Adex Media, Inc. and Subsidiaries Unaudited Pro Forma Combined Financial Statements Basis of Pro Forma Presentation
Exhibit
99.4 – Unaudited Pro Forma Financial Information
Adex
Media, Inc. and Subsidiaries
Unaudited
Pro Forma Combined Financial Statements
Basis
of Pro Forma Presentation
On August
29, 2008, Adex Media, Inc. (the “Company”) entered into an asset purchase
agreement (the “Asset Purchase Agreement”), pursuant to which the Company
acquired substantially all the assets of Bay Harbor Marketing, LLC (“Bay
Harbor”), a California limited liability company. The asset purchase agreement
was completed on August 29, 2008 (“Closing Date”).
Bay
Harbor is engaged in providing marketing solutions, focusing exclusively on the
financial services market.
The
purchase price for the Bay Harbor assets consisted of the following: (i) Fifty
Thousand Dollars ($50,000) paid to Bay Harbor at the closing; (ii) fifty
thousand (50,000) unregistered restricted shares of the Company’s common stock
(the “Closing Shares”) issued to Bay Harbor on the Closing Date subject to a
contractual lock-up and share release agreement (the “Lock-Up Agreement”); (iii)
one hundred fifty two thousand one hundred fifty one (152,151) restricted
unregistered shares of the Company’s common stock issued to the managing member
of Bay Harbor, on the Closing Date; (iv) one hundred forty-seven thousand two
hundred seventy-three (147,273) restricted unregistered shares of the Company’s
common stock issued to a creditor of Bay Harbor, on the Closing Date; and (v) an
additional amount of up to one hundred fifty thousand (150,000) restricted
unregistered shares of the Company’s common stock (the “Earn Out Shares”) issued
to an escrow agent on the Closing Date in the name of Bay Harbor pursuant to an
escrow agreement (the “Escrow Agreement”). The Earn Out
Shares are subject to the Lock-Up Agreement and all or part of the Earn Out
Shares are subject to release from escrow within a certain period of time
following August 29, 2009, in accordance with an earn-out formula setting forth
certain net revenue and net profit margin performance targets for the Bay Harbor
assets.
The
aggregate purchase price was $1,878,562 which included the
following:
Cash
paid at closing
|
$ | 50,000 | ||
Restricted
shares of common stock issued to seller
|
239,850 | |||
Restricted
shares of common stock issued to managing member of seller
|
729,868 | |||
Restricted
shares of common stock issued to creditor of seller
|
706,469 | |||
Restricted
shares issued as finders’ fees
|
47,943 | |||
Cash
paid for closing costs
|
36,432 | |||
Accrued
closing costs
|
68,000 | |||
Total
|
$ | 1,878,562 |
The
aggregate value of the aforementioned unregistered common stock issued was
$1,676,187 and was determined based on the simple three day average of closing
market prices of the Company’s common shares from August 27, 2008 through August
29, 2008, less a 10% discount. This value per share was calculated to be
$5.33.
The
Company has not yet finalized the allocation of the purchase price and has
engaged an independent valuation consultant to assist it in its final purchase
price allocation. The following table summarizes the estimated fair values of
the assets acquired. The allocation of the purchase price was based upon
management’s estimates and assumptions:
Intangible
assets
|
$ | 330,000 | ||
Goodwill
|
1,548,562 | |||
Total
assets acquired
|
$ | 1,878,562 | ||
The
acquisition of the assets was accounted for as a business combination and the
operations of Bay Harbor were included in the Company’s results of operations
beginning on August 29, 2008, the acquisition date. The factors resulting in
goodwill were Bay Harbor’s name, reputation, and established key personnel. The
full amount of the aforementioned goodwill is deductible for tax purposes over a
period of 15 years.
