CONFIDENTIAL INFORMATION
BuzzFeed, Inc.

&

Subsidiaries

Consolidated Financial Statements
Jan-Jun 2014 YTD (Draft Unaudited)

Consolidated Balance Sheets

As of 6/30/14

Assets

Current Assets
Cash, cash equivalents, and marketable securities

$ 22,261,774

27,696,792

Accounts receivable, net

1,027,874

Prepaid and other current assets

50,986,441

Total Current Assets

3,345,246

Property and equipment, net
Other assets
Total Assets

1,593,730

$ 55,925,417

Liabilities and Stockholders' Equity

Current Liabilities
Accounts payable

$

433,202
8,393,337

Deferred obligation
Total liabilities

47,532,080

Stockholders' Equity
Total liabilties and stockholders' equity

2,077,293
5,882,841

Accrued expenses and other current liabilities

$ 55,925,417

Consolidated Statements of Operations
YTD 2014

Revenue

$ 46,159,098
5,818,808

Cost of revenue
Selling, general and administrative

20,983,958

Editorial

10,449,422

5,602,235

Research and development

669,368

Depreciation and amortization

43,523,791

Total operating expenses

2,635,307

Loss from operations

112,710

Other income, net

2,748,017

Income from operations before income taxes
Income tax provision
Net Loss

CONFIDENTIAL INFORMATION

$

2,748,017

 CONFIDENTIAL INFORMATION
BuzzFeed, Inc.

&

Subsidiaries

Consolidated Financial Statements
Jan-Jun 2014 YTD (Draft Unaudited)

Consolidated Statements of Cash Flows

YTD 2014

Operating Activities

Net loss

$

2,748,017

Adjustments to reconcile net loss to net cash used in operating activities:

669,368
368,788

Depreciation and amortization
Stock-based compensation
Asset Impairment
Changes in operating assets and liabilities:

(1,252,061)
(427,161)
(249,671)
(1,606)
1,350,928
(372,610)

Accounts receivable, net
Other current assets
Other long term assets
Accounts payable
Accrued expenses and other current liabilities
Deferred obligation

2,833,993

Cash used in operating activities
Investing Activities

(1,298,989)

Capital Expenditures
Cash inflows related to acquisitions

(1,298,989)

Cash from (used in) investing activities
Financing Activities

Proceeds from exercise of stock options

(0)
125,688

Cash from financing activities

125,688

Preferred stock issuance, net of issuance costs

1,660,692
20,601,082

Increase (decrease) in cash and equivalents
Cash and equivalents at beginning of period
Cash and equivalents at end of period

CONFIDENTIAL INFORMATION

$

22,261,774

 BuzzFeed, Inc.

Consolidated Financial Statements
December 31, 2013 and 2012

BuzzFeed, Inc.
Consolidated Balance Sheets
December 31, 2013 and 2012

2013

Assets

2012

Current assets
$

Cash and cash equivalents

20,601,209

$

Marketable securities

21,212,509
6,993,560

Accounts receivable

26,444,731

Prepaid and other current assets

8,275,790

616 724

122 809

47,662,664

36,604,668

Property and equipment, net

2,714,141

1,026,165

Other assets

1 332 199

Total current assets

Total assets

484 044

$

51 709004

$

38 114 877

$

3,301,357

$

1,151,663

Liabilities and Stockholders' Equity
Current liabilities
Accounts payable
Accrued expenses and other current liabilities

4,640,197

Deferred revenue

1,268,608

613 537

286 885

Total current liabilities

8 555 091

2 707 156

Total liabilities

8,555,091

2,707,156

3,000,500

3,000,500

3,801

3,801

7,904,463

7,904,463

15,434,047

15,434,047

19,310,914

19,310,914

2,464

1,620

1,467,002

762,465

Commitments and contingencies (Note 6)
Stockholders' equity
Series A, convertible preferred stock, $0.001 par value; 3,500,000 shares authorized;
3,500,000 shares issued and outstanding at December 31, 2013 and 2012
Series A-1, convertible preferred stock, $0.001 par value; 3,800,515 shares authorized;
3,800,515 shares issued and outstanding at December 31, 2013 and 2012
Series

B,

convertible preferred stock, $0.001 par value; 4,401,242 shares authorized;

4,401,242 shares issued and outstanding at December 31, 2013 and 2012
Series C, convertible preferred stock, $0.001 par value; 5,024,637 shares authorized;
5,024,637 shares issued and outstanding at December 31, 2013 and 2012
Series D, convertible preferred stock, $0.001 par value; 2,412,718 shares authorized;
2,412,718 shares issued and outstanding at December 31, 2013 and 2012
Common stock, $0.001 par value. 25,000,000 shares authorized at December 31, 2013 and
2012; 2,463,631 and 1,619,539 shares issued and outstanding at December 31, 2013 and
2012, respectively
Additional paid-in capital
Accumulated other comprehensive income

2,090
(3,971,368)

Accumulated deficit
Total stockholders' equity

(11,010,089)
35 407 721

43 153 913
$

Total liabilties and stockholders' equity

51,709,004

$

38 114 877

The accompanying notes are an integral part of these consolidated financial statements.

3

 BuzzFeed, Inc.
Consolidated Statements of Operations and Comprehensive Income (Loss)
Period Ended December 31, 2013 and 2012

2013

2012

Revenue

$ 64,095,207

$ 20,333,560

Cost of revenue
Selling, general and administrative
Editorial
Research and development
Depreciation and amortization
Total operating expenses
Income (loss) from operations
Other income (expense), net
Income (loss) before income taxes
Income tax provision
Net income (loss)

9,907,232
27,048,071
11,739,790
5,957,456
733 512
55,386,061
8,709,146
(25,295)
8,683,851
(1,645,130)
$ 7,038,721

$ (4,026,079l

$

7,038,721

$

$

2,090
7,040,811

$ (4,026,079}

Statements of Operations

3,627,594
12,603,079
4,724,608
3,111,993
292,547
24,359,821
(4,026,261)
182
(4,026,079)

Statements of Comprehensive Income (Loss)

Net income (loss)
Other comprehensive income (loss)
Foreign currency translation adjustment
Comprehensive income (loss)

(4,026,079)

The accompanying notes are an integral part of these consolidated financial statements.
4

 BuzzFeed, Inc.
Consolidated Statements of Stockholders' Equity
Years Ended December 31, 2013, 2012, and 2011

Convertible Preferred Stock
Shares
Amount

16,726,394

Balance at December 31, 2011

$

26,342,811

Common Stock
Amount
Shares

664,678

$

665

Additional
!!aid-in cal!ital

$

Net loss
Stock-based compensation expense
Issuance of Series D preferred stock convertible preferred stock
at

$8.0283 per share,

net of

$59,106 issuance cost

2,412,718

Balance at December 31, 2012

19,139,112

45,653,725

784,996
169 865
1,619,539

785
170
1,620

289,858
135 722
762,465

844,092

844

289,735
414,802

Net income
Stock-based compensation expense
Issuance of common stock upon exercise of stock options
Foreign currency translation adjustment

Balance at December 31, 2013

19 139 112

$

45 653 725

$

2 463 631

$

2 464

$

1 467 002

(6,984,010)

$

290,643
135 892
35,407,721

7,038,721

$

(3,971,368) $

19,556,841
(4,026,079)
139,510
19,310,914

(11,010,089)

The accompanying notes are an integral part of these consolidated financial statements.

5

Total
Stockholders'
Egui�

(4,026,079)

139,510

19,310,914

Issuance of common stock upon exercise of stock options
Issuance of common stock in connection with acquisitions

197,375

Accumulated
deficit

Accumulated
other
comprehensive
income

2 090
2 090

$

7,038,721
289,735
415,646
2 090
43 153 913

 BuzzFeed, Inc.
Consolidated Statements of Cash Flows
Years Ended December 31, 2013 and 2012

2013

2012

Operating activities

Net loss
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization
Stock-based compensation
Loss on disposition of fixed assets
Provision for doubtful accounts
Asset impairment
Changes in operating assets and liabilities:
Accounts receivable
Other current assets
Other long term assets
Accounts payable
Accrued expenses and other current liabilities
Deferred revenue
Cash used in operating activities

$

7,038,721

$

(4,026,079)

733,512
289,735
115,210
97,952

292,547
139,510
52,056

(18,266,893)
(493,915)
(848,155)
2,149,694
3,371,583
326,652
(5,485,904)

(6,486,256)
(89,333)
(115,274)
834,243
884,020
286,885
(8,227,681)

(2,536,692)

(788,566)
135,011
(6,993,560)

Investing activities

Capital expenditures
Cash inflows related to acquisitions
Purchases of marketable securities
Proceeds from sales of marketable securities
Cash provided by (used in) investing activities

6,993,560
4,456,868

(7,647,115)

Financing activities

Preferred stock issuance, net of issuance costs
Proceeds from exercise of stock options
Proceeds from the early exercise of stock options
Cash provided by financing activities

19,310,914
290,643

309,208
106 438
415,646

Increase (decrease) in cash and equivalents
Effect of currency translation on cash and cash equivalents
Cash and equivalents at beginning of period
Cash and equivalents at end of period

19,601,557
3,726,761

$

(613,390)
2,090
21,212,509
20,601,209

$

$

70,537

$

17,485,748
21,212,509

Supplemental disclosures of cash flow information

Cash paid for income taxes
Non-cash financing activity
Common stock issued related to acquisition

$

$

The accompanying notes are an integral part of these consolidated financial statements.

