Form 8-K System1, Inc. For: May 18

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May 19, 2022 7:37 AM EDT

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Exhibit 99.1

System1, Inc./S1 Holdco LLC

Unaudited Statements of Operations


(in thousands)	System1, Inc. Sucessor Period			S1 Holdco LLC Predecessor Period			S1 Holdco LLC QTD		S1 Holdco LLC QTD		S1 Holdco LLC QTD		S1 Holdco LLC QTD		S1 Holdco LLC QTD		S1 Holdco LLC QTD		S1 Holdco LLC QTD			S1 Holdco LLC QTD			S1 Holdco LLC YTD		S1 Holdco LLC YTD		S1 Holdco LLC YTD		S1 Holdco LLC YTD		S1 Holdco LLC YTD			S1 Holdco LLC YTD
	1.27.22 - 3.31.22			1.1.22 - 1.26.22			31-Dec-21		30-Sep-21		30-Jun-21		31-Mar-21		31-Dec-20		30-Sep-20		30-Jun-20			31-Mar-20			31-Dec-21		30-Sep-21		30-Jun-21		31-Dec-20		30-Sep-20			30-Jun-20
Revenue		166,108			52,712			199,803		171,446		169,579		147,561		135,755		117,268		100,019			122,935			688,389		488,586		317,140		475,977		340,222			222,954
Operating cost and expenses:
Cost of revenues		120,131			41,760			155,276		128,885		126,167		110,785		96,635		83,892		73,937			86,532			521,113		365,837		236,952		340,996		244,361			160,469
Salaries, commissions, and benefits		43,459			35,175			18,715		15,139		17,698		15,195		15,915		13,120		13,183			13,330			66,747		48,032		32,893		55,548		39,633			26,513
Selling, general, and administrative		14,981			14,817			14,650		7,936		6,277		6,950		5,863		7,095		4,879			5,142			35,813		21,163		13,227		22,979		17,116			10,021
Depreciation and amortization		23,311			1,000			3,625		3,459		3,112		3,689		3,082		3,331		3,889			3,530			13,885		10,260		6,801		13,832		10,750			7,419

Total operating costs and expenses		201,882			92,752			192,266		155,419		153,254		136,619		121,495		107,438		95,888			108,534			637,558		445,292		289,873		433,355		311,860			204,422
Operating income		(35,774	)		(40,040	)		7,537		16,027		16,325		10,942		14,260		9,830		4,131			14,401			50,831		43,294		27,267		42,622		28,362			18,532
Loss (gain) on Fait Value of Warrants		13,761			—			—		—		—		—		—		—		—			—			—		—		—		—		—			—
Interest expense		4,776			1,049			4,162		4,184		4,476		4,048		5,781		5,741		6,332			6,497			16,870		12,708		8,524		24,351		18,570			12,829

Income (loss) from continuing operations before income tax		(54,311	)		(41,089	)		3,375		11,843		11,849		6,894		8,479		4,089		(2,201	)		7,904			33,961		30,586		18,743		18,271		9,792			5,703
Income tax expense		(16,252	)		(629	)		262		475		77		151		1,527		198		(173	)		355			965		703		228		1,907		380			182

Net income (loss) from continuing operations		(38,059	)		(40,460	)		3,113		11,368		11,772		6,743		6,952		3,891		(2,028	)		7,549			32,996		29,883		18,515		16,364		9,412			5,521
Net Income (Loss) Attributable To Noncontrolling Interest		(8,068	)		—			—		—		—		—		—		—		—			—			—		—		—		—		—			—
Gain (loss) from discontinued operations, net of taxes		—			—			—		—		—		—		55,315		99		(4,460	)		(3,557	)		—		—		—		47,397		(7,918	)		(8,017	)

Net income		(29,991	)		(40,460	)		3,113		11,368		11,772		6,743		62,267		3,990		(6,488	)		3,992			32,996		29,883		18,515		63,761		1,494			(2,496	)

System1, Inc./S1 Holdco LLC

Unaudited Condensed Balance Sheet


(in thousands)	System1, Inc.			S1 Holdco LLC			S1 Holdco LLC			S1 Holdco LLC			S1 Holdco LLC			S1 Holdco LLC			S1 Holdco LLC			S1 Holdco LLC			S1 Holdco LLC
	31-Mar-22			31-Dec-21			30-Sep-21			30-Jun-21			31-Mar-21			31-Dec-20			30-Sep-20			30-Jun-20			31-Mar-20
ASSETS
Current Assets:
Cash and cash equivalents	$	42,178		$	47,896		$	36,209		$	34,567		$	30,853		$	29,013		$	37,657		$	33,985		$	55,763
Accounts receivable, net of allowance for doubtful accounts		99,976			90,203			85,588			79,446			75,610			71,140			58,404			53,662			66,331
Restricted cash		4,895			—			—			—			—			—			—			—			—
Prepaid expenses and other current assets		14,468			7,689			7,236			4,870			3,996			3,016			4,012			4,825			5,739
Assets of discontinued operations		—			—			—			—			—			—			20,602			13,936			13,229

Total current assets		161,517			145,788			129,033			118,883			110,459			103,169			120,675			106,408			141,062

