EXHIBIT 99.2
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
On March 13, 2007, Ad.Venture, Purchaser and 180 Connect entered into the arrangement, whereby
Purchaser will acquire all the outstanding 180 Connect common shares in exchange for either shares
of Ad.Venture common stock, exchangeable shares of Purchaser (and certain ancillary rights) or a
combination of shares of Ad.Venture common stock and exchangeable shares of the Purchaser (and
certain ancillary rights). On August 24, 2007, the Company consummated the plan of arrangement.
As part of the arrangement, which is discussed in greater detail below, all outstanding options to
purchase 180 Connect common shares were exchanged for options to purchase Ad.Venture common stock.
Ad.Venture assumed all of 180 Connects obligations pursuant to 180 Connects outstanding warrants,
stock appreciation rights and convertible debentures. On consummation, 180 Connect became an
indirect subsidiary of Ad.Venture and Ad.Venture changed its name to 180 Connect Inc.
The following unaudited pro forma condensed combined balance sheet combines the historical
balance sheet of Ad.Venture and the consolidated balance sheet of 180 Connect as of June 30, 2007,
giving effect to the arrangement as if it had been consummated on June 30, 2007. The following
unaudited pro forma condensed combined statement of operations for the twelve-month period ended
December 31, 2006 combines the statement of operations of Ad.Venture for the twelve-month period
ended December 31, 2006 with the consolidated statement of operations of 180 Connect for its year
ended December 31, 2006, giving effect to the arrangement as if it had occurred at January 1, 2006.
The following unaudited pro forma condensed combined statement of operations for the six-month
period ended June 30, 2007 combines the statement of operations of Ad.Venture for the six-month
period ended June 30, 2007 with the consolidated statement of operations of 180 Connect for the six
months ended June 30, 2007, giving effect to the arrangement as if it had occurred at January 1,
2006.
We are providing the following information to aid you in your analysis of the financial
aspects of the arrangement. We derived the historical financial information of Ad.Venture from (i)
the audited financial statements of Ad.Venture for the period from April 7, 2005 (inception) to
March 31, 2006, (ii) the audited financial statements of Ad.Venture as of and for the year ended
March 31, 2007, (iii) the unaudited financial statements of Ad.Venture for the period from April 7,
2005 (inception) to December 31, 2005, (iv) the unaudited financial statements of Ad.Venture for
the nine months ended December 31, 2006, and (v) the unaudited financial statements for Ad.Venture
for the three months ended June 30, 2007. The unaudited statement of operations information of
Ad.Venture for the twelve-month period ended December 31, 2006 is derived by adding Ad.Ventures
unaudited statement of operations for the nine months ended December 31, 2006 to the audited
statement of operations for the period from April 7, 2005 (inception) to March 31, 2006 and
subtracting therefrom Ad.Ventures unaudited statement of operations for the period from April 7,
2005 (inception) to December 31, 2005. The unaudited statement of operations information of
Ad.Venture for the six-month period ended June 30, 2007 is derived by adding Ad.Ventures unaudited
statement of operations for the three months ended June 30, 2007 to the audited statement of
operations for the year ended March 31, 2007 and subtracting Ad.Ventures unaudited statement of
operations for the nine months ended December 31, 2006. We derived the historical financial
information of 180 Connect for the year ended December 31, 2006 from the audited consolidated
financial statements of 180 Connect for the year ended December 31, 2006, included elsewhere in
this Current Report on Form 8-K. We derived the historical financial information of 180 Connect
for the six months ended June 30, 2007 from the unaudited consolidated financial statements of 180
Connect for the six months ended June 30, 2007, included elsewhere in this Current Report on Form
8-K.
This information should be read together with 180 Connects audited and unaudited financial
statements and related notes, Managements Discussion and Analysis of Financial Condition and
Results of Operations of 180 Connect and other financial information included elsewhere in this
Current Report on Form 8-K.
The historical financial information has been adjusted to give pro forma effect to events that
are related and/or directly attributable to the arrangement, are factually supportable and are
expected to have a continuing impact on the combined results. Accordingly the adjustments presented
on the pro forma condensed combined financial statements have been identified and presented in
accordance with their timing to provide relevant information necessary for an accurate
understanding of the combined company upon consummation of the arrangement.