6

135,892

 BuzzFeed, Inc.
Notes to Consolidated Financial Statements
December 31, 2013 and 2012
1.

Description of the Business

BuzzFeed, Inc. (formerly known as Contagious Media LLC) was incorporated in Delaware on June
24, 2008. BuzzFeed, Inc. and subsidiaries (the "Company" or "BuzzFeed") is a media company
that is redefining online advertising with its social, content-driven publishing technology. BuzzFeed
provides the most shareable breaking news, original reporting, entertainment, and video across the
social web to its global audience. The company derives its revenue primarily from social content
advertising sold to leading brands.
BuzzFeed, Inc. holds 100% of the outstanding shares of BF Acquisition Holding Corp., a Delaware
company, which holds all of the outstanding shares of Ze Frank Games, Inc. and Kingfish Labs,
Inc. BuzzFeed, Inc. also holds 100% of the outstanding shares of BuzzFeed UK Limited, a United
Kingdom company, and BuzzFeed Pty Limited, an Australia company.
On July 28, 2014, the Company issued 1,605,982 shares of Series E convertible preferred stock for
gross proceeds of $50,000,001 (refer to Note 8). Management believes that these proceeds
together with existing capital resources will be sufficient to support the Company's operations
beyond the next twelve months. The Company may need to raise additional capital in the future to
achieve its business objectives. There is no assurance that the company will be successful in
obtaining funding, or whether any funding from either an equity or debt financing would be available
on reasonable terms, if at all.
The Company is subject to additional business and market risks and uncertainties including, but
not limited to, variability and uncertainty of revenue and operating results, the continued risk of
development and acceptance of additional products or services, intellectual property and related
risks, dependence on key personnel and the impact of potential competition from other companies.
2.

Summary of Significant Accounting Policies
Principles of Consolidation

The accompanying consolidated financial statements include the accounts of BuzzFeed Inc. and its
wholly owned subsidiaries. All intercompany balances and transactions have been eliminated in
consolidation.
Use of Estimates

The preparation of financial statements in conformity with generally accepted accounting principles
in the United States of America requires management to make certain estimates and assumptions
that affect the reported amounts of assets and liabilities, disclosure of contingent assets and

liabilities at the date of the financial statements, and the reported results of operations during the
reporting period. Significant items subject to such estimates and assumptions include valuation
allowances for deferred income tax assets, and valuation of common stock and share-based
compensation. Actual results could differ from those estimates.
Fair Value Measurements

The fair value framework under the applicable authoritative guidance requires the categorization of
assets and liabilities into three levels:
•

Level 1-quoted prices (unadjusted) in active markets for identical assets or liabilities

•

Level 2-inputs other than quoted prices included within Level 1 that are either directly or
indirectly observable

7

 BuzzFeed, Inc.
Notes to Consolidated Financial Statements
December 31, 2013 and 2012

•

Level 3-unobservable inputs in which little or no market activity exists, therefore requiring
an entity to develop its own assumptions about the assumptions that market participants
would use in pricing.

The fair value of a financial instrument is the amount for which the instrument could be exchanged
in a current transaction between willing parties. The carrying amounts of cash and cash
equivalents, accounts receivable, restricted cash, accounts payable, accrued expenses and other
current liabilities and deferred obligations approximate fair value. Marketable securities are
categorized as Level 1. The Company currently has no other financial assets or liabilities that are
measured at fair value.
The Company's non-financial assets, which include property and equipment, are not required to be
measured at fair value on a recurring basis. However, if certain triggering events occur, or if an
annual impairment test is required and the Company is required to evaluate the non-financial asset
for impairment, a resulting asset impairment would require that the non-financial asset be recorded
at the fair value.
Cash and Cash Equivalents and Marketable Securities

Financial instruments that potentially subject the Company to concentration of credit risk consist of
cash and cash equivalents. The Company considers instruments with an original maturity of three
months or less at the date of purchase to be cash equivalents. The Company's cash and cash
equivalents consist of demand deposits with financial institutions. The associated risk of
concentration is mitigated by banking with creditworthy institutions.
The Company invests its excess cash in liquid debt instruments

of the

U.S.

government.

Investments with maturities of less than 12 months from the balance sheet date are classified as
short-term investments.
Accounts Receivable and Allowance for Doubtful Accounts

The Company's accounts receivable are customer obligations due under normal trade terms,
carried at their face value less an allowance for doubtful accounts if required. The Company
determines its allowance for doubtful accounts based on the evaluation of the aging of its accounts
receivable and on a customer-by-customer analysis of its high-risk customers. The Company's
reserve contemplates its historical loss rate on receivables, specific customer situations and the
economic environments in which the Company operates. As of December 31, 2013 and 2012, the
Company did not require an allowance for doubtful accounts.
Property and Equipment

Property and equipment are stated at cost, less accumulated depreciation and amortization.
Depreciation and amortization on property and equipment is calculated using the straight-line
method over the estimated useful lives of the assets. Leasehold improvements are amortized over

the shorter of the lease term or the estimated useful life. The estimated useful lives of property and
equipment include: furniture and fixtures 5 years; computer equipment - 3 years; and software 3 years.
-

Website and Internal Use Software Development Costs

The Company capitalizes certain costs incurred for development of websites or software for
internal use. The Company capitalizes development costs when preliminary developments efforts
are successfully completed, management has authorized and committed project funding and it is
probable that the project will be completed and the software will be used as intended. Costs include
payroll and payroll-related costs of employees directly associated with the development activities.
Costs incurred for enhancements that are expected to result in additional features or functionality

8

 BuzzFeed, Inc.
Notes to Consolidated Financial Statements
December 31, 2013 and 2012

are capitalized and expensed over the estimated useful life of the enhancements, generally one to
three years. Costs incurred in the preliminary and post-implementation stages of the Company's
products are expensed as incurred.
During the years ended December 31, 2013 and 2012, the Company capitalized $424,990 and
$192,848, respectively, included in property and equipment and amortized $220,054 and $112,661,
respectively, included in depreciation and amortization expense.
Evaluation of Long-Lived Assets and Impairment

The Company reviews its property and equipment, and internal-use software systems subject to
amortization, for impairment, when events or changes in circumstances indicate that the carrying
amount of the asset may not be recoverable. If circumstances require a long-lived asset to be
tested for possible impairment, the Company first compares undiscounted cash flows expected to
be generated by the asset to its carrying value. If the carrying value of the long-lived asset is not
recoverable on an undiscounted cash flow basis, an impairment is recognized to the extent that the
carrying value exceeds its fair value. Fair value is determined through various valuation techniques
which may include discounted cash flow models, quoted market values and third-party independent
appraisals, as considered necessary.
Revenue Recognition

The Company generates revenue principally from advertising across BuzzFeed properties.
Additionally, the Company generates revenue from other sources including video production and
managing customers' advertising campaigns on third party websites and platforms.
Advertising revenue are recognized when the related advertising services are delivered based on

the specific terms of the advertising contract, and are commonly based on the number of ads
delivered, views, impressions, clicks or actions by users on advertisements. The Company
recognizes revenue based on these terms because the services have been provided, the fees the
Company charges are fixed or determinable, persuasive evidence of an arrangement exists, and
collectability is reasonably assured. In addition to the above revenue recognition criteria, video
license revenue is recognized when the video is complete, has been delivered or is available for
immediate and unconditional delivery; and the license period of the arrangement has commenced
and the customer can begin the video's exploitation, exhibition or sale. Revenues are deferred
upon receipt of cash in advance of performance.
In the normal course of business, the Company acts as an intermediary in executing transactions
with third parties. The determination of whether revenue should be reported on a gross or net basis
is based on an assessment of whether the Company is acting as the principal or an agent in the
transaction. In determining whether the Company acts as the principal or an agent, the Company
follows the accounting guidance for principal-agent considerations. While none of the factors
identified in this guidance are individually co nsidered presumptive or determinative, because the
Company is the primary obliger and is responsible for (i) identifying and contracting with third-party
advertisers, (ii) establishing the selling prices of the advertisements sold, (iii) performing all billing
and collection activities including retaining credit risk and (iv) bearing sole responsibility for
fulfillment of the advertising, the Company acts as the principal in these arrangements and
therefore reports revenue earned and costs incurred on a gross basis.
Cost of Revenue

Cost of revenue consists primarily of amounts due to third party websites and platforms to fulfill
customers' advertising campaigns. Additionally, web hosting and advertising serving platform costs
are included in cost of revenue.