Restricted Cash	$	3,034		$	743		$	—		$	—		$	—		$	—		$	—		$	—		$	—
Property and equipment, net		2,855			830			836			916			976			1,057			1,137			1,139			1,243
Internal-use software development costs, net		10,704			11,213			11,012			10,578			9,764			9,660			10,079			9,414			9,045
Intangible assets, net		568,675			50,368			52,534			54,698			56,740			59,009			60,829			52,638			54,764
Goodwill		907,009			44,820			44,820			44,820			44,820			44,820			44,820			54,566			54,898
Due from related party		—			2,469			2,469			2,453			1,222			969			969			—			—
Operating lease right-of-use assets		6,388
Other assets		808			680			529			—			—			—			—			—			—
Assets of discontinued operations		—			—			—			—			—			—			67,714			69,138			70,101

Total Assets	$	1,660,990		$	256,911		$	241,233		$	232,348		$	223,981		$	218,684		$	306,223		$	293,304		$	331,114

LIABILITIES AND MEMBERS’ DEFICIT
Current Liabilities:
Accounts payable	$	76,004		$	72,846		$	64,625		$	60,659		$	57,410		$	52,104		$	40,690		$	34,058		$	42,476
Accrued expenses and other current liabilities		67,635			31,284			20,319			18,814			9,988			17,150			15,987			14,312			17,806
Deferred Revenue		64,810			1,971			2,100			2,383			2,053			1,889			2,727			2,453			2,242
Operating lease liabilities, current		1,895			—			—			—			—			—			—			—			—
Due to related party		80			—			—			—			—			—			—			—			—
Notes payable, current		14,822			170,453			171,780			4,739			9,374			9,374			19,347			24,347			44,237
Liabilities of discontinued operations		—			—			—			—			—			—			62,523			56,303			47,141

Total current liabilities		225,246			276,554			258,824			86,595			78,825			80,517			141,274			131,473			153,902

Operating lease liabilities, non current	$	5,645		$	—		$	—		$	—		$	—		$	—		$	—		$	—		$	—
Notes payable, non-current		409,777			—			—			168,226			169,411			170,595			226,417			228,469			229,432
Warrant liability		40,773			—			—			—			—			—			—			—			—
Deferred tax liability		144,027			—			—			—			—			—			—			—			—
Other long-term liabilities		5,804			8,758			9,368			9,051			16,497			15,801			12,935			11,821			13,208
Liabilities of discontinued operations		—			—			—			—			—			—			—			—			—

Total liabilities	$	831,272		$	285,312		$	268,192		$	263,872		$	264,733		$	266,913		$	380,626		$	371,763		$	396,543

Commitments and contingencies (Note 8)
Members’ deficit:
Class A common stock	$	9		$	—		$	—		$	—		$	—		$	—		$	—		$	—		$	—
Class C common stock		2			—			—			—			—			—			—			—			—
Additional paid-in capital		728,540			—			—			—			—			—			—			—			—
Accumulated deficit		(89,175	)		—			—			—			—			—			—			—			—
Members’ deficit in S1 Holdco		—			(28,829	)		(27,182	)		(31,646	)		(40,850	)		(47,886	)		(74,078	)		(78,017	)		(64,753	)
Noncontrolling interest		190,370			—			—			—			—			—			—			—			—
Accumulated other comprehensive income		(28	)		428			223			122			98			(343	)		(325	)		(443	)		(675	)

Total members’ deficit		829,718			(28,401	)		(26,959	)		(31,524	)		(40,752	)		(48,229	)		(74,403	)		(78,460	)		(65,428	)

Total Liabilities And Members’ Deficit	$	1,660,990		$	256,911		$	241,233		$	232,348		$	223,981		$	218,684		$	306,223		$	293,303		$	331,115

System1, Inc./S1 Holdco LLC


Unaudited Condensed Statements of Cash Flow (in thousands)	System1, Inc. Sucessor Period			S1 Holdco LLC Predecessor Period			S1 Holdco LLC QTD			S1 Holdco LLC QTD			S1 Holdco LLC QTD			S1 Holdco LLC QTD			S1 Holdco LLC QTD			S1 Holdco LLC QTD			S1 Holdco LLC QTD			S1 Holdco LLC QTD			S1 Holdco LLC YTD			S1 Holdco LLC YTD			S1 Holdco LLC YTD			S1 Holdco LLC YTD			S1 Holdco LLC YTD			S1 Holdco LLC YTD
	1.27.22 - 3.31.22			1.1.22 - 1.26.22			31-Dec-21			30-Sep-21			30-Jun-21			31-Mar-21			31-Dec-20			30-Sep-20			30-Jun-20			31-Mar-20			31-Dec-21			30-Sep-21			30-Jun-21			31-Dec-20			30-Sep-20			30-Jun-20
Cash Flows From Operating Activities:
Net cash provided by operating activities of continuing operations		(28,918	)		(10,490	)		21,336			12,056			17,185			10,128			15,714			12,971			9,122			14,600			60,705			39,369			27,313			52,407			36,693			23,722
Net cash used for operating activities of discontinued operations		—			—			—			—			—			—			(1,917	)		1,979			(390	)		(5,532	)		—			—			—			(5,860	)		(3,943	)		(5,922	)

Net cash provided by operating activities		(28,918	)		(10,490	)		21,336			12,056			17,185			10,128			13,797			14,950			8,732			9,068			60,705			39,369			27,313			46,547			32,750			17,800