II-1
The unaudited pro forma condensed combined financial information is for illustrative purposes
only. The financial results may have been different had the companies always been combined. You
should not rely on the unaudited pro forma condensed combined financial information as being
indicative of the historical results that would have been
achieved had the companies been combined for the periods presented or the future results that
the combined company will experience. Ad.Venture and 180 Connect have not had any historical
relationships prior to the arrangement. Accordingly, no pro forma adjustments were required to
eliminate activities among the companies. The historical financial statements of the registrant
will be the historical financial statements of 180 Connect.
Upon completion of the arrangement, each 180 Connect common share will be exchanged for 0.60
shares of Ad.Venture common stock or 0.60 exchangeable shares of Purchaser (and certain ancillary
rights). Each exchangeable share will be exchangeable for one share of Ad.Venture common stock.
Only 180 Connect shareholders who are Canadian residents may elect to receive exchangeable shares.
The exchangeable shares will entitle holders to dividends and other rights that are substantially
economically equivalent to those of holders of shares of Ad.Venture common stock. Holders of
exchangeable shares will also have the right, through a voting trust arrangement, to vote at
meetings of Ad.Venture stockholders. The exchangeable share structure is designed to provide an
opportunity for shareholders of 180 Connect that are eligible Canadian residents and who validly
make the required tax election to achieve a deferral of Canadian tax on any accrued capital gain on
their 180 Connect common shares in certain circumstances until redemption or purchase of such
exchangeable shares pursuant to its terms. Based on the number of Ad.Venture shares of common
stock and 180 Connect common shares outstanding as of the consummation of the arrangement,
16,422,442 million shares of Ad.Venture common stock and/or exchangeable shares, representing 63.2%
of the combined companys voting interests has been issued to 180 Connect shareholders in
connection with the arrangement.
The arrangement will be accounted for under the reverse acquisition application of the equity
recapitalization method of accounting in accordance with U.S. GAAP for accounting and financial
reporting purposes. Under this method of accounting, Ad.Venture will be treated as the acquired
company for financial reporting purposes. In accordance with guidance applicable to these
circumstances, the arrangement will be considered to be a capital transaction in substance.
Accordingly, for accounting purposes, the arrangement will be treated as the equivalent of 180
Connect issuing stock for the net monetary assets of Ad.Venture, accompanied by a recapitalization.
The net monetary assets of Ad.Venture will be stated at their fair value, essentially equivalent to
historical costs, with no goodwill or other intangible assets recorded. The accumulated deficit of
180 Connect will be carried forward after the completion of the arrangement. Operations prior to
the merger will be those of 180 Connect. Upon the completion of the arrangement, Ad.Venture
adopted the fiscal year of 180 Connect, as the accounting acquiror. As a result, the fiscal year
presented in these pro forma condensed combined financial statements is December 31, 2006 and the
interim period is the six months ended June 30, 2007.
As disclosed in note 24 of the 180 Connect audited financial statements for the year ended
December 31, 2006, no compensation expense was recorded related to the stock appreciation rights
issued to certain employees in December 2006 under the long term incentive plan because the long
term incentive plan had not been approved by the shareholders. Had 180 Connect recorded
compensation expense in 2006, the amount would have been approximately $5,000. The stock
appreciation rights had a fair market value of approximately $0.25 million on the grant date and
vest over four years. Under the arrangement, Ad.Venture assumed the obligation to issue equity
upon the settlement of the stock appreciation rights at a value equivalent to the issue-date fair
market value. Therefore, compensation expense will be recorded in the period the long term
incentive plan was approved by the shareholders of Ad.Venture.
The following unaudited pro forma condensed combined financial statements have been prepared
based on the conversion of 9,577,709 outstanding shares of Ad.Venture common stock, which is net of
1,672,288 of shares that were not converted by shareholders.