9

 BuzzFeed, Inc.
Notes to Consolidated Financial Statements
December 31, 2013 and 2012
Selling, General and Administrative

Selling, general and administrative expense consists primarily of compensation-related expenses
for sales, marketing, creative, and corporate employees. Also, it consists of expense for travel,
marketing, facilities, professional services fees, insurance costs, and other general overhead costs.
Editorial

Editorial expenses consist primarily of compensation-related expenses and related travel and
image licensing costs incurred for the publishing of editorial content across all platforms.
Research and Development

Research and development expenses consist primarily of compensation-related expenses incurred
for the development of, enhancements to and maintenance of the Company's website, technology
platforms and infrastructure. Certain development expenses have been capitalized under the
provisions of the applicable authoritative guidance, whereby the Company capitalizes costs
associated with website and internal-use software systems that have reached the application
development stage.
Income Taxes

Income taxes are accounted for under the asset and liability method. Deferred tax assets and
liabilities are recognized for the future tax consequences attributable to differences between the
financial statement carrying amounts of existing assets and liabilities and their respective tax bases
and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured
using enacted tax rates expected to apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities
of a change in tax rates is recognized in income in the period that includes the enactment date. A
valuation allowance is recorded for deferred tax assets if it is more likely than not that some portion
or all of the deferred tax assets will not be realized.
The Company recognizes tax benefits from uncertain tax positions if it is more likely than not that
the tax position will be sustained on examination by the taxing authorities based on the technical
merits of the position. The Company has no tax positions for which it is reasonably possible that

the total amounts of unrecognized tax benefits will significantly increase or decrease within twelve
months from December 31, 2013.
Stock-Based Compensation

Stock-based compensation is recognized as an expense in the financial statements and is
measured at the fair value of the award. The Company recognizes compensation expense for stock
awards based on grant date fair value using the Black-Scholes option-pricing model.
Stock-based compensation cost for employees included in net loss amounted to $289,735 and
$139,510 for the years ended December 31, 2013 and 2012, respectively. The Company
recognized no income tax benefit in the consolidated statements of operations for stock-based
compensation arrangements in 2013 and 2012.

10

 BuzzFeed, Inc.
Notes to Consolidated Financial Statements
December 31, 2013 and 2012

The following table summarizes share-based compensation cost included in the consolidated
statements of operations:

$

Selling, general and administrative
Editorial
Research and development

Years Ended December 31,
2012
2013

159,017
66,129
64,589
289,735

----�-

$

$

$

94,250
29,756
15,504
139,510

Comprehensive Income (Loss)

Comprehensive income (loss) includes certain changes in stockholders' equity that are excluded
from net income (loss) such as cumulative foreign currency translation adjustments and unrealized
gains or losses on marketable securities.
Recently Issued Accounting Standards

In February 2013, the Financial Accounting Standards Board ("FASB") issued accounting guidance
on the reporting of reclassification out of accumulated other comprehensive income. The guidance
requires an entity to present, either on the face of the statement where net income is presented or
in the notes, significant amounts reclassified out of accumulated other comprehensive income by
the respective line items of net income if the amount is reclassified to net income in its entirety in
the same reporting period. For other amounts not required to be reclassified in their entirety to net
income in the same reporting period, a cross reference to other disclosures that provide additional
detail about the reclassification amount is required. The Company's adoption of this guidance on
January 2. 2013 did not have a material effect on the Company's financial condition or results of
operations.
In May 2014, FASB issued Accounting Standards Update No. 2014-09, Revenue from Contracts
with Customers. The new standard requires companies to recognize revenue for the transfer of
goods and services to customers in amounts that reflect the consideration the company expects to
receive in exchange for those goods and services. The new standard will also result in enhanced
disclosures about revenue. This standard is effective for annual reporting periods beginning after
December 15, 2016, including interim periods within that reporting period, and can be adopted
either retrospectively or as a cumulative-effect adjustment. Early adoption is prohibited. We are
assessing the impact the adoption of this standard will have on our consolidated financial
statements and disclosures.
3.

Marketable Securities

MarKetable securities as of December 31, 2013 and 2012 consisted of the following:

U.S. Treasuries

2013
Amortized
Level 1 Fair
Cost
Value
$
$

11

$

2012
Level 1 Fair
Value
6,993,560 $ 6,993,560

Amortized
Cost

 BuzzFeed, Inc.
Notes to Consolidated Financial Statements
December 31, 2013 and 2012
4.

Property and Equipment, net

Property and equipment as of December 31, 2013 and 2012 consisted of the following:
2012

2013

$

Furniture and fixtures
Leasehold improvements
Computer equipment
Software
Website and internal-use software

148,755
283,841
617,042
9,157
499,683
1,558,478

$

814,753
593,344
1,447,877
103,561
924 675
3,884,210

(532,313)

(1,170,069)

Less: Accumulated depreciation and amortization
$

2,714,141

1,026,165

$

Depreciation and amortization expense was $733,512 and $292,547 for the years ended
December 31, 2013 and 2012, respectively. During 2013 the Company disposed equipment
resulting in a loss of $115,209.
5.

Accrued Expenses and Other Current Liabilities

Accrued expenses at December 31, 2013 and 2012 consisted of the following:

$

Employee-191ated accruals

Other accrued expenses

995,080

Other current liabilities

106,437

$
6.

2013
3,538,680

4,640,197

$

2012
1,041,150

227,458

$

1,268,608

Commitments and Contingencies

The Company leases office space under non-cancelable operating leases with various expiration
dates through 2019. Rent expense for the years ended December 31, 2013 and 2012 was
$2,384,813 and $675,691 respectively.
Future minimum lease payments under non-cancelable operating leases as of December 31, 2013
are as follows:
2014
2015

$

3,780,398
3,760,640

2016

383,701

2017
2018
Thereafter

309,426
318,709
244,370
8,797,244

$

Effective April 2014, the Company entered into a lease agreement for office space and video
production facilities in Los Angeles under an operating lease which generally expires in February

12

 BuzzFeed, Inc.
Notes to Consolidated Financial Statements
December 31, 2013 and 2012

2016. Total payments due under the lease agreement are expected to be approximately $1.9
million. The lease contains an annual escalation clause, renewal provisions and generally requires
the Company to pay utilities, insurance, taxes and other operating expenses.
There are no legal proceedings to which the Company is a party that are reasonably expected to
be material to the Company's business or financial condition. From time to time, the Company may
be involved in other disputes or regulatory inquiries that arise in the ordinary course of business.
The number and significance of these disputes and inquiries may increase as the Company's
business expands. Any claims or regulatory actions against the Company, whether meritorious or
not, could be time consuming, result in costly litigation, require significant amounts of management
time, and result in the diversion of significant operational resources.
Indemnification Provisions

In the ordinary course of business, the Company has included limited indemnification provisions in
certain agreements with parties with whom the Company has commercial relations. Under these
contracts, the Company generally indemnifies, holds harmless, and agrees to reimburse the
indemnified party for losses suffered or incurred by the indemnified party in connection with claims
by a third party with respect to the Company's domain names, trademarks, logos and other
branding elements to the extent that such marks are applicable to its performance under the
subject agreement. It is not possible to determine the maximum potential loss under these
indemnification provisions due to the limited history of prior indemnification claims and the unique
facts and circumstances involved in each particular provision. To date, no significant costs have
been incurred, either individually or collectively, in connection with the Company's indemnification
provisions.
7.

Debt Instruments

On July 23, 2012 the Company entered into a loan agreement ("Loan Agreement") with Silicon
Valley Bank to provide the Company a revolving line of credit with a variable interest rate and other
bank facilities upon the Company's request.
The revolving line of credit was increased to $15 million on November 18, 2013 and subsequently
to $25 million on July 17, 2014. If certain financial covenants are not met, the amount of borrowings
available under the revolving line of credit is based on the Company's eligible accounts receivable
balance at such time. The amounts borrowed are collateralized by the Company's personal
property (including such accounts receivable but excluding intellectual property). As of December
31, 2013 and 2012, the Company did not have outstanding borrowings against the facility.
The aggregate amount available to be used for bank facilities including letters of credit, foreign
exchange contracts and cash management services was increased to $15 million on July 17, 2014.
As of December 31, 2013, the Company held a letter of credit for $1.1 million which represented
security deposits in the Company's New York office location.
The Loan Agreement includes contain covenants that, among other things, require us to maintain
minimum levels of consolidated tangible net worth and certain liquidity ratios. The Company is in
compliance with all covenants.