Cash Flows From Investing Activities:
Purchases of property and equipment		(1,373	)		—			(49	)		—			—			—			(11	)		(8	)		—			—			(49	)		—			—			(19	)		(8	)		—
Proceeds from sale of Protected		—			—			—			—			—			—			74,544			—			—			—			—			—			—			74,544			—
Purchase of business, net of cash acquired		(423,853	)		—			—			—			—			—			—			—			—			—
Expenditures for internal-use software development costs		(922	)		(441	)		(1,585	)		(1,668	)		(1,793	)		(1,440	)		(617	)		(1,632	)		(1,970	)		(1,893	)		(6,486	)		(4,901	)		(3,233	)		(6,112	)		(5,495	)		(3,863	)

Net cash provided by (used in) investing activities of continuing operations		(426,148	)		(441	)		(1,634	)		(1,668	)		(1,793	)		(1,440	)		73,916			(1,640	)		(1,970	)		(1,893	)		(6,535	)		(4,901	)		(3,233	)		68,413			(5,503	)		(3,863	)
Net cash provided by (used in) investing activities of discontinued operations		—			—			—			—			—			—			(142	)		(79	)		144			(170	)		—			—			—			(247	)		(105	)		(26	)

Net cash provided by (used in) investing activities		(426,148	)		(441	)		(1,634	)		(1,668	)		(1,793	)		(1,440	)		73,774			(1,719	)		(1,826	)		(2,063	)		(6,535	)		(4,901	)		(3,233	)		68,166			(5,608	)		(3,889	)

Cash Flows From Financing Activities:
Proceeds from term loan and line of credit		449,000			—			—			—			—			—			—			—			—			20,000			—			—			—			20,000			20,000			20,000
Repayment of line of credit		—			—			—			—									(34,862	)		—									—			—			—			(34,862	)		—
Repayment of term loan		(172,488	)		—			(1,750	)		(1,750	)		(6,386	)		(1,750	)		(32,231	)		(7,715	)		(21,727	)		(1,750	)		(11,636	)		(9,886	)		(8,136	)		(63,423	)		(31,192	)		(23,477	)
Payments for deferred financing cost		(24,423	)		—			(382	)		—			—			—			—			—			—			—			(382	)		—			—			—			—			—
Cash received from backstop		246,484			—			—			—			—			—			—			—			—			—
Member capital contributions		—			—			(32	)		109			3			147			206			551			747			751			227			259			150			2,255			2,049			1,498
Payments on contingent consideration		—			—			—			—			(1,715	)		(5,000	)		—			—			(5,038	)		(462	)		(6,715	)		(6,715	)		(6,715	)		(5,500	)		(5,500	)		(5,500	)
Related party loan		—			—			—			—			(1,500	)		—			—			—			—			—			(1,500	)		(1,500	)		(1,500	)		—			—			—
Redemptions of Class A common stock		(510,469	)		—			—			—			—			—			—			—			—			—
Distributions to members from sale of Protected		—			—			—			—									(28,765	)		—									—			—			—			(28,765	)		—
Distributions to members		(247	)		—			(4,786	)		(7,102	)		(2,691	)		—			(12,575	)		(1,146	)		(3,558	)		(501	)		(14,579	)		(9,793	)		(2,691	)		(17,780	)		(5,205	)		(4,059	)

Net cash provided by financing activities		(12,143	)		—			(6,950	)		(8,743	)		(12,289	)		(6,603	)		(108,227	)		(8,310	)		(29,576	)		18,038			(34,585	)		(27,635	)		(18,892	)		(128,075	)		(19,848	)		(11,538	)
Effect of exchange rate changes in cash, cash equivalents and restricted cash		(237	)		(132	)		(322	)		(3	)		611			(245	)		120			35			130			(735	)		41			363			366			(450	)		(570	)		(605	)

Net Increase In Cash		(467,446	)		(11,063	)		12,430			1,642			3,714			1,840			(20,536	)		4,956			(22,540	)		24,308			19,626			7,196			5,554			(13,812	)		6,724			1,768
Cash and restricted cash:
Beginning of period		517,553			48,639			36,209			34,567			30,853			29,013			49,549			44,593			67,133			42,825			29,013			29,013			29,013			42,825			42,825			42,825

End of period	$	50,107		$	37,576		$	48,639		$	36,209		$	34,567		$	30,853		$	29,013		$	49,549		$	44,593		$	67,133		$	48,639		$	36,209		$	34,567		$	29,013		$	49,549		$	44,593

