EX-99.3 4 v102922_ex99-3.htm

Unaudited Pro Forma Condensed Consolidated Financial Data

The following unaudited pro forma condensed consolidated balance sheet is derived from the historical balance sheets of the Fortress International Group, Inc., (“Fortress”) and Rubicon Integration LLC (“Rubicon”) as of September 30, 2007. The unaudited pro forma condensed combined statement of operations for the nine months ended September 30, 2007 is derived from the historical financial statements of Fortess and Rubicon for the same period.  The unaudited pro forma condensed combined statement of operations for the year ended December 31, 2006 is derived from the historical statement of operations of Rubicon for the period from inception (August 15, 2006) through December 31, 2006, the historic financial statement of operations of Fortress and those of VTC, LLC and Vortech, LLC (“TSS/Vortech”, which were acquired by Fortress on January 19, 2007) for the year ended December 31, 2006.

The unaudited pro forma condensed consolidated balance sheet gives effect to the acquisition as if it occurred on January 1, 2007, and the unaudited pro forma condensed consolidated statements of operations for the year-ended December 31, 2006 and the nine months ended September 30, 2007 give effect to the acquisition as if it occurred on August 15, 2006.

 The unaudited pro forma condensed consolidated balance sheet and statements of operations reflect Fortress’ November 30, 2007 acquisition of Rubicon for approximately $7.5 million, including acquisition costs, for all of the outstanding capital interest of Rubicon. Total consideration is subject to change based on the outcome of certain possible post-closing working capital and other adjustments. See the Fortress’ Form 8-K as filed with the Securities and Exchange Commission on December 6, 2007 for a description of the possible adjustments. Rubicon provides consulting, owner’s representation and equipment integration services for mission-critical facilities to corporate customers across the United States.

Management believes that, on the basis set forth herein, the pro forma statements reflect a reasonable estimate of the Rubicon acquisition based on currently available information. The acquisition is accounted for under the purchase method of accounting. The allocation of purchase price is based upon the estimated fair value of assets acquired and liabilities assumed. Certain of the purchase price allocations reflected in the Pro Forma Statements are preliminary and may be different from the final allocation of the purchase price and any such differences may be material. The pro forma financial data is presented for informational purposes only and does not purport to represent what the Company’s financial position or results of operations would have been had the Rubicon acquisition in fact occurred on the dates assumed or that may result from future operations. The pro forma data should be read in conjunction with the Company’s Consolidated Financial Statements and Rubicon’s financial statements and related notes thereto.


FORTRESS INTERNATIONAL GROUP, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
September 30, 2007
 
                   
   
 
     
Pro forma
 
Pro forma
 
   
Fortress
 
Rubicon
 
Adjustments
 
Combined
 
ASSETS
                 
                   
Current assets
                 
Cash
 
$
17,930,458
 
$
481,241
 
$
(5,082,222
) (A)
$
13,329,477
 
Contract and other receivables, net
   
9,021,636
   
202,685
   
-
   
9,224,321
 
Cost and estimated earnings in excess of billings
                     
-
 
 on uncompleted contracts
   
4,225,316
   
-
   
-
   
4,225,316
 
Other prepaid
   
570,325
   
1,750
   
-
   
572,075
 
Income taxes recoverable
   
840,000
   
-
   
-
   
840,000
 
Total current assets
   
32,587,735
   
685,676
   
(5,082,222
)(A)
 
28,191,189
 
                           
Property and equipment, net
   
1,068,242
   
1,758
   
-
   
1,070,000
 
Goodwill
   
16,499,945
   
-
   
3,136,098
  (A)  
19,636,043
 
Intangibles, net
   
18,503,881
   
-
   
3,193,125
  (A)  
21,697,006
 
Other assets
   
477,352
   
-
   
-
   
477,352
 
Total assets
 
$
69,137,155
 
$
687,434
 
$
1,247,001
 
$
71,071,590
 
                           
                           
LIABILITIES AND MEMBERS' EQUITY
                         
                           
Current Liabilities
                         
Notes payable-current portion
 
$
121,692
 
$
-
 
$
1,517,753
  (A)
$
1,639,445
 
Accounts payable and accrued expenses
   
11,617,131
   
90,555
 
 
243,150
   
11,950,836
 
Billings in excess of costs and estimated earnings
                     
-
 
 on uncompleted contracts
   
1,814,612
   
145
   
-
   
1,814,757
 
 Total current liabilities
   
13,553,435
   
90,700
   
1,760,903
   
15,405,038
 
                           
Notes payable
   
7,785,193
   
-
   
-
   
7,785,193
 
 
                         
Total liabilities
   
21,338,628
   
90,700
   
1,760,903
   
23,190,231
 
                           
Common stock, par value of $.0001 per share
   
1,193
   
-
   
200
  (A)  
1,393
 
Additional paid in capital
   
54,047,798
   
-
   
1,247,550
  (A)  
55,295,348
 
Treasury stock
   
(814,197
)
 
-
   
-
   
(814,197
)
Retained earnings (accumulated deficit)
   
(5,436,267
)
 
-
   
(1,164,918
)
 
(6,601,185
)
Members' equity
   
-
   
596,734
   
(596,734
) (A)
 
-
 
Total liabilities; members' and stockholders' equity
 
$
69,137,155
 
$
687,434
 
$
1,247,001
 
$
71,071,590
 
 

See notes to unaudited pro forma condensed consolidated financial statements.