13

 BuzzFeed, Inc.
Notes to Consolidated Financial Statements
December 31, 2013 and 2012
8.

Stockholders' Equity
Convertible Preferred Stock

Shares
Series

Series
Series
Series
Series
Series

A-1
A
B
C
D

Year Issued

2008
2008
2010
2011
2012

Shares

Issued and

Authorized

Outstanding

3,800,515
3,500,000
4,401,242
5,024,637
2,412,718
19,139,112

3,800,515
3,500,000
4,401,242
5,024,637
2,412,718
19,139,112

Liquidation
Value

Price

$

0.1579
1.0000
1.8177
3.0848
8.0283

600, 101
3,500,000
8,000,138
15,500,000
19,370,024
$ 46,970,263
$

On July 28, 2014, the Company issued 1,605,982 shares of Series E convertible preferred stock at
a purchase price of $31.1336 per share for proceeds of $50,000,001. The terms and conditions of
the outstanding and issued shares reflect any changes effective with the execution of the Series E
financing on July 28, 2014.
On December 19, 2012, the Company issued 2,412,718 shares of Series D convertible preferred
stock at a purchase price of $8.0283 per share for net proceeds of $19,310,914 (net of issuance
costs of $59,110).
Voting Rights

Each share of the Company's preferred stock is entitled to the number of votes equal to the number
of shares of common stock into which such share of preferred stock could be converted. Each
share of common stock is entitled to one vote.
Dividends

Holders of shares of the Company's preferred stock are entitled to receive noncumulative annual
dividends at a rate of 8% of the applicable original issue price when, as and if declared by the
Company's board of directors, prior and in preference to any dividends on shares of the Company's
common stock. The Company has not declared or paid any cash dividends.
Conversion

Shares of the Company's preferred stock are convertible at the option of the holders into shares of
the Company's common stock. Each share of preferred stock is convertible, without payment of
additional consideration by the holder, into such number of fully paid and non-assessable shares of
common stock as is determined by dividing the adjusted original issue price by the conversion price
applicable to such share.
Each share of preferred stock will be automatically converted based on its conversion ratio into
shares of common stock upon the earlier of the occurrence of a qualified initial public offering, as
defined, or the vote of the holders of a majority of the outstanding Series A, B, C and D preferred
stock (voting together as a single class and on an as-converted basis), the holders of a majority of
the outstanding Series C and D preferred stock (voting together as a single class and on an as­
converted basis}, and the holders of a majority of the outstanding Series E preferred stock (voting
together as a separate class).

14

 Buzzfeed, Inc.
Notes to Consolidated Financial Statements
December 31, 2013 and 2012
Liquidation Preference

In the event of any liquidation, dissolution or winding up of the Company, including a deemed
liquidation event, as defined, the holders of Series, A, B, C, D and E preferred stock shall be
entitled to receive, on a pari passu basis and in preference to all other holders of capital stock of
the Company, pro rata, an amount equal to the respective purchase price plus declared and unpaid
dividends on each share of Series, A, B, C, D and E preferred stock. Next, if proceeds remain, the
holders of Series A-1 preferred stock shall be entitled to receive, in preference to holders of
common stock, an amount equal to the purchase price plus declared but unpaid dividends on each
share of Series A-1 preferred stock. After the payment of such preferential amounts, any remaining
proceeds shall be distributed pro rata among the holders of common stock. If the proceeds are
insufficient to permit payment in full to all holders of Series A, B, C, D and E preferred stock, the
assets shall be distributed ratably to the holders of the Series A, B, C, D and E preferred stock in
proportion to the amount each such holder would otherwise be entitled to receive.
Redemption

In accordance with the terms of the Series E agreement, the preferred stock is not redeemable and
any redemption rights under the previous agreements for Series A, B, C and D preferred stock
have been canceled.
Stock Option Plan

The Company's 2008 Stock Plan (the "Plan") was adopted on June 25, 2008. The Plan allows for
the grant of incentive and nonqualified stock options and restricted stock to eligible participants.
Options are generally granted for a term of 10 years from the date of grant. Options granted under
the Plan may be exercised prior to vesting. Stock options generally vest over four years.
On December 17, 2012, the Stock Plan was amended to increase the maximum number of shares

of common stock available for issuance by 395,255. At December 31, 2013 and 2012, there were
400,126 and 1,158,206 shares available for future issuances under the Plan.
The fair value of stock option awards are estimated on the date of grant using the Black-Scholes
option-pricing model based upon the following range of assumptions:

Fair value common stock
Expected dividend yield
Expected volatility
Expected term (years)
Risk free interest rate

2013

2012

46%-49%
5.23-6.08
.79%-1.78%

47%-48%
5.51-6.42
.82%-1.24%

$2.36-$3.20

$.80

The Company uses the simplified method in accordance with the applicable authoritative guidance
to estimate the expected term of the option, due to the limited historical experience to date. The
risk-free rate for the expected term of the option is based on the U.S. Treasury yield curve in effect
at the time of grant. Since the Company's common stock is not publicly traded for a sufficient time
period, the expected volatility is based on expected volatilities of similar companies that have a
history of being publicly traded. No dividends have been assumed. Share-based compensation
expense is reduced by estimated forfeitures.

15

 BuzzFeed, Inc.
Notes to Consolidated Financial Statements
December 31, 2013 and 2012

A summary of the share activity under the Plan is presented below:
Weighted

Balance as of December 31, 2012
Granted
Exercised
Forfeited
Expired

Weighted

Average

Average

Remaining

Aggregate

Number of

Exercise

Contract

Intrinsic

Shares

Price

Tenn

2,293,891

$

0.55

Value

7.8

$ 4,162,439

2.76
0.52
1.87
0.53

851,831
(1,000,380)
(80,226)
(13,316)

Balance as of December 31, 2013

2,051,800

$

1.42

7.9

$ 3,646,382

Expected to vest at December 31, 2013

1,713,125

$

1.38

7.8

$ 3,123,821

845,280

$

0.52

6.5

$ 2,263,409

Exercisable at December 31, 2013

The number of shares exercised in the year ended December 31, 2013 included shares exercised
prior to vesting which are not considered "issued" in accordance with authoritative accounting
literature. As of December 31, 2013, the Company received proceeds of $106,438 for the early
exercise of 156,288 shares not yet vested which is included as a liability. Amounts are reclassified
to equity upon vesting.
The total fair value of vested stock options was $202,854 and $132,813 for the years ended
December 31, 2013 and 2012, respectively.
As of December 31, 2013 there was $1,150,794 of total remaining unrecognized stock-based
compensation cost expected to be recognized over the weighted-average remaining requisite
service period of 3.1 years. The weighted average fair value of stock options granted during
December 31, 2013 and 2012 was $1.28 and $0.37, respectively. The intrinsic value of stock
options exercised was $1,998,122 and $318,188 for the years ended December 31, 2013 and
2012, respectively.
The Company currently uses authorized and unissued shares to satisfy share award exercises.
9.

Income Taxes

In assessing the realizability of the Company's deferred tax assets, management considers
whether it is more likely than not that some portion or all of the deferred tax assets will not be
realized. The ultimate realization of deferred tax assets is dependent upon the generation of future
taxable income during the periods in which those temporary differences become deductible.
Management's assessment is based on the weight of available evidence, including cumulative
losses since inception and expected future losses and as such, management does not believe it is
more likely than not that the deferred tax assets will be realized. Accordingly, a full valuation
allowance has been established and no deferred tax assets and related tax benefit have been
recognized in the accompanying financial statements. As of December 31, 2013 and 2012,
deferred tax assets were fully offset by a valuation allowance of $1,732,841 and $5,181,543,
respectively. The decrease of $3,448,702 in the valuation allowance was primarily attributable to
the utilization of net operating losses to offset taxable income for the year ended December 31,
2013.