System1, Inc./S1 Holdco LLC


Non-GAAP Financials (in thousands)	System1, Inc. Sucessor Period			S1 Holdco LLC Predecessor Period			S1 Holdco LLC QTD		S1 Holdco LLC QTD			S1 Holdco LLC QTD		S1 Holdco LLC QTD		S1 Holdco LLC QTD		S1 Holdco LLC QTD		S1 Holdco LLC QTD			S1 Holdco LLC QTD			S1 Holdco LLC YTD		S1 Holdco LLC YTD		S1 Holdco LLC YTD		S1 Holdco LLC YTD		S1 Holdco LLC YTD		S1 Holdco LLC YTD
	1.27.22 - 3.31.22			1.1.22 - 1.26.22			31-Dec-21		30-Sep-21			30-Jun-21		31-Mar-21		31-Dec-20		30-Sep-20		30-Jun-20			31-Mar-20			31-Dec-21		30-Sep-21		30-Jun-21		31-Dec-20		30-Sep-20		30-Jun-20
Net income (loss) from continuing operations	$	(38,059	)	$	(40,460	)	$	3,113	$	11,368		$	11,772	$	6,743	$	6,952	$	3,891	$	(2,029	)	$	7,549		$	32,996	$	29,883	$	18,515	$	16,364	$	9,412	$	5,520
Income tax expense		-16,252			-629			262		475			77		151		1,527		198		(173	)		355			965		703		228		1,907		380		183
Interest expense		4,776			1,049			4,162		4,185			4,237		4,048		5,781		5,741		6,332			6,497			16,632		12,470		8,286		24,351		18,570		12,829
Depreciation & amortization		23,311			1,000			3,625		3,458			3,113		3,689		3,082		3,331		3,889			3,530			13,884		10,259		6,801		13,832		10,750		7,419
Other income/expense (1)		1,800			-61			70		(25	)		256		84		196		294		138			(229	)		385		315		340		399		202		(91	)
Stock-based compensation and distributions to Members (2)		27,208			27,355			3,458		673			3,342		2,118		3,362		1,817		2,288			2,008			9,591		6,133		5,460		9,474		6,113		4,295
Revaluation of non-cash warrant liability		13,761			0			—		—			—		—		—		—		—			—			—		—		—		—		—		—
Terminated product lines (3)		0			0			—		—			—		—		—		—		(2	)		559			—		—		—		556		556		556
Costs related to acquisitions/business combinations		6,390			15,676			7,970		2,755			623		1,484		1,033		222		71			1,032			12,833		4,862		2,108		2,358		1,325		1,103
Acquisition earnout		274			9			32		31			32		63		62		2,278		373			—			158		126		95		2,713		2,651		373
Severance costs		206			0			3		118			164		330		121		393		545			21			615		612		494		1,080		960		567
Other costs, including restructuring		26			0			0		8			98		99		101		11		185			98			206		205		197		396		294		283

Adjusted EBITDA	$	23,442		$	3,938		$	22,696	$	23,046		$	23,715	$	18,809	$	22,217	$	18,177	$	11,616		$	21,420		$	88,265	$	65,570	$	42,524	$	73,430	$	51,214	$	33,036

(1)	Non-cash adjustments related to foreign exchange and asset disposals

(2)	Comprised of distributions to equity holders and non-cash stock-based compensation

(3)	In 2020, S1 Holdco terminated its Social Publishing product line, where it created quiz content primarily for the purpose of display advertising monetization. S1 Holdco has excluded revenue and direct costs associated with this product line for all presented periods

Non-Financial Metrcis

(In thousands except ratios)


	QTD			QTD			QTD			QTD			QTD			QTD			QTD			QTD			QTD			YTD			YTD			YTD			YTD			YTD			YTD
O&O Advertising	31-Mar-22			31-Dec-21			30-Sep-21			30-Jun-21			31-Mar-21			31-Dec-20			30-Sep-20			30-Jun-20			31-Mar-20			31-Dec-21			30-Sep-21			30-Jun-21			31-Dec-20			30-Sep-20			30-Jun-20
Revenue	$	180,049		$	190,035		$	162,606		$	160,817		$	139,426		$	125,241		$	108,314		$	92,067		$	111,878		$	652,884		$	462,848		$	300,242		$	437,501		$	312,259		$	203,945
Advertising Spend (1)	$	137,948		$	152,653		$	126,404		$	123,244		$	107,298		$	93,800		$	80,217		$	69,406		$	84,066		$	509,599		$	356,946		$	230,542		$	327,489		$	233,689		$	153,472

Adjusted Gross Profit	$	42,101		$	37,383		$	36,202		$	37,572		$	32,128		$	31,442		$	28,097		$	22,661		$	27,812		$	143,284		$	105,902		$	69,700		$	110,012		$	78,570		$	50,473
O&O Sessions (2)		975,025			999,975			859,392			766,293			741,122			691,279			644,780			670,112			815,554			3,366,783			2,366,807			1,507,415			2,821,726			2,130,446			1,485,666
O&O CPS (3)	$	0.14		$	0.15		$	0.15		$	0.16		$	0.14		$	0.14		$	0.12		$	0.10		$	0.10		$	0.15		$	0.15		$	0.15		$	0.12		$	0.11		$	0.10
O&O RPS (4)	$	0.18		$	0.19		$	0.19		$	0.21		$	0.19		$	0.18		$	0.17		$	0.14		$	0.14		$	0.19		$	0.20		$	0.20		$	0.16		$	0.15		$	0.14
Spread		31	%		24	%		29	%		30	%		30	%		34	%		35	%		33	%		33	%		28	%		30	%		30	%		34	%		34	%		33	%
Partner Network
Revenue	$	10,897		$	9,768		$	8,840		$	8,763		$	8,135		$	10,514		$	8,955		$	7,951		$	11,056		$	35,505		$	25,738		$	16,898		$	38,477		$	27,963		$	19,008
Adjusted Gross Profit	$	10,897		$	9,768		$	8,840		$	8,763		$	8,135		$	10,514		$	8,955		$	7,951		$	11,056		$	35,505		$	25,738		$	16,898		$	38,477		$	27,963		$	19,008
Network Sessions (5)		295,052			286,291			278,460			312,406			326,127			318,930			323,878			484,653			392,906		$	1,203,284			916,993			638,533			1,520,367			1,201,437			877,559
Network RPS (6)	$	0.04		$	0.03		$	0.03		$	0.03		$	0.02		$	0.03		$	0.03		$	0.02		$	0.03		$	0.03		$	0.03		$	0.03		$	0.03		$	0.02		$	0.02
O&O Advertising, Excluding Terminated Product Lines
Revenue	$	180,049		$	190,035		$	162,606		$	160,817		$	139,426		$	125,241		$	108,314		$	91,712		$	106,587		$	652,884		$	462,848		$	300,242		$	431,855		$	306,613		$	198,299
Advertising Spend	$	138,052		$	152,653		$	126,404		$	123,244		$	107,298		$	93,800		$	80,217		$	69,053		$	79,165		$	509,599		$	356,946		$	230,542		$	322,235		$	228,436		$	148,218