FORTRESS INTERNATIONAL GROUP, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
Nine Months Ending September 30, 2007
 
                       
   
 
     
Pro Forma
     
Pro Forma
 
   
Fortress
 
Rubicon
 
Adjustments
     
Combined
 
                       
Revenue
 
$
32,232,016
 
$
6,823,582
 
$
-
       
$
39,055,598
 
                                 
Cost of revenue
   
27,378,926
   
5,861,853
   
-
         
33,240,779
 
Gross profit
   
4,853,090
   
961,729
   
-
         
5,814,819
 
                                 
Selling, general and administrative
   
10,026,448
   
387,333
   
410,100
   
(B
)
 
10,823,881
 
Depreciation
   
289,708
   
586
    -          
290,294
 
Amortization of intangibles
   
1,574,671
   
8,689
   
613,875
   
(C
)
 
2,197,235
 
Total operating expenses
   
11,890,827
   
396,608
   
1,023,975
         
13,311,410
 
                                 
Operating income
   
(7,037,737
)
 
565,121
   
(1,023,975
)
       
(7,496,591
)
                                 
Other income (expense), net
   
476,388
   
(29,824
)
 
(140,943
)
 
(D
)
 
305,621
 
Net income (loss) before income taxes
   
(6,561,349
)
 
535,297
   
(1,164,918
)
       
(7,190,970
)
                                 
Income tax (benefit)
   
(349,325
)
 
-
   
-
   
(E
)
 
(349,325
)
                                 
Net income (loss)
 
$
(6,212,024
)
$
535,297
 
$
(1,164,918
)
     
$
(6,841,645
)
                                 
Weighted average shares outstanding, basic and diluted
   
11,743,186
                     
11,943,186
(F)
                                 
Net loss per share, basic and diluted
 
$
(0.53
)
                 
$
(0.57
)
 

See notes to unaudited pro forma condensed consolidated financial statements.


FORTRESS INTERNATIONAL GROUP, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
Twelve Months Ending December 31, 2006
 
                               
               
TSS/Vortech
 
Rubicon
         
               
Pro Forma
 
Pro Forma
     
Pro Forma
 
   
Fortress
 
TSS/Vortech
 
Rubicon
 
Adjustments
 
Adjustments
     
Combined
 
                               
Revenue
 
$
-
 
$
60,154,971
 
$
185,860
 
$
-
 
$
-
       
$
60,340,831
 
                                             
Cost of revenue
   
-
   
48,172,911
   
90,970
   
-
   
-
         
48,263,881
 
Gross profit
   
-
   
11,982,060
   
94,890
   
-
   
-
         
12,076,950
 
                                             
Selling, general and administrative
   
-
   
8,165,386
   
19,352
   
1,449,337
 (G)  
546,800
   
(B
)
 
10,180,875
 
Depreciation
   
-
   
277,664
   
-
    -      -          
277,664
 
Amortization of intangibles
   
-
   
-
   
46,943
   
2,468,800
 (H)  
818,500
   
(C
)
 
3,334,243
 
Formation and operating costs
   
689,120
   
-
   
-
   
-
   
-
         
689,120
 
Total operating expenses
   
689,120
   
8,443,050
   
66,295
   
3,918,137
   
1,365,300
         
14,481,902
 
                                             
Operating income
   
(689,120
)
 
3,539,010
   
28,595
   
(3,918,137
)
 
(1,365,300
)
       
(2,404,952
)
                                             
Other income (expense), net
   
1,666,806
   
(24,084
)
 
-
   
(769,867
) (I)
 
(187,924
)
 
(D
)
 
684,931
 
Net income (loss) before income taxes
   
977,686
   
3,514,926
   
28,595
   
(4,688,004
)
 
(1,553,224
)
       
(1,720,021
)
                                             
Income tax expense
   
332,414
   
-
   
-
   
-
   
-
   
(E
)
 
332,414
 
                                             
Net income (loss)
 
$
645,272
 
$
3,514,926
 
$
28,595
 
$
(4,688,004
)
$
(1,553,224
)
     
$
(2,052,435
)
                                             
                                             
Weighted average shares outstanding, basic and diluted
   
9,550,000
                                 
11,596,713
 (F)
                                             
Net loss per share, basic and diluted
 
$
0.07
                               
$
(0.18
)
 

See notes to unaudited pro forma condensed consolidated financial statements.