16

 BuzzFeed, Inc.
Notes to Consolidated Financial Statements
December 31, 2013 and 2012

Significant components of deferred tax assets and liabilities at December 31, 2013 and 2012 were
as follows:
Year Ended December 31,
2013

Deferred tax assets:
Net operating losses carryforwards
Accruals
Depreciation and amortization
Bad debt
Deferred revenue
Other
Total deferred tax assets
Valuation allowance
Net deferred tax assets
Deferred tax liabilities:
Depreciation and amortization
Loss on disposals
Intangible assets
Total deferred tax liabilities
Net deferred tax liability

$

$

2,085,870
132,622

2012

$

5, 169, 178
52,995
138,780

29,540
130,380
7 091
2,385,503
(1,732,841)
652,662

4 807
5,365,760
(5,181,543)
184,217

(213,360)
(37,660)
(401,642)
(652,662)

(184,217)
(184,217)
$

As a result of a cumulative change in stock ownership occurring in a prior year, as of December 31,
2013, approx imately $4.9 million of the federal net operating loss ("NOL") carryforwards are subject
to annual limitations under Internal Revenue Code (" IRC") Section 382. The federal NOL
carryforwards will be made available for utilization over the period from 2014 to 2028. As of
December 31, 2013 and 2012, the Company had federal net operating losses of approximately $0
and $11,602,697 to offset taxable income.
In addition, the Company had net operating loss carryforwards for state income tax purposes of
approximately $83,618 and $1,224,261 as of December 31, 2013 and 2012, respectively, which
expire, if not utilized, beginning in the year 2028.
As of December 31, 2013, the Company has federal NOL carryforwards of approximately $550,000
attributable to excess tax deductions from stock option exercises. The benefit of these NOLs, which
are not reflected in the deferred asset schedule, will be credited to additional paid in capital when
NOLs are utilized.
In accordance with the Company's accounting policy, it recognizes accrued interest and penalties
related to unrecognized tax benefits in the provision for income taxes.
The Company is subject to taxation in the United States and various other state and local
jurisdictions. The Company is subject to examination dating back to 2009.
10.

Subsequent Events

The Company has evaluated subsequent events through September 30, 2014, the date the
consolidated financial statements available for issuance. There were no material subsequent
events through the date of this report which have not already been reflected or disclosed in the
consolidated financial statements.

17

 BuzzFeed, Inc.

Consolidated Financial Statements
December 31, 2012 and 2011

Buzzfeed, Inc.
Consolidated Balance Sheets
Decembe r 31 , 201 2 and 2011

Acc:cuU rec••
Prepaid and Glher' c:umNC assets
Total Cunnt Assets

2911

$21,212.509

$17,485,748

6,993,560
8,275,190

1,789,534

36,I,M 668

19.308,758

1,026.166

530,146

$ 3811141877

$20.m.674

s 1,151,663
1,268.608
286,885
2.701.156

$

33.476

�-

Propelty and ....... net
Other assets
Total Assets

20t2

368,770

4M,044

·

Llabllllles and Sfocldloldara. EqullJ
Cunnl I ialJiltieS
Accotns peyallle
� expenses and Glher' currant iabilities
Derened olJligalian
Total cumlfll iabiilies

276,419

374,414

660,833

2,707,156

660,833

3,000.500

3,000,500

3,801

3,801

COIMftillle ...... stock. S0.001 .,_.,..,.; 4,401,242 shares Uhorized;
4,401,242 shares issued and outatanci119 at Oecernbel' 31, 2012 and 2011

7,904,463

7,904,463

pnifend atoclc. S0.001 par"81ue; 5,024,637 shares authorized;
5,024,637 .shants issued and oUhtancling al Decedler 31. 2012 - 2011

15,434,6'7

15,434,047

Total lialJilities
Commitmanls - Ccningencies· (NOte 6)
Stockhok'lers Equly
Series A, COIMllillle pnleDad stock. $0.001 psvalue; 3,500,000 sh818S aulhorized;
3.S00.000 shares issued and outslancling at December 31, 2012 md 2011
Series A-1, convertible preiand stock.

$0JJ01 .. value; 3.800.515 shares aulhorized;
3,800.515 shants issued and 0Uhta11cling al December 31, 2012 md 2011
Series 8,

Series C, COIMltillle

Series 0, convertible prefenad stoct, S0.0011Wvalue: 2,412,718 shares auchorized;
2.412, 718 and 0 shares issued and outstadng al December 31, 2012 and 2011, respectiwly
Common Stock. $0.001 .. value. 25,000,000 and 23,000,000 shares
authorized al December 31, 2012 and 2011, respectively; 1,619,539 and
664,678 shales issued and outstanding al December 31, 2012 and
2011, respectiwiely
Additional peict-in captal
Accundaled deficit
Total stockholders' equity
Total liallilties and stoclcholdera' equity

19,310,914

1,620
762.465
(11,010,089)

(6,984,010)

35,407,721
$38,114,877

S20'207,674

665
197,375

19,556,841

The accompanying notes are an integral part of these consolidated financial statements.

3

 BuzzFeed, Inc.
Consolidated Statements of Operations
Period Ended December 31 , 201 2 and 201 1

RMenue

21t2

21t1

$ 20.333.560

$ 4.127.936

Cost rl nMllUe (8Xidusiwa rldepeciation
and amodizalion .... .,..,.,
Seling. genll8I and administ1111iw
Editorial
Resealch and dei:relopment

3.627.594

4,082,005

3.111,993
292.5'7
24,369,821 .

1.688.428
7,486,435

(4:026.i!1l

Q.358.500)

4.124.608

Depreciation and amodizalion
Total opemting expenses
Loss ivm operations

Other income, nat

182

Loss tom operations before income taxes
s

868,780

19'.186

(4,026,079)

8l59
(3,349.741)

�4.026,o79i

s (3.349.741!

Income tax pnMsion

Net loss

662.'36

12.603.079

The accompanying notes are an integral part of these consolidated financial statements.

4

 BuzzFeed, Inc.
Consolidated Statements of Stockholders' Equ ity
Period Ended December 31 , 20 1 2 and 201 1

CCllMNtQde Preferred
.....

Stoc:t

1 1 ,701,757

Bllence et December 31, 2010

Amount

$ 10,908,764

AMount

Addllllolte
paid-In
capilll

$

$

.ComnloJt s.t

....

654,678

655

112,091

Net Loss

82.794

Stock-based compensation expense
Shares issued in connection with:
Issuance of Series C prel'erred stock COfMftible preferred stock
at $3.0848 per share, net of$65,929 issuance cost
Exen:ise of stock .-,
Bllence at December 31, 2011

5,024,637

15,434,047

16.726,394

26,.342,811

10,000

10

2.-490

664,678

665

197,375

Net lots
Stock-based compenelllian expense
Sbalw issued in connection with:
lnulnce of Series D piwlln9CI stock conveltible preferred stock
It $8.02.83 I* ...... net of$69,106 isllUMCe cost
Exercise of stock optianl
IQU811Ce of common stock in connection willl acquiaitions
Balance at December 31, 2012

AccunNd1d
1i1
cllldt

$ (3,634;69)
(3,349,741)

19,310,914

1911391112

$'51653.725

1.6191539

170

$

1.620

$

762,'65

The accom panying notes are an integral part of these consolidated financial statements.

5

7,387,241
(3,349,741)
82,794

(6,914,010)

19,651.841

(4,026,079)

(4.026.079)
139,510
1.9,310,91'
290.643
135.892

289,858
135,722

785

784,996
169,865

$

15,434,0"7
2,500

139,610
2,412,718

TOllll
�
E4plflJ

s

(!1.010.0fS9)

s

35M'f.121

 Buzzfeed, Inc.
Consolidated Statements of Cash Flows
Period Ended December 31, 201 2 and 201 1

2'1t

20t2

Openlllng Adlvll•
Net. loss

� to l8COllCile net loss to net cash used in operating actMties:
Depseciation and amadiation
Stoct.-.cl compensation
Anet lmpaiment
a..,.. in op1111ti119 assets and iabilties:

s

(4.028.079) $

194,786

292.5'7

139.510

82.794

52,056

Accounts receiuable, net
Olber cmant assels
°"'81' long term assets

(1.435.426)

(6,486.256)
(89,333)

Accounts payable
Accnl8d expenses and olher cunent ....._
Oeflned ollligation
C8lb uwl In ....... acdvldee

88,862

(115.274)

(282.125)

834.243

211,885
298.393

SM,020

-.-

Imalllng Acdvlllee
Capital Expenclbns

Cash inlows related to acquidions
Purchases fl nwblable seadies
Proceeds tom sales fl mllbtable securities
Caah hm (Ul8d In) 1m·11dng ac:dvldee

(8.2B,181)

(4,t98,572)

{188.566)

(468.125)

(6,993,560)

(3.598,935)

(1,647,1t5)

2,529,994

135.011

Financing Acdvllles

6:5971054

15.434.047

19.310.914
2901643

Pr.r.rrad stock issuance, net cl issuance costs
Procttds tom &XarCise ti stock options
Caah hm ftnendng lldlvtdel

�500

19,&0t ,557

15,436,541

3.726.761

13,775,969

lncreate (decrease) in cash and equMllents
Cash and equMlents at beginning of period
Calh end equivalents at end of period

11.486l48
s 21,212,509

$

SUpplemenfat Dladoeurel of Cash FkM lnfonnedon
Cash paid during the period for
Income Taxes
Interest

s
$

$
s

Non-cash finmcing actMly
Common stock issued related to acquisition

{3.349,741)

s

135.892

3l091779

17,1!5g748

s

The accompanying notes are an integral part of these consolidated financial statements.