Adjusted Gross Profit	$	41,996		$	37,383		$	36,202		$	37,572		$	32,128		$	31,442		$	28,097		$	22,659		$	27,422		$	143,284		$	105,902		$	69,700		$	109,619		$	78,178		$	50,081
O&O Sessions (2)		975,025			999,975			859,392			766,293			741,122			691,279			644,780			663,135			737,243			3,366,783			2,366,807			1,507,415			2,736,438			2,045,159			1,400,378
O&O CPS (3)	$	0.14		$	0.15		$	0.15		$	0.16		$	0.14		$	0.14		$	0.12		$	0.10		$	0.11		$	0.15		$	0.15		$	0.15		$	0.12		$	0.11		$	0.11
O&O RPS (4)	$	0.18		$	0.19		$	0.19		$	0.21		$	0.19		$	0.18		$	0.17		$	0.14		$	0.14		$	0.19		$	0.20		$	0.20		$	0.16		$	0.15		$	0.14
Spread		30	%		24	%		29	%		30	%		30	%		34	%		35	%		33	%		35	%		28	%		30	%		30	%		34	%		34	%		34	%

(1)	Advertising spend is the amount of advertising that is spent to acquire traffic to Owned & Operated websites

(2)	O&O sessions are the total number of monetizable user visits to Owned & Operated websites

(3)	CPS is advertising spend divided by O&O Sessions

(4)	RPS is O&O Revenue divided by O&O Sessions

(5)	Network sessions are the number of monetizable user visits delivered by network partners to RAMP

(6)	RPS is Partner Network revenue divided by Network Sessions

Non-Financial Metrcis

(In thousands except ratios)


	QTD		QTD		QTD		QTD		QTD		QTD		QTD		QTD		QTD		YTD		YTD		YTD		YTD		YTD		YTD
	31-Mar-22		31-Dec-21		30-Sep-21		30-Jun-21		31-Mar-21		31-Dec-20		30-Sep-20		30-Jun-20		31-Mar-20		31-Dec-21		30-Sep-21		30-Jun-21		31-Dec-20		30-Sep-20		30-Jun-20
Billings (1)	$	45,405	$	38,443	$	37,632	$	40,473	$	37,992	$	31,126	$	27,758	$	26,458	$	22,529	$	154,541	$	116,097	$	78,465	$	107,871	$	76,745	$	48,987
Change in Deferred Revenue During Period	$	5,512	$	(671)	$	(567)	$	4,445	$	6,792	$	6,287	$	2,591	$	4,796	$	4,409	$	9,999	$	10,671	$	11,238	$	18,084	$	11,796	$	9,205
Advertising Spend (2)	$	22,296	$	17,986	$	16,966	$	17,884	$	23,626	$	17,562	$	18,059	$	22,467	$	18,575	$	76,462	$	58,477	$	41,510	$	76,664	$	59,101	$	41,042
Beginning Subscribers		2,208		2,208		2,187		2,128		1,905		1,770		1,586		1,357		1,234		1,905		1,905		1,905		1,234		1,234		1,234
Ending Subscribers (3)		2,284		2,208		2,208		2,187		2,128		1,905		1,770		1,586		1,357		2,208		2,208		2,187		1,905		1,770		1,586
New Subscribers (4)		388		312		298		331		462		324		341		398		275		1,403		1,091		793		1,338		1,014		673
CTA (5)	$	57.49	$	57.73	$	56.91	$	54.10	$	51.10	$	54.23	$	52.95	$	56.42	$	67.53	$	54.51	$	53.60	$	52.35	$	57.29	$	58.27	$	60.96
ARPU (6)	$	20.22	$	17.41	$	17.13	$	18.76	$	18.84	$	16.94	$	16.54	$	17.98	$	17.39	$	75.15	$	56.45	$	38.35	$	68.72	$	51.09	$	34.74

(1)	Billings is the total amount billed to customers during a period

(2)	Advertising spend is the total amount spent on advertising to acquire new subscribers during a period

(3)	Ending subscribers are the number of paying subscribers for its products, at the end of a period

(4)	New subscribers are the number of new subscribers acquired for its products, during a period

(5)	CTA is advertising spend divided by new subscribers in a period

(6)	ARPU is the billings in a period divided by average of the beginning and ending subscribers during that period

*	Deferred revenue from billings is amortized on a straight line basis over the subscription period and recognized as revenue in the financial statements

**	Excludes metrics for terminated product lines

Protected.net Group Limited

Unaudited Statements of Operations


(in thousands)	Predecessor Period			QTD			QTD			QTD			QTD			QTD			QTD			QTD			QTD			YTD			YTD			YTD			YTD			YTD			YTD
	1.1.22 - 1.26.22			31-Dec-21			30-Sep-21			30-Jun-21			31-Mar-21			31-Dec-20			30-Sep-20			30-Jun-20			31-Mar-20			31-Dec-21			30-Sep-21			30-Jun-21			31-Dec-20			30-Sep-20			30-Jun-20
Revenue		12,016			39,115			38,199			36,028			31,199			25,149			25,415			21,965			18,379			144,541			105,426			67,227			90,908			65,759			40,345
Cost of Revenue		8,434			23,186			22,570			23,460			29,731			23,122			23,827			27,892			23,139			98,946			75,760			53,191			97,980			74,858			51,030