1
ADEX MEDIA, INC. and Subsidiaries
|
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Unaudited
Pro Forma Combined Consolidated Balance Sheet
|
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9/30/08
|
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____________
|
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Adex
Media, Inc. and subsidiaries
|
Bay
Harbor Marketing, LLC
|
Combined
|
Pro
forma Adjustments
|
Pro
forma Consolidated
|
|||||||||||||||||
ASSETS
|
|||||||||||||||||||||
Current
assets:
|
|||||||||||||||||||||
Cash
and cash equivalents
|
$ | 650,099 | $ | 5,877 | $ | 655,976 | $ | (5,877 | ) |
(a)
|
$ | 650,099 | |||||||||
Short-term
investments
|
2,784,815 | - | 2,784,815 | 2,784,815 | |||||||||||||||||
Total
cash, cash equivalents, and short-term investments
|
3,434,914 | 5,877 | 3,440,791 | (5,877 | ) | 3,434,914 | |||||||||||||||
Accounts
receivable, net of allowance for doubtful accounts of $400 and
$410
|
444,033 | - | 444,033 | - | 444,033 | ||||||||||||||||
Credit
card holdbacks
|
379,035 | - | 379,035 | - | 379,035 | ||||||||||||||||
Inventory
|
33,077 | - | 33,077 | - | 33,077 | ||||||||||||||||
Other
receivables
|
43,783 | - | 43,783 | - | 43,783 | ||||||||||||||||
Prepaid
expenses and other current assets
|
60,676 | 5,000 | 65,676 | (5,000 | ) |
(a)
|
60,676 | ||||||||||||||
Total
current assets
|
4,395,518 | 10,877 | 4,406,395 | (10,877 | ) | 4,395,518 | |||||||||||||||
Property
and equipment, net
|
55,910 | 55,910 | - | 55,910 | |||||||||||||||||
Intangible
assets, net
|
1,448,981 | 322,679 | 1,771,660 | -461,083 |
(a),(b)
|
1,310,577 | |||||||||||||||
Goodwill
|
8,448,789 | 1,548,562 | 9,997,351 | -1,548,562 |
(a)
|
8,448,789 | |||||||||||||||
Total
assets
|
$ | 14,349,198 | $ | 1,882,118 | $ | 16,231,316 | $ | (2,020,522 | ) | $ | 14,210,794 | ||||||||||
LIABILITIES
AND STOCKHOLDERS EQUITY (DEFICIT)
|
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Current
liabilities:
|
|||||||||||||||||||||
Accounts
payable
|
$ | 830,206 | $ | 41,585 | $ | 871,791 | (41,585 | ) |
(a)
|
$ | 830,206 | ||||||||||
Accrued
liabilities
|
737,153 | 63,659 | 800,812 | -63,659 |
(a)
|
737,153 | |||||||||||||||
Deferred
revenue
|
13,412 | 6,702 | 20,114 | -6,702 |
(a)
|
13,412 | |||||||||||||||
Line
of credit
|
- | 44,377 | 44,377 | -44,377 |
(a)
|
- | |||||||||||||||
Promissory
Note
|
541,912 | 220,642 | 762,554 | -220,642 |
(a)
|
541,912 | |||||||||||||||
Total
current liabilities
|
2,122,683 | 376,965 | 2,499,648 | (376,965 | ) | 2,122,683 | |||||||||||||||
Notes
Payable, less current portion
|
- | 127,295 | 127,295 | (127,295 | ) |
(a)
|
- | ||||||||||||||
Deferred
tax liability
|
429,077 | - | 429,077 | - | 429,077 | ||||||||||||||||
Total
Liabilities
|
2,551,760 | 504,260 | 3,056,020 | -504,260 | 2,551,760 | ||||||||||||||||
Stockholders
Equity (deficit):
|
|||||||||||||||||||||
Common
Stock, $.0001 par value; 150,000,000
|
|||||||||||||||||||||
shares
authorized, 31,202,347 and 250,000
|
|||||||||||||||||||||
shares
issued and outstanding at September 30, 2008 and December 31,
2007
|
3,120 | 3,120 | - | 3,120 | |||||||||||||||||
Additional
paid in capital
|
13,568,799 | 13,568,799 | - | 13,568,799 | |||||||||||||||||
Members'
equity (deficit)
|
- | 1,377,858 | 1,377,858 | -1,377,858 | 0 | ||||||||||||||||
Retained
earnings (accumulated deficit)
|
(1,774,481 | ) | (1,774,481 | ) | (138,404 | ) |
(a),
(b)
|
(1,912,885 | ) | ||||||||||||
Total
stockholders equity
|
11,797,438 | 1,377,858 | 13,175,296 | (1,516,262 | ) | 11,659,034 | |||||||||||||||
Total
liabilities and stockholders equity (deficit)
|
$ | 14,349,198 | $ | 1,882,118 | $ | 16,231,316 | $ | (2,020,522 | ) | $ | 14,210,794 |
2
ADEX
MEDIA, INC. and Subsidiaries
|