6

 Buzzfeed, Inc.
Notes to Consolidated Financial Statements
December 31 , 201 2 and 201 1
1.

Description of the Business

BuzzFeed, Inc. (formerly known as Contagious Media LLC) was incorporated in Delaware on June
24, 2008. BuzzFeed, Inc. and subsidiaries (the "Company" or "BuzzFeed•) is a media com pany for
the social age, focused on delivering high-quality original reporting, insight, and viral content across
a rapidly expanding array of subject areas. The Company's technology powers the social
distribution of content, detects what is trending on the web, and connects people in real-time with
content of the moment. The company derives its revenue from social content advertising sold to
leading brands.
BuzzFeed, Inc. holds 1 00% of the outstanding shares of BF Acquisition Holding Corp. , a Delaware
company, which holds all of the outstanding shares of Ze Frank Games, I nc. and Kingfish Labs,
Inc. BuzzFeed, I nc. holds 1 00% of the outstanding shares of BuzzFeed UK Limited, a U nited
Kingdom company. There was no activity in BuzzFeed UK Limited in 201 2.
The Company incurred losses of $4,026,079 for the year ended December 31 , 201 2 and has an
accu m ulated deficit of $ 1 1 ,01 0, 089 as of December 3 1 , 2012 and may continue to incur losses for
the foreseeable future. The Company has historically financed its operations through equ ity
financings and management may continue such financing in the future.
On December 1 9, 2012 the Company issued 2,4 1 2,71 8 shares of Series D convertible preferred
stock at a purchase price of $8.0283 per share for aggregate proceeds of $ 1 9,31 0,914 (net of
issuance costs of $59, 1 06). Management of the Company believes that these proceeds are
sufficient to fund the capital needs of the Company and the Company will continue as a going
concern through at least December 31 . 201 3. The Company may need to raise additional capital in
the future to achieve its business objectives; however there can be no assurance that any s uch
additional financing will be available.
The Company is subject to additional business and market risks and uncertainties including, but
not limited to, variability and uncertainty of revenue and operating results, the continued risk of
development and acceptance of additional products or services, intellectual property and related
risks, dependence on key personnel and the impact of potential competition from other com panies.

2.

Summary of Significant Accounting Policies
Use of Estimates

The preparation of financial statements in conformity with generally accepted accounting principles
in the United States of America requires management to make certain estimates and assumptions
that affect the reported amounts of assets and liabilities, disclosure of contingent assets and

liabilities at the date of the financial statements, and the reported results of operations during the
reporting period. Sign ificant items subject to such estimates and assumptions include the carrying
amount of property, plant and equipment, valuation allowances for deferred income tax assets, and
valuation of common stock and share-based compensation. Actual results could differ from those
estimates.
Principles of Consolidation

The accompanying consolidated financial statements include the accounts of BuzzFeed I nc. and its
wholly owned subsidiaries. All significant intercompany balances and transactions have been
eliminated in consolidation.
·

7

 BuzzFeed, Inc.
Notes to Consolidated Financial Statements
December 31 , 201 2 and 201 1
Fair Value Measurements
The fair value framework under the Financial Accounting Standards Board ("FASB") guidance
requires the categorization of assets and liabilities into three levels: Level 1--quoted prices
(unadjusted) in active markets for identical assets or liabilities; Level 2-inputs other than quoted
prices included within Level 1 that are either directly or indirectly observable; and Level 3unobservable inputs in which little or no market activity exists, therefore requiring an entity to
develop its own assumptions about the assumptions that market participants would use in pricing.

The fair value of a financial instrument is the amount for which the instrument could be exchanged
in a current transaction between willing parties. Cash and cash equivalents, accounts receivable,
restricted cash, accounts payable, accrued expenses and other current l iabilities and deferred
obligation carrying amounts approximate fair value. Marketable securities are categorized as Level
1 . The Company currently has no other financial assets or liabilities that are measured at fair value.
The Company's non-financial assets, which include property and equipment, are not required to be
measured at fair value on a recurring basis. However, if certain triggering events occur, or if an
annual impairment test is required and the Company is required to evaluate the non-financial asset
for impairment, a resulting asset impairment would require that the non-financial asset be recorded
at the fair value.

Cash and Cash Equivalents and Marketable Securities

Financial instruments that potentially subject the Company to concentration of credit risk consist of
cash and cash equivalents. The Com pany considers instruments with a maturity of three months or

less at the date of purchase to be cash equivalents. The Company's cash and cash equivalents
consist of demand deposits with financial institutions. The associated risk of concentration is
mitigated by banking with creditworthy institutions.

The Company invests its excess cash in liquid debt instruments of the U.S. government. All
investments with an original maturity of three months or less are considered cash equivalents.
Investments with maturities of less than 12 months from the balance sheet date are classified as
current assets. I nvestments with maturities greater than 12 months from the balance sheet date are
classified as long-term assets.
Restricted Cash
The Company had restricted cash amounts of $428,726 and $325,91 1 at Decem ber 31 , 201 2 and
201 1 , respectively, recorded in other assets, which represented security deposits in the Company's
office locations.
Accounts Receivable and Allowance for Doubtfu l Accounts
The Company's accounts receivable are customer obligations due under normal trade terms,
carried at their face value less an allowance for doubtful accounts if required. The Company
determines its allowance for doubtful accounts based on the evaluation of the aging of its accounts
receivable and on a customer-by-customer analysis of its high-risk customers. The Company's
reserve contemplates its hisforical loss rate on receivables, specific customer situations and the
economic environments in which the Company operates. As of December 31 , 2012 and
December 31 , 201 1 , the Company recorded an allowance for doubtful accounts of $0 and $0,
respectively.
Property and Equipment

Property and equipment are stated at cost, less accumulated depreciation and amortization .
8

 Buzzfeed, Inc.
Notes to Consolidated Fina ncial Stateme nts
December 31 , 201 2 and 201 1
Depreciation and amortization on property and equipment is calculated using the straight-line
·

method over the estimated useful lives of the assets. The estimated useful life of property and
equipment ranges from 3 to 5 years. Leasehold i mprovements are amortized over the shorter of
the lease term or the estimated useful life of the assets.
Capitalized Internal Use Software
The Company accounts for the cost of computer software developed for i nternal use by capital izing
qualifying costs, which are i ncurred during the application development stage, and amortizing them
over the software's estimated useful life. Costs incurred in the preliminary and post-implementation
stages of the Company's products are expensed as incurred . The amounts capitalized include
payroll and payroll-related costs of employees directly associated with the development activities.
The Company amortizes capitalized software over the expected period of benefit, which is three
years, beginning when the software is ready for its intended use. For the years ended
December 31 , 201 2 and 201 1 , the Company had gross capitalized costs of $ 1 92,848 and
$1 65,456, respectively, which are included in property and equ ipment and amortization expense of
$1 1 2,661 and $67,620, respectively, wh ich is included in depreciation and amortization expe nse.
Unamortized software costs were $31 0,485 and $230,297 for the years ended December 31 , 201 2
and 201 1 , respectively. The Company's policy is to amortize such capitalized costs using the
straight-line method over the estimated useful life of 3 years.
Evaluation of Long-Lived Assets and Impairment
The Company reviews its property and equipment, and capitalized internal-use software systems
subject to amortization , for impairment, when events or changes in circumstances indicate that the
carrying amount of the asset may not be recoverable. If circumstances require a tong-lived asset
to be tested for possible impairment, the Company first compares undiscounted cash flows

expected to be generated by the asset to its carrying value. If the carrying value of the long-l ived
asset is not recoverable on an u ndiscounted cash flow basis, an i m pairment

is recognized to the

extent that the carrying value exceeds its fair value. Fair value is determined through various
valuation techniques including discounted cash flow models, quoted market values and third-party
independent appraisals, as considered necessary.
Revenue Recognition
The Company generates reven ue principally from advertising on the BuzzFeed website.
Additionally, the Company generates revenue from other sources including managing customers'
advertising cam paigns on third party websites and platforms.
Revenues are recognized when the related advertising services are delivered based on the specific
terms of the advertising contract, and are commonly based on the number of ads delivered, views,
clicks or actions by users on advertisements. The Company recog n izes revenue based on these
terms because the services have been provided, the fees the Company charges are fixed or
determinable, persuasive evidence of an arrangement exists, and coltectability is reasonably
assured.