Gross profit (Loss)		3,582			15,929			15,629			12,568			1,469			2,027			1,587			(5,926	)		(4,759	)		45,595			29,666			14,037			(7,072	)		(9,099	)		(10,686	)
General and administrative		1,431			4,231			3,910			5,074			2,697			2,365			1,730			1,978			637			15,912			11,681			7,771			6,711			4,346			2,616
Related party rent expense		62			208			133			180			144			111			159			116			150			665			457			324			536			425			266

Total Operating Expenses		1,493			4,440			4,042			5,254			2,841			2,476			1,889			2,094			788			16,577			12,138			8,095			7,247			4,771			2,882
Gain on sale of intangible assets		—			—			—			—			—			—			(1,580	)		—			—			—			—			—			(1,580	)		(1,580	)		—
Foreign currency transaction (gains)/losses		97			225			583			209			322			(170	)		37			60			207			1,341			1,115			532			135			304			267
Other operating income		—			—			(0	)		(222	)		(121	)		(18	)		(3	)		(27	)		(0	)		(343	)		(343	)		(343	)		(48	)		(30	)		(27	)

Other operating expense (income)		97			225			583			(13	)		201			(188	)		(1,546	)		33			207			997			772			189			(1,494	)		(1,306	)		240
Operating income (loss)		1,992			11,264			11,004			7,326			(1,574	)		(262	)		1,244			(8,054	)		(5,754	)		28,020			16,757			5,753			(12,826	)		(12,564	)		(13,808	)
Related party interest expense		—			—			—			—			—			105			136			130			35			—			—			—			406			301			165
Related party interest income		(83	)		(303	)		(153	)		(328	)		(157	)		—			—			—			—			(941	)		(638	)		(485	)		—			—			—
Interest expense		230			53			144			235			151			29			—			—			—			583			530			386			29			—			—
Other non-operating expenses/(income)		—			—			—			(70	)		70			(2	)		—			—			—			—			—			—			(2	)		—			—

Total non-operating expenses/(income), net		147			(250	)		(9	)		(163	)		64			132			136			130			35			(358	)		(108	)		(99	)		433			301			165
Net income (loss) before income taxes		1,844			11,514			11,013			7,489			(1,638	)		(394	)		1,108			(8,184	)		(5,789	)		28,378			16,865			5,852			(13,258	)		(12,865	)		(13,973	)
Income Tax Expense (Benefit)		(1,688	)		(16,139	)		966			—			—			—			—			—			—			(15,173	)		966			—			—			—			—

Net income (loss)		3,532			27,653			10,047			7,489			(1,638	)		(394	)		1,108			(8,184	)		(5,789	)		43,551			15,899			5,852			(13,258	)		(12,865	)		(13,973	)

Protected.net Group Limited

Unaudited Condensed Balance Sheet

(in thousands)


	31-Dec-21			30-Sep-21			30-Jun-21			31-Mar-21			31-Dec-20			30-Sep-20			30-Jun-20			31-Mar-20
ASSETS
Current assets:
Cash	$	35,067		$	21,112		$	14,227		$	11,296		$	6,253		$	7,060		$	5,356		$	7,020
Restricted cash		1,333			2,148			2,458			5,757			5,604			4,943			4,874			7,321
Prepaid expenses and other current assets		546			548			691			791			359			317			404			327
Deposits		15			3,000			3,000			3,000			3,000			3,000			3,000			—

Total current assets		36,963			26,807			20,376			20,844			15,216			15,320			13,634			14,667

Due from related parties		33,082			33,115			26,249			15,719			10,230			—			244			139
Property, plant and equipment		616			398			373			370			270			195			184			196
Intangible Assets		369			386			415			62			53			54			90			108
Deferred tax assets		17,237			—			—			—			—			—			—			—
Goodwill		284			284			284			—			—			—			—			—

Total assets	$	88,550		$	60,991		$	47,696		$	36,995		$	25,769		$	15,568		$	14,153		$	15,112

Liabilities and Shareholders’ Deficit:
Accounts payable	$	216		$	3,029		$	732		$	2,876		$	3,005		$	2,698		$	3,739		$	436
Accrued expenses		10,162			7,537			6,199			7,686			6,704			5,896			5,907			8,441
VAT tax liability		11,404			9,696			9,351			6,965			6,366			8,939			8,446			6,211
Deferred revenue		57,405			58,186			58,731			54,139			47,431			41,855			39,044			34,156
Related party deferred revenue		166			187			208			229			168			—			—			—
Current portion of note payable		2,813			2,250			2,813			2,250			1,500			—			—			—
Due to related party		23			—			—			—			4			3,501			5,599			6,243
Refund liability		537			429			449			597			512			558			405			428

Total current liabilities		82,725			81,313			78,482			74,741			65,690			63,447			63,140			55,915

Note payable, net of current portion and deferred financing costs		10,546			11,086			11,636			12,164			8,352			—			—			—
Deferred tax liability		—			966			—			—			—			—			—			—