FORTRESS INTERNATIONAL GROUP, INC.
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 

(A) Calculation of the purchase price of Rubicon by Fortress on November 30, 2007
 
 
 
 
 
 
 
Cash
 
$
4,500,000
 
 
 
 
Working capital adjustment paid
 
 
293,189
 
 
 
 
Direct costs incurred
 
 
148,090
 
 
 
 
Common stock issued 
 
 
1,080,800
 
 
*
 
Contingent promissory note, issued December 31, 2007
 
 
1,517,753
 
 
**
 
 
 
 
 
 
 
 
 
Total consideration
 
$
7,539,832
 
 
 
 
 
 
 
 
 
 
 
 
Estimated allocation of the purchase price:
 
 
 
 
 
 
 
Fair value of net tangible assets acquired
 
$
596,734
 
 
 
 
Fair value of intangbile assets acquired, net:
 
 
 
 
 
 
 
Goodwill
 
 
3,136,098
 
 
 
 
Tradename
 
 
540,000
 
 
 
 
In-place contracts
 
 
50,000
 
 
 
 
Customer relationships
 
 
2,800,000
 
 
 
 
Covenants not to compete
 
 
417,000
 
 
 
 
 
 
 
 
 
 
 
 
Total allocated purchase price
 
$
7,539,832
 
 
 
 


*
The stock is comprised of 200,000 shares of Fortress common stock valued at $5.40 per share, which is computed as the five day average closing price from  November 28, 2007 through December 2, 2007.
 
**
This contingent note was issued and earned at December 31, 2007, based on achieving peformance targets detailed in the purchase agreement for the month of December 2007. The note is required to be paid January 31, 2007 and includes additional consideration of interest at an annual rate of 6% from the purchase date through December 31, 2007.
 
(B)
To record increased employee compensation compensation totaling $546,800 and $410,100 for the twelve month period ending December 31, 2006 and the nine month period ending September 30, 2007, respectively.
 
(C)
To record intangible amortization expense on in place contracts, customer relationships and covenants not to compete over a estimated lives of one year, five years and  two years, respectively, on a straight line basis. Amortization expense totaled $818,500 and $613,875 for the twelve month period ended December 31, 2006 and the nine month period ended September 30, 2007, respectively.
 
(D)
To reverse interest income to reflect the payment of $4,941,279 as the cash portion of the acquisition, including direct costs and working capital adjustments, which totaled $187,924 and $140,943 for the twelve month period ending December 31, 2006 and the nine month period ending September 30, 2007, respectively.
 
(E)
There is no tax benefit, as any asset is fully reserved.
 
(F)
Pro forma net income per share was calculated by dividing pro forma net income by the weighted average number of shares outstanding as follows:

   
Twelve Months
     
Nine Months
 
   
Ended
     
Ended
 
   
December 31,
     
September 30,
 
   
2006
     
2007
 
Weighted average shares outstanding, as previously filed
   
9,550,000
         
11,743,186
 
TSS/Vortech acquistion
   
1,846,713
   
*
   
-
 
Rubicon acquisition
   
200,000
   
**
   
200,000
 
     
 
         
 
 
Basic and diluted average shares outstanding
   
11,596,713
         
11,943,186
 
                     

*
Includes 2,602,813 shares of Fortress stock issued in the TSS/Vortech acquisition, which was offset by 756,100 shares repurchased for $4.3 million in cash by Fortress from shareholders voting against the TSS/Vortech acquistion.
 
**
Includes 200,000 shares of Fortress common stock valued at $5.40 per share, which is computed as the five day average closing price from November 28, 2007 through December 2, 2007.


FORTRESS INTERNATIONAL GROUP, INC.
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
 
The following represent TSS/Vortech pro forma adjustments at December 31, 2006:

(G)
Adjustments to selling, general and administrative expenses for the twelve month period ended December 31, 2006 are as follows:

Salary to be paid to a director under an employment agreement entered into in conjunction with the acquisition:
  $
200,000
 
 
     
Consulting payments to be made to Washington Capital Advisors, LLC under a consulting agreement entered into in conjunction with the acquisition
   
200,000
 
 
     
Increased compensation expense related to 576,559 shares granted to key employees under restricted share grants issued in conjunction with the acquisition
   
1,049,337
 
 
     
Total selling, general and administrative expense adjustments for the twelve month period ended December 31, 2006
  $
1,449,337
 


(H)
To record increased amortization expense of customer relationships and, in-place contracts totaling $2,012,500 and $456,300, respectively, for the twelve months ended December 31, 2006. The intangibles will be amortized straight line over their respective weighted average lives.

(I)
To reduce interest income and increase interest expense, net by $769,867 for the twelve months ended December 31, 2006. The estimated decrease interest income on cash consideration was $169,867. Increased interest expense on the average outstanding convertible promissory notes issued in conjunction with the acquisition totaled $600,000 for the twelve month period ended December 31, 2006.