149

 
$
75,705

 
 
 
 
 
 
 
 
LIABILITIES AND STOCKHOLDERS’ EQUITY
 
 
 
 
Current liabilities:
 

 
 

 
 
 
 
Accounts payable
$
3,441

 
$
862

 



$
4,303

Deferred revenue
1,842

 
243

 



2,085

Accrued and other liabilities
3,224

 
964

 
(326
)
(b)
4,102

 
 
 
 
 
250

(g)
 
 
 
 
 
 
(10
)
(c)
 
Total current liabilities
8,507

 
2,069

 
(86
)
 
10,490

Other long-term liabilities
14

 
176

 
(176
)
(b)
1,023

 
 
 
 
 
1,009

(h)
 
Total liabilities
8,521

 
2,245

 
747

 
11,513

Commitments and contingencies
 
 
 
 
 
 
 
Stockholders’ equity:
 

 
 

 
 
 
 
Preferred stock
—

 
 
 
 
 
—

Common stock
7

 
 
 
 
 
7

Treasury stock
(3,818
)
 
 
 
 
 
(3,818
)
Additional paid-in capital
817,904

 
 
 
 
 
817,904

Accumulated other comprehensive income
16

 
 
 
 
 
16

Accumulated deficit
(749,797
)
 
 
 
(120
)
(i)
(749,917
)
Members' equity
 
 
(522
)
 
522

(j)
—

Total stockholders’ equity
64,312

 
(522
)
 
402

 
64,192

Total liabilities and stockholders’ equity
$
72,833

 
$
1,723

 
$
1,149

 
$
75,705


The accompanying notes are an integral part of these unaudited pro forma condensed consolidated financial statements.

3


UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
For the Six Months Ended June 30, 2014
(In thousands, except per share data)

 
Historical
 
 
 
 
 
Geeknet, Inc.
 
Treehouse
 
Pro Forma Adjustments
 
Pro Forma Consolidated
Net revenue
$
46,086

 
$
4,322

 
$
(96
)
(m)
$
50,312

Cost of revenue
38,801

 
3,304

 
97

(k)
42,140

 
 
 
 
 
(62
)
(m)
 
Gross margin
7,285

 
1,018

 
(131
)
 
8,172

Operating expenses:
 
 
 
 
 
 
 
Sales and marketing
5,496

 
—

 
158

(o)
5,654

Technology and design
3,940

 
—

 
 
 
3,940

General and administrative
4,432

 
1,614

 
111

(l)
5,900

 
 
 
 
 
(99
)
(n)
 
 
 
 
 
 
(158
)
(o)
 
Total operating expenses
13,868

 
1,614

 
12

 
15,494

Loss from operations
(6,583
)
 
(596
)
 
(143
)
 
(7,322
)
Interest and other income (expense), net
189

 
(8
)
 
 
 
181

Loss from continuing operations before income taxes
(6,394
)
 
(604
)
 
(143
)
 
(7,141
)
Income tax benefit
—

 
 
 
 
 
—

Net loss from continuing operations
$
(6,394
)
 
 
 
 
 
$
(7,141
)
Loss per share from continuing operations:
 
 
 
 
 
 
 
Basic and diluted
$
(0.96
)
 
 
 
 
 
$
(1.07
)
Shares used in per share calculations:
 

 
 

 
 

 
 

Basic and diluted
6,676

 
 
 
 
 
6,676


The accompanying notes are an integral part of these unaudited pro forma condensed consolidated financial statements.


4


UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
For the Year Ended December 31, 2013
(In thousands, except per share data)

 
Historical
 
 
 
 
 
Geeknet, Inc.
 