Total liabilities	$	93,271		$	93,365		$	90,118		$	86,905		$	74,042		$	63,447		$	63,140		$	55,915

Commitments and Contingencies
Shareholders’ Deficit:
Class A Preferred shares		11			11			11			11			11			11			11			11
Class B Common shares		11			11			11			11			11			11			11			11
Additional paid-in capital		40,953			40,953			40,953			40,953			40,953			40,953			40,953			40,953
Accumulated deficit		(45,696	)		(73,349	)		(83,396	)		(90,885	)		(89,247	)		(88,854	)		(89,962	)		(81,778	)

Total Shareholders’ deficit		(4,721	)		(32,374	)		(42,421	)		(49,911	)		(48,273	)		(47,879	)		(48,987	)		(40,803	)

Total Liabilities and Shareholders’ Deficit	$	88,550		$	60,991		$	47,696		$	36,995		$	25,769		$	15,568		$	14,153		$	15,112

*	Class A Preferred shares, par value £0.0001 per share, 7,992,009 shares authorized, issued, and outstanding on September 30, 2021 and December 31, 2020, respectively

**	Class B Common shares, par value £0.0001 per share, 7,960,105 shares authorized, issued, and outstanding on September 30, 2021 and December 31, 2020, respectively

Protected.net Group Limited

Unaudited Condensed Statements of Cash Flow


(in thousands)	QTD			QTD			QTD			QTD			QTD			QTD			QTD			QTD			YTD			YTD			YTD			YTD			YTD			YTD
	31-Dec-21			30-Sep-21			30-Jun-21			31-Mar-21			31-Dec-20			30-Sep-20			30-Jun-20			31-Mar-20			31-Dec-21			30-Sep-21			30-Jun-21			31-Dec-20			30-Sep-20			30-Jun-20
Cash Flows From Operating Activities:
Net income (loss)		27,653			10,047			7,489			(1,638	)		(394	)		1,108			(8,184	)		(5,789	)		43,551			15,899			5,852			(13,258	)		(12,865	)		(13,973	)
Adjustments to reconcile net loss to net cash used in operating activities:																										—
Depreciation		49			39			36			28			24			18			17			15			151			102			63			75			51			33
Amortization		24			29			29			12			13			16			18			19			94			70			41			67			54			37
Gain on sale of Network Protected intangible assets		—			—			—			—			—			(1,580	)		—			—			—			—			—			(1,580	)		(1,580	)		—
Amortization of deferred financing costs		23			13			34			13			2			—			—			—			82			59			46			2			—			—
Interest income on loan with System 1 SS Protect Holdings, Inc.		638			(189	)		(307	)		(143	)		(2	)		—			—			—			—			(638	)		(450	)		(2	)		—			—
Financing fee income on loan with System 1 SS Protect Holdings, Inc.		(21	)		(21	)		(21	)		(14	)		—			—			—			—			(77	)		(56	)		(35	)		—			—			—
Change in operating assets and liabilities:		—			—			—			—			—			—			—			—			—			—			—			—			—			—
Prepaid expenses and other current assets		(98	)		143			112			(432	)		(43	)		188			(77	)		(244	)		(275	)		(177	)		(320	)		(177	)		(134	)		(321	)
Deposits		2,985			—			—			—			—			—			(3,000	)		—			2,985			—			—			(3,000	)		(3,000	)		(3,000	)
Accounts payable		(2,813	)		2,295			(2,471	)		(129	)		302			(1,041	)		3,303			(2,620	)		(3,118	)		(305	)		(2,600	)		(56	)		(358	)		683
Accrued expenses		2,625			1,338			(1,402	)		982			808			(11	)		(2,534	)		3,809			3,544			918			(420	)		2,072			1,264			1,275
VAT tax liability		1,708			345			2,385			599			(2,573	)		494			2,235			(1,957	)		5,037			3,329			2,984			(1,801	)		772			278
Refund liability		108			(20	)		(148	)		85			(46	)		152			(22	)		11			25			(83	)		(63	)		95			141			(11	)
Deferred revenue		(780	)		(545	)		4,593			6,708			5,576			2,811			4,888			4,453			9,974			10,755			11,300			17,727			12,152			9,340
Deferred tax assets		(17,237	)		—			—			—			—			—			—			—			(17,237	)		—			—			—			—			—
Related party deferred revenue		(21	)		(21	)		(21	)		61			168			—			—			—			(2	)		19			40			168			—			—
Deferred tax liability		(966	)		966			—			—			—			—			—			—			—			966			—			—			—			—
Due from related party		(921	)		109			29			(83	)		(168	)		244			(104	)		(137	)		(866	)		55			(54	)		(165	)		3			(241	)
Due to related party		23			—			—			(4	)		1,266			(861	)		(644	)		(11	)		18			(4	)		(4	)		(250	)		(1,516	)		(655	)

Net cash generated by (used in) operating activities		12,978			14,529			10,337			6,043			4,933			1,539			(4,105	)		(2,451	)		43,887			30,909			16,380			(84	)		(5,017	)		(6,556	)