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Unaudited
Pro Forma Combined Consolidated Statements of Operations
|
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For
the nine months ended September 30, 2008
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____________
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Adex
Media, Inc. and subsidiaries
|
Bay
Harbor Marketing, LLC
|
Combined
|
Pro
forma Adjustments
|
Pro
forma Consolidated
|
|||||||||||||||||
Revenues:
|
|||||||||||||||||||||
Marketing
platform services
|
$ | 2,750,264 | $ | 341,714 | $ | 3,091,978 | $ | (63,472 | ) |
(d)
|
$ | 3,028,506 | |||||||||
Products
|
476,228 | - | 476,228 | 476,228 | |||||||||||||||||
Total
Revenues
|
$ | 3,226,492 | $ | 341,714 | $ | 3,568,206 | $ | (63,472 | ) | $ | 3,504,734 | ||||||||||
Cost
of sales:
|
|||||||||||||||||||||
Marketing
platform services
|
2,299,117 | 203,241 | 2,502,358 | (52,426 | ) |
(d)
|
2,449,932 | ||||||||||||||
Products
|
127,526 | - | 127,526 | - | 127,526 | ||||||||||||||||
Amortization
of acquired product licenses
|
18,795 | - | 18,795 | - | 18,795 | ||||||||||||||||
Total
Cost of sales
|
2,445,438 | 203,241 | 2,648,679 | (52,426 | ) | 2,596,253 | |||||||||||||||
Gross
profit
|
781,054 | 138,473 | 919,527 | (11,046 | ) | 908,481 | |||||||||||||||
Operating
expenses:
|
|||||||||||||||||||||
Product
development
|
52,550 | - | 52,550 | - | 52,550 | ||||||||||||||||
Sales
and marketing
|
1,350,135 | 318,286 | 1,668,421 | (61,079 | ) |
(d)
|
1,607,342 | ||||||||||||||
General
administrative
|
955,729 | - | 955,729 | - | 955,729 | ||||||||||||||||
Amortization
of intangible assets
|
22,224 | - | 22,224 | 54,904 |
(b)
|
77,128 | |||||||||||||||
Impairment
of intangible assets
|
310,000 | - | 310,000 | - | 310,000 | ||||||||||||||||
Total
operating expenses
|
2,690,638 | 318,286 | 3,008,924 | (6,175 | ) | 3,002,749 | |||||||||||||||
Income
(loss) before interest, other income (expense) and provision for income
taxes
|
(1,909,584 | ) | (179,813 | ) | (2,089,397 | ) | (4,871 | ) | (2,094,268 | ) | |||||||||||
Interest
and other income (expense), net
|
45,582 | (24,908 | ) | 20,674 | - | 20,674 | |||||||||||||||
Income
(loss) before provision for income taxes
|
(1,864,002 | ) | (204,721 | ) | (2,068,723 | ) | (4,871 | ) | (2,073,594 | ) | |||||||||||
Provision
for income tax expense (benefit)
|
(12,123 | ) | - | (12,123 | ) | - | (12,123 | ) | |||||||||||||
Net
income (loss)
|
$ | (1,851,879 | ) | $ | (204,721 | ) | $ | (2,056,600 | ) | $ | (4,870 | ) | $ | (2,061,471 | ) | ||||||
Net
income (loss) per common share, basic and diluted
|
$ | (0.12 | ) | $ | (0.13 | ) | $ | (0.02 | ) | $ | (0.13 | ) | |||||||||
Weighted
average common shares used in
|
|||||||||||||||||||||
computing,
basic and diluted loss per share
|
15,443,218 | 15,443,218 | 317,294 |
(c)
|
15,760,512 | ||||||||||||||||
3
ADEX
MEDIA, INC. and Subsidiaries
|
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Unaudited
Pro Forma Combined Consolidated Statements of Operations
|
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For
the year ended December 31, 2007
|
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____________
|
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Adex
Media, Inc. and subsidiaries
|
Bay
Harbor Marketing, LLC
|
Combined
|
Pro
forma Adjustments
|
Pro
forma Consolidated
|
|||||||||||||||||
Revenues:
|
|||||||||||||||||||||
Marketing
platform services
|
$ | 1,771,478 | $ | 396,296 | $ | 2,167,774 | $ | - | $ | 2,167,774 | |||||||||||
Products
|
- | - | - | - | - | ||||||||||||||||
Total
Revenues
|
$ | 1,771,478 | $ | 396,296 | $ | 2,167,774 | $ | - | $ | 2,167,774 | |||||||||||
Cost
of sales:
|
|||||||||||||||||||||
Marketing