In the normal course of business, the Company acts as an i ntermediary in executing transactions
with third parties. The determination of whether revenue should be reported on a gross or net basis
is based on an assessment of whether the Company is acting as the principal or an agent in the
transaction. In determining whether the Company acts as the principal or an agent, the Company
follows the accounting guidance for principal-agent considerations. While none of the factors
identified in this guidance are individually considered presumptive or determinative, because the .
Company is the primary obligor and is responsible for (i) identifying and contracting with third-party
advertisers, (ii) establishing the selling prices of the advertisements sold, (iii} performing a l l billing
and collection activities including retaining credit risk and (iv) bearing sole responsibility for

9

 BuzzFeed, Inc.
Notes to Consolidated Financial Statements
December 31 , 201 2 and 201 1
fulfillment of the advertising, the Company acts as the principal in these arrangements and
therefore reports reven ue earned and costs incurred on a gross bas is
.

Deferred Obligation

As of December 31 , 20 1 2 and Decem ber 3 1 , 201 1 , there was $286,885 and $0, respectively, of
services for which cash payments were received in a dvance of the Com pa ny s performance of the
service under the arra ngement and recorded as deferred obligation in the accom pany ing
'

consolidated balance sheets.

Cost of Revenue

Cost of revenue consists primari ly of amounts due to third party websites and platforms to fulfill
customers' advertising campaigns. The Company recognizes these cost of revenues as th e
associated revenue is recogn ized. Additionally, web hosting and advertising serving p latfo rm costs
are included in cost of revenue.

Selling, General and Administrative

Selling, gene ral and administrative expense consists primarily of com pensation-related expenses
of sales and marketing personnel, and related support teams, travel and other marketing spend .
Also, it consists of general and administrative expenses including faci l ities , executive a nd
administrative compensation, employee benefits, professional services fees, insurance costs, and
other g ene ra l overhead costs.
Editorial
Editorial

expenses consist primarily of compensation-related expenses and related travel and
costs incurred for the pub lis h i n g of editorial content.

image licensing

Research and Development
Research and development expenses consist

prim arily of compensation-related expenses incurred
Company's website, techn ology

for the development of, enhancements to and maintenance of the

platforms and infrastructure. Certain development expenses have been capitalized under the
provisions of the guidance related to Accounting for the Costs of Computer Software Developed or
Obtained for Internal Use, whe re by

the Company's capitalizes costs associated with customized

internal-use software systems that have reached the application development stage.

Income Taxes

Income taxes are accou nted for under the asset and liability method. Deferred tax assets and
between the
financial statement carrying amounts of existing assets and liabilities and their respective tax bases
and o pe rating loss and tax credit carry-forwards. Deferred tax assets and lia bi l ities are measured
using enacted tax rates expected to apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. The effect on deferred tax assets and
liabilities of a change in tax rates is recognized in income in the period that includes the enactment
date. A val uation allowance is recorded for deferred tax assets if it is more likely than not that
liabilities are recognized for the future tax consequences attributable to differences

some portion or all of the deferred tax assets will not be realized.

Company recog n izes benefits associated with an uncertain tax pos itio n in its financial
basis of a two-step process whereby ( 1) the Compai:ty determines, based on the
technical merits of the position , it is more-likely-than-not that the tax position will be susta i n a b le
upon audit and (2) those tax positions th at meet the more-likely-than-not threshold are recog n iz ed
at the largest amount of tax benefit that is g reater than 50 percent likely to be realized upon
ultimate settlement with the related tax a u tho rity This involves the identification of potential
u n certa i n tax positions and the eval uation of tax law and an assessment of whether a liability for
The

statements on the

.

10

 Buzzfeed, I nc.
Notes to Consolidated Financial Statements
December 31 , 201 2 and 201 1
7.

Debt Instruments

On July 23, 201 2 the Com pany entered into a $5 million cred it faci lity with Silicon Val ley Bank. The
amount of borrowings available under the credit facility at any time is based on the Company's
monthly accounts receivable bal ance at s uch time, and the amounts borrowed are collateralized by
the Company's personal property (including such accounts receivable but excl uding intellectual
property).

The credit facility includes contain covenants that, among other things, require us to maintain
m i n im u m levels of consol i dated tangible net worth and certain l i q uid ity ratios. The Com pany is in
compliance with all covenants.

As of December 3 1 , 201 2, the Com pa n y had not borrowed on the facility.
8.

Stockholders' Equity
Convertible Preferred Stock

Seltes

....
luued md

v....
......

.......
Authortzed

2008
2008
2010

3,500,000

3,500,000

$ 1.0000

$

4,401 ,242

4,401 ,242

$ 1.8177
$ 3.0848

$
$
$
$

Series A
Series A-1
Series B
Series C
Series O

201 1

2012

3.800.515

5,024,637

2.412.718

19,139.1 12

OUlatwllng
3.800.515

5,024,637

2.412l18

191139.1 12

......
Price

$ 0. 1 579

$ 8.0283

�
v....

$

3,500,000
600, 1 01
8,000,000
1 5,500,000
19.370.024
461970,125

On December 23, 201 1 , the Company issued 5,024,637 shares of Series C convertible preferred
stock at a price of $3.0848 per share for net proceeds of $1 5,434,047 comprised of $1 5,500,000 i n
cash ( net of issuance costs o f $65,953).
On Decembe r 1 9, 2012, the Company issued 2,4 1 2,7 1 8 shares of Series D convertible preferred
stock at a purchase p rice of $8.0283 per share for net proceeds of $1 9,31 0,914 comprised of
$ 1 9, 370, 024 in cash ( net of issuance costs of $59, 1 1 0).

Voting Rights

Each share of the Company's preferred stock is entitled to the n umber of votes equal to the number
of shares of common stock into which such share of preferred stock could be converted and votes
with the common stock as a single class. Each share of common stock is entitled to one vote.

Dividends

Holders of shares of the Com pa ny s preferred stock are entitled to receive noncumulative an nual
dividends at a rate of 8% of the appl ica b le original issue price when, as and if declared b y the
Com pan y s board of directors, prior and in preference to any d ividends on shares of the Co mpany s
common stock.
'

'

'

Conversion

Shares of the Company's preferred stock are convertible at the option of the holders into shares of
the Company's common stock. Each share of preferred stock is convertible, without payment of

15

 Buzzfeed, Inc.

Notes to Consolidated Financial Statements
December 31 , 201 2 and 201 1
additional consideration by the holder, into such number of fully paid and non-assessable shares of
com mon stock as is determined by dividing the adjusted orig inal issue price by the conversion price
applicable to such share.
Each share of preferred stock will be automatically converted based on its conversion ratio into
shares of common stock upon the earlier of the occurrence of a qualified initial public offering, as
defined , or the vote of the holders of a majority of the outstanding Series A, B, C and D preferred
stock (voting together as a single class and on an as-converted basis) and the holders of a majority
of the outstand ing Series C and D preferred stock (voting together as a single class and on an as­
converted basis).

Liquidation Preference
In the event of any liquidation, d issolution or winding up of the Company, including a deemed
liquidation event, as defined, the holders of Series, A, B, C and D preferred stock shall be entitled
to receive, on a pari passu basis and in preference to all other holders of capital stock of the
Company, pro rata, an amount equal to the respective purchase price plus declared and u n paid
dividends on each share of Series, A, B, C and D preferred stock (the "Liquidation Preference").
Next, the holders of Series A-1 preferred stock shall be entitled to receive, in preference to holders
of common stock, an amount equal to the purchase price plus declared but u n paid dividends on
each share of Series A-1 preferred stock. After the payment of such preferential amounts, any
remaining assets shall be distributed pro rata among the holders of common stock and the Series
A, B, C and D preferred stock on an as-converted basis until the holders of the Series A, B, C and
D preferred stock receive an aggregate (including the Liquid ation Preference) of two times the
applicable per share purchase price. Any remaining proceeds shall be paid to the holders of
common stock. If the assets are insufficient to permit payment of the Liquidation Preference in full
to all holders of Series A, B, C and D preferred stock, the assets shall be distributed ratably to the
holders of the Series A, B, C and D preferred stock in proportion to the amount each such holder
would otherwise be entitled to receive .

As a deemed liquidation event u nder these provisions, which includes certain transactions
including a change in control, is not solely withi n the control of the Company, preferred stock has
been classified as temporary equ ity.

Redemption
At any time after December 1 8, 201 7, the holders of (i) a majority of the then outstanding Series A,
B, C and 0 preferred stock (voting together as a single class and on an as-converted basis) and (ii)
a majority of the outstanding Series C and D preferred stock (voting together as a single class and
on an as-converted basis) may req uire that all of the then outstanding shares of Series A, B, C and
0 preferred stock be redeemed. U pon such a request, the Company must, to the extent it may
lawfully do so, redeem in two ann ual installments the then outstanding shares of Series A, B, C and
O preferred stock by paying in cash a sum per share equal to the applicable per share pu rchase
price plus any declared but unpaid dividends.
Stock Option P lan
On J une 25, 2008, the Company adopted the 2008 Stock Plan (the

Plan) which authorized

1 ,574,744 shares of common stock for issuance to employees and other service providers. On May
3, 201 0, September 27, 201 1 , December 22, 201 1 and December 1 7, 201 2 the Company

increased the authorized amount of common stock by 952,946, 297,084, 1 ,057,000, and
395,255 shares, respectively. All options have a term of no greater than 1 0 years from the date of

grant. Stock options generally vest 25% one year after grant and 1 /48th each month over the next
36 months.