Cash Flows From Investing Activities:
Purchases of intangibles, property, plant and equipment		(274	)		(63	)		(40	)		(147	)		106			(29	)		(5	)		(72	)		(524	)		(250	)		(187	)		—			(106	)		(77	)
Proceeds from sale of intangibles		100			—			—			—						1,500			—			—			100			—			—			1,500			1,500			—
Cash received in acquisition of Host Plus Limited, net of cash paid		—			—			13			—			—			—			—			—			13			13			13			—			—			—
Loan advanced to Just Develop It		(16,223	)		(4,981	)		(8,430	)		—			—			—			—			—			(29,635	)		(13,411	)		(8,430	)		—			—			—
Repayment of loan by Just Develop It		16,223			4,981			8,430			—			(213	)		—			—			—			29,635			13,411			8,430			(213	)		—			—
Loan advanced to Company director		(228	)		(1,706	)		(282	)		—			238			(238	)		—			—			(2,216	)		(1,988	)		(282	)		—			(238	)		—
Repayment of loan by Company director		566			1,651			—			—			—			—			—			—			2,216			1,651			—			—			—			—
Loan advanced to System 1 SS Protect Holdings, Inc.		—			(6,711	)		(9,948	)		(5,250	)		(10,060	)		—			—			—			(21,909	)		(21,909	)		(15,197	)		(10,060	)		—			—

Net cash used by investing activities		164			(6,829	)		(10,257	)		(5,397	)		(9,929	)		1,234			(5	)		(72	)		(22,319	)		(22,483	)		(15,653	)		(8,773	)		1,157			(77	)

Cash Flows From Financing Activities:
Proceeds from bank loan		—			—			—			5,000			10,000			—			—			—			5,000			5,000			5,000			10,000			—			—
Repayment of principal on bank loan		—			(1,125	)		—			(375	)		—			—			—			—			(1,500	)		(1,500	)		(375	)		—			—			—
Proceeds from related party loans		—			—			—			—			2,000			—			—			9,000			—			—			—			11,000			9,000			9,000
Repayment of related party loans		—			—			—			—			(11,000	)		3,000			—			(3,000	)		—			—			—			(11,000	)		—			(3,000	)
Repayment of loan to Just Develop It		—			—			(449	)		—			4,000			(4,000	)		—			—			(449	)		(449	)		(449	)		—			(4,000	)		—
Payment of deferred financing costs		—			—			—			(75	)		(150	)		—			—			—			(75	)		(75	)		(75	)		(150	)		—			—

Net cash (used in) provided by financing activities		—			(1,125	)		(449	)		4,550			4,850			(1,000	)		—			6,000			2,976			2,976			4,101			9,850			5,000			6,000

Effect of exchange rate changes on cash		—			—			—			—			—			—			—			—			—			—			—			—			—			—

Net change in cash		13,142			6,574			(368	)		5,197			(147	)		1,773			(4,110	)		3,477			24,544			11,403			4,828			993			1,140			(633	)

Cash, beginning of period		23,259			16,685			17,053			11,856			12,003			10,230			14,341			10,863			11,856			11,856			11,856			10,863			10,863			10,863

Cash, end of period	$	36,401		$	23,259		$	16,685		$	17,053		$	11,856		$	12,003		$	10,230		$	14,341		$	36,401		$	23,259		$	16,685		$	11,856		$	12,003		$	10,230

Protected.net Group Limited

Non-GAAP Financials


(in thousands)	Predecessor Period			QTD			QTD			QTD			QTD			QTD			QTD			QTD			QTD			YTD			YTD			YTD			YTD			YTD			YTD
	1.1.22 - 1.26.22			31-Dec-21			30-Sep-21			30-Jun-21			31-Mar-21			31-Dec-20			30-Sep-20			30-Jun-20			31-Mar-20			31-Dec-21			30-Sep-21			30-Jun-21			31-Dec-20			30-Sep-20			30-Jun-20
Net income (loss)	$	3,532		$	27,653		$	10,047		$	7,489		$	(1,638	)	$	(394	)	$	1,108		$	(8,184	)	$	(5,789	)	$	43,551		$	15,899		$	5,852		$	(13,258	)	$	(12,865	)	$	(13,973	)
Income Tax Expense		(1,688	)		(16,139	)		966			—			—			—			—			—			—			(15,173	)		966			—			—			—			—
Interest expense, net		147			(56	)		(131	)		(165	)		(6	)		93			131			176			35			(358	)		(302	)		(171	)		435			342			211
Depreciation & amortisation		19			73			69			65			39			37			35			35			34			245			172			104			141			105			70
Terminated product lines (1)		0			(13	)		29			3			62			(336	)		(1,691	)		86			163			81			94			64			(1,777	)		(1,441	)		250
Costs related to acquisitions/business combinations		104			699			196			499			297			32			—			—			—			1,690			991			795			32			—			—
Non-cash foreign exchange adjustments		97			228			581			209			322			(194	)		46			68			190			1,341			1,112			532			110			304			258
VAT accrual for previously uncollected VAT		368			956			1,110			1,492			1,116			615			866			1,408			46			4,675			3,718			2,608			2,934			2,319			1,453
Director salary payments		—			922			936			949			—			—			—			—			—			2,806			1,885			949			—			—			—
Other costs including restructuring		—			—			—			—			—			424			34			—			—			—			—			—			458			34			—

Adjusted EBITDA	$	2,581		$	14,323		$	13,803		$	10,540		$	193		$	277		$	529		$	(6,411	)	$	(5,320	)	$	38,859		$	24,536		$	10,733		$	(10,925	)	$	(11,202	)	$	(11,731	)

(1)	Protected terminated its Network Protect VPN product. Protected has excluded revenue, direct costs and operating expenses associated with this product line from Adjusted EBITDA for all presented periods

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Form 8-K System1, Inc. For: May 18

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