The exchangeable shares are substantially economically equivalent to Ad.Venture shares and can
only be settled for Ad.Venture shares, accordingly, such exchangeable shares have been presented as
equity in these pro forma condensed combined balance sheets and included in the number of basic
common shares outstanding.
The unaudited pro forma condensed combined financial statements should be read in conjunction
with the notes thereto.
II-2
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
JUNE 30, 2007
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
Pro Forma |
|
|
|
|
| |
|
180 Connect |
|
|
Ad.Venture |
|
|
Adjustments |
|
|
Pro Forma |
|
| |
|
(Restated) |
|
|
|
|
|
|
|
|
|
|
(Restated) |
|
| |
|
|
|
|
|
(in thousands) |
|
|
|
|
|
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash |
|
$ |
359 |
|
|
$ |
101 |
|
|
$ |
52,666 |
A |
|
$ |
14,640 |
|
|
|
|
|
|
|
|
|
|
|
|
(10,620 |
)B |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,050 |
)C |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,600 |
)D |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(5,000 |
)E |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(9,822 |
)F |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(10,394 |
)G |
|
|
|
|
Accounts receivable |
|
|
41,001 |
|
|
|
|
|
|
|
|
|
|
|
41,001 |
|
Inventory |
|
|
14,765 |
|
|
|
|
|
|
|
|
|
|
|
14,765 |
|
Restricted cash |
|
|
11,859 |
|
|
|
|
|
|
|
|
|
|
|
11,859 |
|
Prepaid expenses and other assets |
|
|
3,795 |
|
|
|
5 |
|
|
|
|
|
|
|
3,800 |
|
Taxes receivable |
|
|
|
|
|
|
229 |
|
|
|
|
|
|
|
229 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current assets |
|
|
71,779 |
|
|
|
335 |
|
|
|
14,180 |
|
|
|
86,294 |
|
Property, plant and equipment |
|
|
31,942 |
|
|
|
3 |
|
|
|
|
|
|
|
31,945 |
|
Goodwill |
|
|
11,034 |
|
|
|
|
|
|
|
|
|
|
|
11,034 |
|
Customer contracts, net |
|
|
23,232 |
|
|
|
|
|
|
|
|
|
|
|
23,232 |
|
Deferred tax asset |
|
|
242 |
|
|
|
|
|
|
|
|
|
|
|
242 |
|
Other assets |
|
|
4,724 |
|
|
|
|
|
|
|
(680 |
)G |
|
|
4,044 |
|
Investments held in trust account |
|
|
|
|
|
|
52,666 |
|
|
|
(52,666 |
)A |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets |
|
$ |
142,953 |
|
|
$ |
53,004 |
|
|
|
(39,166 |
) |
|
$ |
156,791 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities and Shareholders Equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable and accrued liabilities |
|
$ |
61,805 |
|
|
$ |
859 |
|
|
$ |
|
|
|
$ |
62,664 |
|
Taxes payable |
|
|
|
|
|
|
72 |
|
|
|
|
|
|
|
72 |
|
Current portion of long-term debt |
|
|
35,100 |
|
|
|
|
|
|
|
5,149 |
G,L |
|
|
35,100 |
|
|
|
|
|
|
|
|
|
|
|
|
(5,149 |
)G |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current portion of capital lease obligations |
|
|
11,823 |
|
|
|
|
|
|
|
|
|
|
|
11,823 |
|
Fair value of derivative financial instruments |
|
|
7,642 |
|
|
|
10,822 |
|
|
|
(5,245 |
)G |
|
|
13,219 |
|
Notes payable to shareholders |
|
|
|
|
|
|
900 |
|
|
|
(900 |
)C |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities |
|
|
116,370 |
|
|
|
12,653 |
|
|
|
(6,145 |
) |
|
|
122,878 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tax liability |
|
|
352 |
|
|
|
|
|
|
|
|
|
|
|
352 |
|
Long-term debt |
|
|
8,468 |
|
|
|
|
|
|
|
(5,000 |
)E,L |
|
|
3,468 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Convertible debt |
|
|
5,539 |
|
|
|
|
|
|
|
(5,539 |
)G |
|
|
|
|
Long-term portion of capital leases |
|
|
13,398 |
|
|
|
|
|
|
|
|
|
|
|
13,398 |
|
Common
stock, and changes in Trust Account value attributable to shares subject to