Treehouse
 
Pro Forma Adjustments
 
Pro Forma Consolidated
Net revenue
$
138,262

 
$
9,431

 
$
(228
)
(m)
$
147,465

Cost of revenue
111,145

 
7,157

 
155

(k)
118,246

 
 
 
 
 
(211
)
(m)
 
Gross margin
27,117

 
2,274

 
(172
)
 
29,219

Operating expenses:
 
 
 
 
 
 
 
Sales and marketing
11,888

 
—

 
337

(o)
12,225

Technology and design
6,076

 
—

 
 
 
6,076

General and administrative
9,296

 
2,159

 
240

(l)
11,358

 
 
 
 
 
(337
)
(o)
 
Total operating expenses
27,260

 
2,159

 
240

 
29,659

Loss from operations
(143
)
 
115

 
(412
)
 
(440
)
Interest and other income (expense), net
(24
)
 
(17
)
 
 
 
(41
)
Loss from continuing operations before income taxes
(167
)
 
98

 
(412
)
 
(481
)
Income tax benefit
—

 
 
 
 
 
—

Net loss from continuing operations
$
(167
)
 
 
 
 
 
$
(481
)
Loss per share from continuing operations:
 
 
 
 
 
 
 
Basic and diluted
$
(0.03
)
 
 
 
 
 
$
(0.07
)
Shares used in per share calculations:
 

 
 

 
 

 
 

Basic and diluted
6,620

 
 
 
 
 
6,620


The accompanying notes are an integral part of these unaudited pro forma condensed consolidated financial statements.


5


GEEKNET, INC.

NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


1.      Basis of Presentation

On August 1, 2014, pursuant to an Asset Purchase Agreement (the “Asset Purchase Agreement”) between Geeknet, Inc. (the "Company") and Treehouse Brand Stores, LLC (“Treehouse”) and Jed Seigle, the sole manager and 98% owner of Treehouse, the Company completed its acquisition of substantially all the assets of Treehouse and assumed certain related liabilities. The accompanying unaudited pro forma condensed consolidated financial statements present the pro forma consolidated financial position and results of operations of the consolidated company based upon the historical financial statements of the Company and the historical financial statements of Treehouse, after giving effect to the acquisition of Treehouse and adjustments described in these footnotes, and are intended to reflect the impact of the acquisition on the Company.

The unaudited pro forma condensed consolidated balance sheet combines the consolidated balance sheet of the Company as of June 30, 2014 and the balance sheet of Treehouse as of June 30, 2014 and gives effect to the acquisition as if it had been completed on June 30, 2014. The unaudited pro forma condensed consolidated statement of operations for the six months ended and the year ended December 31, 2013 combines the historical results of the Company and the historical results of Treehouse and gives effect to the acquisition as if it had occurred on January 1, 2013.

The acquisition was accounted for using the purchase method of accounting in accordance with Accounting Standard Codification 805, Business Combinations, and the Company’s cost to acquire Treehouse has been allocated to the assets acquired and liabilities assumed based upon the respective preliminary estimate of fair values as of June 30, 2014 using assumptions that the Company’s management believes are reasonable given the information currently available. The process for estimating the fair values of identifiable intangible assets and certain tangible assets requires the use of significant estimates and assumptions, including estimating future cash flows and developing appropriate discount rates. The excess of the purchase price over the estimated amounts of net assets as of June 30, 2014 was allocated to goodwill in accordance with the accounting guidance. The Company believes the preliminary estimated fair values assigned to the assets acquired and liabilities assumed are based on reasonable assumptions, however the fair value estimates may change if additional information becomes available. Differences between the preliminary allocation and any changes thereto could be material.

Acquisition-related transaction costs are not included as a component of consideration transferred but are required to be expensed as incurred. The unaudited pro forma condensed consolidated balance sheet reflects the estimated acquisition-related transaction costs of both companies as a reduction of cash with a corresponding decrease in retained earnings. These costs are not presented in the unaudited pro forma condensed consolidated statement of operations because they will not have a continuing impact on the consolidated results.
 
The unaudited pro forma condensed consolidated financial statements do not reflect the expected realization of cost savings following the acquisition or anticipated costs the Company will incur to realize such synergies. Although management expects that costs savings will result from the acquisition, there can be no assurance that these cost savings will be achieved.