16

 Buzzfeed, Inc.
Notes to Consolidated Financial Statements
December 31 , 201 2 and 201 1
At December 31 , 2012, there were 1 , 1 58,206 additional shares avai lable for the Company to grant
under the Plan. The fair value of each stock option award is estimated on the date of grant using
the Black-Scholes option-pricing model using assumptions in the following table. The Company

uses the simplified method in accordance with ASC 71 8-1 0-899 to estimate the expected term of
the option, due to the limited historical experience to date. The risk-free rate for the expected term

of the option is based on the U.S. Treasury yield curve in effect at the time of grant. Since the
Company's common stock is not publicly traded for a sufficient time period, the expected volatility

is based on expected volatilities of similar companies that have a history of being publicly traded.
No d ividends have been assumed. Share-based compensation expense is reduced by estimated
forfeitures based on historical experience.

Valuation Assumptions

Fair Wlhae common stock
Expected dllidand yield

Expected wlatilily
Expected tann (yems)
Risk tee nanm rate

2112

2011

S.80

S.52 - S.80

47% - 48%

47% - 48%

5.51 - 6.42
.82 - 1.24

5.55 - 6.08
1.1 1 - 2.48

A summary of the share activity under the Plan is presented below:

Number of
Shares
Balance • of December 31, 2810
Granted
Exercised
Fodeited

Expired

Balance • of December 31, 2011

Granted
Exercised
ForleQd

Expired

1.907.212

Average
Exerclla Price
s

(10,000)
(109.355)

(6.250)

Contract
Tenn

......
lmrtllllc
Value

8.6

$

210,630

8.1

s

960,596

0.56
0.25
0.52
0.52

794,593

2,576.200

0.38

Remaining

s

674,342

0.43
0.80
0.37
0.57
0.52

(784.996)
(164.176)
(7,479)

Balance • of December 31, 2812

2.293.891

s

0.55

7.8

s 4,162,439

Exereisable at December 31 . 2012

1,098,803

s

0.40

6.8

s

Expected to wst aler December 31, 2012

1,195,088

s

0.68

8.7

s 2,011,179

17

2,151,260

 BuzzFeed, Inc.
Notes to Consolidated Financial Statements
December 31 , 201 2 and 201 1
The total fair value of shares vested during 201 2 and 201 1 was $1 32,81 3 and $89,01 7,
respectively.
At December 3 1 , 201 2 and 201 1 , there was $376,789 and $333,244, respectively, of total
unrecognized compensation cost related to non-vested share-based compensation arrangements
under the Plan. The weighted average period over which unrecognized compensation cost was
expected to be recognized at December 3 1 , 201 2 and 201 1 was 2.7 and 2.6, respectively. The
weighted average fair value of options granted during December 31 , 201 2 and 201 1 was $0.37 and
$0.26, respectively. The intrinsic value of options exercised at December 31 , 201 2 and 201 1 was

$31 8, 1 88 and $2,700, respectively.
The Company currently uses authorized and unissued shares to satisfy share award exercises.

9.

Income Taxes
In assessing the real izability of the Company's deferred tax assets, management considers
whether it is more likely than not that some portion or all of the deferred tax assets will not be
realized. The ultimate realization of deferred tax assets is dependent u pon the generation of future
taxable income during the periods in which those temporary differences become deductible.
Management's assessment is based on the weight of available evidence, including cum ulative
losses since inception and expected future losses and as such, management does not believe it is
more likely tha n not that the deferred tax assets will be realized. Accordingly, a full valuation
allowance has been established and no deferred tax assets and related tax benefit have been
recognized in the accompanying financial statements. As of December 31 , 20 1 2 and 201 1 , the
deferred tax assets were fully offset by a valuation allowance. The valuation allowance as of
December 31 , 201 2 and 201 1 was $5, 1 81 , 543 and $3, 1 1 4,643. The net change in the valuation

allowance for the year ended

December 31 , 2012 was an

increase of

$1 , 703,220.

The i n c rease in

the valuation allowance in 2012 is primarily attributable to increases in the net operating loss.
Significant components of deferred tax assets and (liabilities) at Decem ber 31 , 201 2 and 20 1 1
were as follows:

Year Ended December 31,
2012
2011

Oelaned tax assets:
Net operating losses csryfolwads
Accruals

s

Dep9ciation and amortization

5,169,178
52,995

138,781
4,807

Other

Total deferred tax assets
Vllualion allowance
Tolal net dlfamld tax assets
Deferred tax iabilities:
1nt111tJb1e assets
Tolal defell9d tax liabilities
Net deferred tax assets

18

$

3,176,704
54,463
2,026

5,365,760
(5.181,543)
184.217

3.233. 192
(3,114,643)
118,549

(184.21D
C184.21D

(118,549)
(118,549)

 Buzzfeed, Inc.
Notes to Consolidated Financial Statements
December 31, 2012 and 201 1
As of December 31 , 201 2, the Company has net operating loss carryforwards for federal income
tax purposes of approximately $1 1 ,602 ,697. The federal net operating loss carryforwards will
expire, if not utilized, beginning i n year 2028.
In addition, the Company has net operating loss carryforwards for state i ncome tax purposes of
approximately $ 1 ,854,941 which expire, if not utilized, beginning in the year 2028.
The Company adopted the provisions of guidance related to uncertainty i n income taxes (f/k/a
FIN 48, Accounting for Uncertainty in Income Taxes - an interpretation of FASB 1 09) on January 1 ,
2009. There was no impact to the financial statements due to the adoption of this guidance.
The balance of gross unrecognized tax benefits at December 31 , 201 2 is approximately $27,000.
It is unlikely that the amount of liability for unrecogn ized tax benefits will significantly change
- within
the next 1 2 months.
In acco rdance with the Company's acco u nting policy, it recognizes accrued i nterest and penalties
related to unrecognized tax benefits in the provision for income taxes. The Company has not
accrued interest and penalties at D.ecember 3 1 , 201 2 . The Company's total amount of
unrecognized tax benefits that if recognized would affect its effective rate is immaterial at
December 31 , 2 0 1 2.
The Company files i ncome tax returns in the U.S., New York, Californ ia, I llinois, Kentucky,
Maryland, Minnesota and New York City. The Company is subject to examination dating back to
2009.
The utilization of net operating losses and tax credit carryforwards and may be subject to
substantial annual limitation i n the event that there is a change i n ownership as provided by
Section 382 of the I nternal Revenue Code and similar state provisions. Such a limitation cou ld
result in the expiration of the net operating loss carryforwards and tax credits before utilization.

1 0.

Acqu isitions

Ze Frank Games, Inc.
On September 1 1 , 201 2, the Company com pleted the acquisition of Ze Frank Games, I nc. for
$ 1 ,000 in cash and 99,089 vested shares of our common stock valued at $0.80.
The Company formed BF Acquisition Holding Corp . , a Delaware corporation, as a wholly owned
subsidiary. BF Acquisition Holding Corp. then formed ZF Merger Acquisition Corp. , a Delaware
corporation, which merged with and into Ze Frank Games, I nc.
Kingfish Labs, Inc.

On September 1 1 , 2012, the Company completed the acq uisition of Kingfish Labs, Inc., for $1 , 000
in cash and 70,776 vested shares of our common stock valued at $0.80.
BF Acquisition Holding Corp. formed KF Merger Acqu isition Corp. , a Delaware corporation, which
merged with and into Kingfish Labs, I nc.

19

 BuzzFeed, Inc.
Notes to Consolidated Financial Statements
December 31 , 201 2 and 201 1
The acquisitions are not material to the Company's consolidated financial statements. The
acquisitions consisted primarily of cash acquired of $ 1 35,01 1 and certain liabilities.

11.

Subsequent Events
On March 7, 201 3, the Company entered into a Distribution Agreement with a pu blishing platform
("Publisher") to provide certain audiovisual content to the Publisher. The agreement provides for a

$3,500,000 guaranteed payment to the Company, in exchange for the Company providing original
videos (the "Content") for platform distribution. Under the Agreement, the Publisher retains 1 00%
of advertising revenue sold by either the Company or the Publisher against the Content u ntil it has
fully recouped the payment amount, at which point advertising revenue is shared in an amount
determined in the Agreement. Each party has termination rights under the Agreement.
The Company has evaluated subsequent events have been evaluated through the date the
consolidated financial statements were available to be issued. There were no material subsequent
events through September 30, 20 1 3 which have not already been reflected or disclosed in the
consolidated financial statements.

20