possible redemption, 1,799,100 shares at
approximately $5.81 per share |
|
|
|
|
|
|
10,625 |
|
|
|
(10,625 |
)F |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities |
|
|
144,127 |
|
|
|
23,278 |
|
|
|
(27,309 |
) |
|
|
140,096 |
|
Shareholders Equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Paid in capital |
|
|
72,175 |
|
|
|
32,344 |
|
|
|
(8,645 |
)B |
|
|
96,698 |
|
|
|
|
|
|
|
|
|
|
|
|
803 |
F |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2,618 |
)H |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,639 |
D |
|
|
|
|
Retained earnings (deficit) |
|
|
(73,834 |
) |
|
|
(2,618 |
) |
|
|
(1,975 |
)B |
|
|
(80,488 |
) |
|
|
|
|
|
|
|
|
|
|
|
(150 |
)C |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(290 |
)G |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,618 |
H |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2,639 |
)D |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,600 |
)D |
|
|
|
|
Accumulated other comprehensive income |
|
|
485 |
|
|
|
|
|
|
|
|
|
|
|
485 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total shareholders equity (deficiency) |
|
|
(1,174 |
) |
|
|
29,726 |
|
|
|
(11,857 |
) |
|
|
16,695 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and shareholders equity |
|
$ |
142,953 |
|
|
$ |
53,004 |
|
|
$ |
(39,166 |
) |
|
$ |
156,791 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See notes to unaudited pro forma condensed combined financial statements.
II-3
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENTS OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 2007
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
Pro Forma |
|
|
|
|
| |
|
180 Connect |
|
|
Ad.Venture |
|
|
Adjustments |
|
|
Pro Forma |
|
| |
|
(in thousands, except share and per-share data) |
|
Revenue |
|
$ |
181,094 |
|
|
$ |
|
|
|
|
|
|
|
$ |
181,094 |
|
Expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Direct |
|
|
164,939 |
|
|
|
|
|
|
|
|
|
|
|
164,939 |
|
General and administrative |
|
|
9,748 |
|
|
|
1,630 |
|
|
|
|
|
|
|
11,378 |
|
Foreign Exchange loss (gain) |
|
|
(41 |
) |
|
|
|
|
|
|
|
|
|
|
(41 |
) |
Restructuring Costs |
|
|
275 |
|
|
|
|
|
|
|
|
|
|
|
275 |
|
Depreciation |
|
|
5,517 |
|
|
|
|
|
|
|
|
|
|
|
5,517 |
|
Amortization of customer
contracts |
|
|
1,841 |
|
|
|
|
|
|
|
|
|
|
|
1,841 |
|
Interest expense (income) |
|
|
6,211 |
|
|
|
(826 |
) |
|
|
154 I |
|
|
|
5,539 |
|
Gain on sale of assets |
|
|
499 |
|
|
|
|
|
|
|
|
|
|
|
499 |
|
Loss from change in fair
value of derivative
instruments |
|
|
4,689 |
|
|
|
6,163 |
|
|
|
|
|
|
|
10,852 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from
continuing operations before
income tax recovery |
|
|
(12,584 |
) |
|
|
(6,967 |
) |
|
|
(154 |
) |
|
|
(19,705 |
) |
Income tax expense (recovery) |
|
|
253 |
|
|
|
167 |
|
|
|
|
|
|
|
420 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from
continuing operations |
|
$ |
(12,837 |
) |
|
$ |
(7,134 |
) |
|
|
(154 |
) |
|
$ |
(20,125 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (Loss) per share from
continuing operations |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
(0.77 |
) |
Diluted |
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
(0.77 |
) |
Weighted average number of
shares outstanding basic |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
26,000,151 |
J |
Weighted average number of
shares outstanding
diluted |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
26,000,151 |
K |
See notes to unaudited pro forma condensed combined financial statements.