2.      Purchase Price Allocation

The total purchase price has been allocated to Treehouse's tangible assets, identifiable intangible assets and assumed liabilities based on a preliminary estimate of their fair values as of June 30, 2014. The excess of the purchase price over the tangible assets, identifiable intangible assets and assumed liabilities is recorded as goodwill. The Company’s estimates and assumptions in determining the estimated fair values of certain assets and liabilities are preliminary and are subject to change. The total preliminary estimated purchase price was allocated as follows:


6


 
(in thousands)
Accounts receivable
$
132

Inventories
1,195

Prepaid expenses and other current assets
32

Property and equipment
58

Goodwill
1,703

Intangible assets
1,303

     Total assets acquired
4,423

 
 
Accounts payable
(862
)
Deferred revenue
(243
)
Accrued and other liabilities
(638
)
     Total liabilities assumed
(1,743
)
 
 
Short-term contingent liabilities
(250
)
Other long-term contingent liabilities
(1,009
)
Preliminary estimated purchase price
$
1,421



3.      Pro Forma Adjustments

The following pro forma adjustments are based on preliminary estimates, which may change as additional information is obtained. Note that the following pro forma adjustments exclude the decrease in interest income that would have resulted based on the estimated decrease in the Company's cash available for investment as a result of the cash paid for the acquisition, as the related interest that would have been earned would be immaterial.

(a) To record the following adjustments to cash (in thousands):

Cash paid relating to acquisition
$
1,421

Cash paid for acquisition-related transaction costs(1)
120

     Cash used from the Company's cash and cash equivalents
$
1,541


(1) Transaction costs incurred after the June 30, 2014 balance sheets presented herein, which excludes an insignificant amount of transaction costs incurred by the Company prior to the acquisition date.

(b) To eliminate certain historical assets and liabilities of Treehouse that were excluded from the acquisition per the Asset Purchase Agreement.

(c) To eliminate the intercompany accounts receivable, accounts payable and inventory related transactions between the Company and Treehouse outstanding at June 30, 2014.

(d) To eliminate the historical cost of the property and equipment, net, of Treehouse, and to establish the fair value of the property and equipment, net, resulting from the acquisition.

(e) To record the portion of the total purchase consideration allocated to goodwill based on the estimated fair value of the total purchase consideration less the estimated fair values assigned to identifiable tangible and intangible assets acquired and liabilities assumed as of June 30, 2014.

(f) To establish the fair value of identifiable intangible assets resulting from the acquisition (in thousands):
        

7


 
Fair Value
Estimated Useful Life (Years)
Acquired License Agreements
$
1,040

5

Developed Technology
138

5

Non-Competition Agreement
82

3

Customer Lists
43

3

Total Identifiable Intangible Assets
$
1,303

 

(g) To record the estimated fair value of a contingent short-term liability due to the seller based on the terms in the Asset Purchase Agreement.

(h) To record the estimated fair value of the long-term contingent liability relating to potential earn-out payments based on the terms of the Asset Purchase Agreement.

(i) To record transaction costs incurred by the Company after the balance sheets presented herein.     

(j) To eliminate the historical members' equity of Treehouse.

(k) To record estimated stock-based compensation expense relating to a senior management award resulting from the acquisition.

(l) To record the estimated adjustment to depreciation and amortization expense for the following periods resulting from the acquisition (in thousands):
    
 
Year Ended
Six Months Ended
 
December 31, 2013
June 30, 2014
Eliminate Treehouse's historical depreciation and amortization expense
$
(74
)
$
(46
)
Estimated depreciation and amortization expense of acquired assets
 
 
   Amortization of acquired intangibles
277

139

   Depreciation of acquired fixed assets
37

18

Total adjustment
$
240

$
111


(m) To eliminate the intercompany revenue and cost of good sold between the Company and Treehouse for the periods presented herein.

(n) To eliminate stock compensation expense related to Phantom Stock Awards issued by Treehouse that were required to be settled as a result of the acquisition.

(o) To reclassify certain costs included in general and administrative expenses per the Treehouse historical financial statements to sales and marketing expenses to conform to the Company's presentation.



8