Summary
Cloudflare, Inc. (NET) filed an 8-K on January 7, 2020, to report on an acquisition and unregistered securities issuance. The company, through its subsidiaries, completed a merger with S2 Systems Corporation for a total consideration of $39.2 million. This consideration was comprised of $21.9 million in cash and 948,501 shares of Cloudflare's Class A common stock. A significant portion of the stock consideration is subject to vesting conditions post-closing. This transaction was conducted under an exemption from SEC registration requirements, specifically Section 4(a)(2) of the Securities Act of 1933.
Key Highlights
- 1Cloudflare acquired S2 Systems Corporation for a total of $39.2 million.
- 2The acquisition consideration included $21.9 million in cash and 948,501 shares of Class A common stock.
- 3A substantial portion of the stock consideration issued is subject to vesting over time, contingent on continued service.
- 4The issuance of Cloudflare's stock in this transaction was made in reliance on an exemption from registration requirements (Section 4(a)(2) of the Securities Act).
- 5The company announced the merger agreement and closing via a press release furnished as an exhibit.
- 6The closing of the merger occurred on January 1, 2020.
Frequently Asked Questions
This 8-K filing was made to report the closing of Cloudflare's acquisition of S2 Systems Corporation and to disclose the unregistered sale of equity securities (Cloudflare's Class A common stock) as part of the merger consideration.
Cloudflare paid a total consideration of $39.2 million for S2 Systems Corporation, which was composed of $21.9 million in cash and 948,501 shares of its Class A common stock.
No, a substantial majority of the 948,501 shares of Class A common stock issued as part of the merger consideration were not fully vested at closing. These shares are subject to customary service-based vesting conditions that will be satisfied after the closing.
The issuance of Cloudflare's Class A common stock was made in reliance on Section 4(a)(2) of the Securities Act of 1933, which provides an exemption from registration requirements for certain transactions not involving a public offering.