II-4
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2006
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
Pro Forma |
|
|
|
|
| |
|
180 Connect |
|
|
Ad.Venture |
|
|
Adjustments |
|
|
Pro Forma |
|
| |
|
(in thousands, except share and per-share data) |
|
Revenue |
|
$ |
335,447 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
335,447 |
|
Expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Direct |
|
|
301,158 |
|
|
|
|
|
|
|
|
|
|
|
301,158 |
|
General and administrative |
|
|
19,675 |
|
|
|
512 |
|
|
|
|
|
|
|
20,187 |
|
Foreign Exchange loss (gain) |
|
|
30 |
|
|
|
|
|
|
|
|
|
|
|
30 |
|
Restructuring Costs |
|
|
893 |
|
|
|
|
|
|
|
|
|
|
|
893 |
|
Depreciation |
|
|
13,560 |
|
|
|
|
|
|
|
|
|
|
|
13,560 |
|
Amortization of customer
contracts |
|
|
3,713 |
|
|
|
|
|
|
|
|
|
|
|
3,713 |
|
Interest expense (income) |
|
|
10,044 |
|
|
|
(1,539 |
) |
|
|
286I |
|
|
|
8,791 |
|
Gain on extinguishment of
debt |
|
|
(1,233 |
) |
|
|
|
|
|
|
|
|
|
|
(1,233 |
) |
Gain on sale of assets |
|
|
(726 |
) |
|
|
|
|
|
|
|
|
|
|
(726 |
) |
Gain from change in fair
value of derivative
instruments |
|
|
(1,364 |
) |
|
|
(3,898 |
) |
|
|
|
|
|
|
(5,262 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from
continuing operations before
income tax recovery |
|
|
(10,303 |
) |
|
|
4,925 |
|
|
|
(286 |
) |
|
|
(5,664 |
) |
Income tax expense (recovery) |
|
|
(1,503 |
) |
|
|
345 |
|
|
|
|
|
|
|
(1,158 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from
continuing operations |
|
$ |
(8,800 |
) |
|
$ |
4,580 |
|
|
$ |
(286 |
) |
|
$ |
(4,506 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) per share
from continuing operations |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
(0.17 |
) |
Diluted |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(0.17 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of
shares outstanding basic |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
26,000,151 |
J |
Weighted average number of
shares outstanding
diluted |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
26,000,151 |
K |
See notes to unaudited pro forma condensed combined financial statements.
II-5
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
The following adjustments represent the pro forma adjustments giving effect to the arrangement as
if it had occurred at June 30, 2007 with respect to the unaudited pro forma condensed combined
balance sheets and January 1, 2006 with respect to the unaudited pro forma condensed combined
statements of operations for the year ended December 31, 2006 and for the six months ended June 30,
2007.
| |
A. |
|
Reflects the release of Ad.Ventures restricted cash held in trust and the transfer of
the balance to cash. |
| |
| |
B. |
|
Gives effect to the payment of $8.645 million of estimated costs payable in cash
directly attributable to the arrangement. The estimated costs include $4.045 million in
legal and accounting fees payable by Ad.Venture and 180 Connect, $3.0 million in financial
advisory fees payable by 180 Connect and $1.6 million in deferred underwriting fees payable
by Ad.Venture. As the arrangement is being treated as the equivalent of 180 Connect issuing
stock for the net monetary assets of Ad.Venture, these costs are charged to equity. In
addition, this gives effect to the payment of $1.975 million in bonuses to certain of 180
Connects directors and officers, which are charged to retained earnings (deficit) in the
pro forma financial statements. |
| |
| |
C. |
|
Gives effect to the payment of $900,000 of notes payable to shareholders and $150,000
to cover operating expenses. |
| |
| |
D. |
|
On July 2, 2007, Laurus and 180 Connect entered into an amendment of the existing 180
Connect credit facility, whereby Laurus increased 180 Connects revolving credit facility
from $37.0 million to $45.0 million until August 24, 2007. In addition, Laurus also agreed
to extend the maturity of the over-advance facility from July 31, 2007 until August 24,
2007. |
| |
| |
|
|