platform services
|
1,328,322 | 140,316 | 1,468,638 | - | 1,468,638 | ||||||||||||||||
Products
|
- | - | - | - | - | ||||||||||||||||
Amortization
of acquired product licenses
|
- | - | - | - | - | ||||||||||||||||
Total
Cost of sales
|
1,328,322 | 140,316 | 1,468,638 | - | 1,468,638 | ||||||||||||||||
Gross
profit
|
443,156 | 255,980 | 699,136 | - | 699,136 | ||||||||||||||||
Operating
expenses - general, administrative, marketing costs, and amortization of
intangible assets
|
251,147 | 393,035 | 644,182 | 83,271 |
(b)
|
727,453 | |||||||||||||||
Total
operating expenses
|
251,147 | 393,035 | 644,182 | 83,271 | 727,453 | ||||||||||||||||
Income
(loss) before interest, other income (expense) and provision for income
taxes
|
192,009 | (137,055 | ) | 54,954 | (83,271 | ) | (28,317 | ) | |||||||||||||
Interest
and other income (expense), net
|
2,320 | (26,767 | ) | (24,447 | ) | - | (24,447 | ) | |||||||||||||
Income
(loss) before provision for income taxes
|
194,329 | (163,822 | ) | 30,507 | (83,271 | ) | (52,764 | ) | |||||||||||||
Provision
for income tax expense (benefit)
|
71,017 | - | 71,017 | - | 71,017 | ||||||||||||||||
Net
income (loss)
|
$ | 123,312 | $ | (163,822 | ) | $ | (40,510 | ) | $ | (83,271 | ) | $ | (123,781 | ) | |||||||
Members'
equity, beginning of year
|
1,396 | 1,396 | - | 1,396 | |||||||||||||||||
Distributions
to equity members
|
122,572 | 122,572 | - | 122,572 | |||||||||||||||||
Members'
equity, end of year
|
2,136 | (161,686 | ) | (83,271 | ) | (244,957 | ) | ||||||||||||||
4
NOTES
TO THE UNAUDITED PRO FORMA COMBINED CONSOLIDATED FINANCIAL
STATEMENTS
The
combined condensed balance sheet at September 30, 2008 and combined condensed
statement of operations for the nine months ended September 30, 2008, include
the accounts of Pieces Media, LLC., Abundantad, Inc., Adex Media, Inc., Bay
Harbor Marketing, LLC, Digital Instructor, LLC, and Vibrantads, LLC. The
combined condensed statement of operations for the year ended December 31, 2007,
include the accounts of Pieces Media, LLC., Abundantad, Inc. Adex Media, Inc.,
and Bay Harbor Marketing, LLC.
(a)
|
To
reverse the assets and liabilities of Bay Harbor Marketing, LLC as the
assets were purchased by Adex Media, Inc. on August 29, 2008 and are
already included in the Adex Media, Inc. balance sheet as of September 30,
2008.
|
(b)
|
To
record the effects of additional accumulated amortization from the period
01/01/2007 to the acquisition date of
08/29/2008.
|
The Company retained an independent valuation of the intangible
assets.
The
purchase price has been allocated as follows:
Intangible
assets
|
$ | 330,000 | ||
Goodwill
|
1,548,562 | |||
Total
assets acquired
|
$ | 1,878,562 |
As of
September 30, 2008, $138,404 of amortization expense and related accumulated
amortization is recorded in relation to the intangible assets.
The
intangible assets resulting from this transaction is primarily attributable to
internal use technology, company trade name, customer databases, and marketing
collateral that was acquired.
The
intangible assets have the following useful lives:
Internal use
technology 5
years
Company trade
name
5 years
Customer
database 2
years
Marketing
Collateral 4
years
Amortization
charges are calculated as if the acquisition occurred on January 1,
2007.
(c)
|
Consists
of the incremental weighted average effects of the 359,424 (includes
10,000 shares issued as finders’ fees) aggregate number of restricted
shares issued assuming the acquisition happened on January 1, 2007 instead
of August 29, 2008.
|
(d)
|
To
eliminate the activity from 08/29/2008 to 09/30/2008 already included in
Adex Media Inc.’s consolidated statement of operations for the nine months
ended September 30, 2008.
|
5