Pursuant to this amendment, 180 Connect issued to Laurus 1,000,000 warrants with a five year
term and an exercise price of $2.61. Ad.Venture issued to Laurus warrants to purchase
250,000 shares of Ad.Venture common stock upon the completion of the arrangement on August
24, 2007 with an exercise price of $2.38. These warrants have been valued using the
Black-Scholes model. Additionally, Laurus received a management fee of $200,000 and upon the
closing of the arrangement received a commitment fee of $1.4 million. In the event that
funds are drawn from the additional $8.0 million available under the amendment to the
revolving credit facility, they would be repaid on August 24, 2007. At August 24, 2007,
there was no balance outstanding under this agreement. |
| |
| |
|
|
This pro forma adjustment reflects the recording of the warrants and the payment of the
fees. |
| |
| |
E. |
|
On August 24, 2007 the Laurus term loan was paid down by $5.0 million without any
redemption premium. This pro forma adjustment reflects the required repayment. |
| |
| |
F. |
|
This adjustment reflects the payout of the conversion value to the Ad.Venture common
stockholders who exercised their conversion rights (1,672,288 shares at approximately $5.87
per share). The remainder of the conversion value was reclassified to stockholders
equity. |
| |
| |
G. |
|
The consummation of the Arrangement Agreement constitutes an event of default as it is
a fundamental transaction under 180 Connects convertible debt agreement. As a result, the
convertible debenture has been reclassified as a current liability in the pro forma
condensed combined balance sheet. The amount together with the related embedded
derivatives liability amount has been increased to 120% of the convertible debenture
principal amount. On August 29, 2007, the lenders exercised their right to redeem the
convertible debentures in full at an amount of 120% of the outstanding principal in
accordance with the terms of the convertible debenture agreement. The payment of this
redemption has been reflected in this pro forma adjustment. |
| |
| |
H. |
|
Reflects the reclassification of Ad.Ventures net monetary assets to paid in capital
and the issuance of 16,413,620 shares of common stock at $0.0001 par value in exchange for
27,356,034 180 Connect shares of common stock. |
II-6
| |
I. |
|
Reflects the elimination of interest income attributable to cash paid as a result of
common stock subject to conversion. |
| |
| |
J. |
|
Reflects 11,249,997 shares of Ad.Venture common stock outstanding before the
acquisition plus 16,422,442 shares issued to 180 Connect stockholders less 1,672,288
Ad.Venture shares not converted. See the table set forth below under Note K. |
| |
| |
K. |
|
Given the pro forma loss from continuing operations, diluted earnings per share is
anti-dilutive. The table below shows the number of shares that would be outstanding if all
potential dilutive instruments were exercised or converted: |
| |
|
|
|
|
AVP Shares Outstanding |
|
|
11,249,997 |
|
180 Connect Shares Outstanding |
|
|
16,422,442 |
|
Less: AVP Shares Not Converted |
|
|
(1,672,288 |
) |
|
|
|
|
Total Shares Outstanding |
|
|
26,000,151 |
|
|
|
|
|
|
|
|
|
|
Potentially Dilutive Securities: |
|
|
|
|
PIPE Warrants |
|
|
942,060 |
|
Employee Options |
|
|
323,479 |
|
Laurus Warrants |
|
|
600,000 |
|
Stock Appreciation Rights |
|
|
167,999 |
|
AVP Warrants and Unit Options |
|
|
19,350,000 |
|
AVP Warrants (issued in connection with the bridge financing) |
|
|
250,000 |
|
|
|
|
|
Maximum Potential Diluted Shares Outstanding |
|
|
47,633,689 |
|
|
|
|
|
| |
L. |
|
Reflects the restatement of the 180 Connect balance sheet as at June 30, 2007 to
reclassify to current portion of long-term debt amounts previously disclosed as long-term
debt in accordance with the Financial Accounting Standards Board (FASB) Emerging Issues
Task Force Issue No.95-22, Balance Sheet Classification of Borrowings Outstanding under
Revolving Credit Agreements that Include Both a Subjective Acceleration Clause and a
Lock-Box Arrangement. |
II-7