Form: 8-K/A

Current report filing

September 7, 2011

Exhibit 99.2

CommereTel Corporation
Unaudited Pro Forma Condensed Consolidated Financial Statements

On April 1, 2011, CommereTel Corporation ("CommerceTel" or the “Company”) completed its acquisition of substantially all of the assets of Adsparq Limited’s (“Adsparq”) Txtstation interactive mobile marketing platform and services. The purchase price for the acquisition was 2,125,000 shares of the Company’s common stock, $26,184 in cash at closing and $250,000 of scheduled cash payments.  The $250,000 of scheduled cash payments are due as follows:  $25,000 payable on the 60th day following closing and the balance is payable in $25,000 installments at the end of each of the next nine 30-day periods thereafter.  The Company assumed none of Adsparq’s liabilities in the transaction, except for the performance obligation of unearned revenue.  For a period of one year following the closing of the transaction, half of the shares of common stock issued to Adsparq will be held in escrow as security for Adsparq’s obligations under the agreement.
 
In connection with the transaction, the Company also issued 300,000 shares of its common stock to the controlling stockholder of Adsparq in consideration of certain indemnification obligations and other agreements.  For one year following the closing of the transaction,  the shareholder has agreed not to, directly or indirectly, transfer, donate, sell, assign, pledge, hypothecate, grant a security interest in or otherwise dispose or attempt to dispose of all or any portion of shares issued to it (or any interest therein).
 
The acquisition has been accounted for as a business combination and the Company valued all assets and liabilities acquired at their fair values on the date of acquisition. Accordingly, the assets and liabilities of the acquired entity were recorded at their estimated fair values at the date of the acquisition.
 
The allocation of the purchase price to assets and liabilities based upon fair value determinations was as follows:
 
Current assets
  $ 10,184  
Equipment
    31,230  
Customer contracts
    1,026,000  
Trade name
    36,000  
Technology/IP
    182,000  
Non-compete
    1,000  
Goodwill
    1,426,730  
Assumed liabilities – deferred revenue
    (20,000 )
Total purchase price
  $ 2,693,144  
 
The purchase price consists of the following:
 
Cash
  $ 26,184  
Present value of scheduled cash payments
    241,960  
Common stock
    2,425,000  
Total purchase price
  $ 2,693,144  
 
The following unaudited pro forma condensed consolidated financial statements have been prepared to give effect to the completed acquisition, which was accounted for as a purchase.
 
 
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The unaudited pro forma condensed consolidated balance sheet as of March 31, 2011, and the unaudited pro forma condensed consolidated statements of operations for the year ended December 31, 2010 and three months ended March 31, 2011, are presented herein. The unaudited pro forma condensed consolidated balance sheet was prepared using the historical balance sheets of CommerceTel as of March 31, 2011 and Adsparq as of March 31, 2011. The unaudited pro forma condensed consolidated statements of operations were prepared using the historical statements of operations of CommerceTel for the year ended December 31, 2010 and three months ended March 31, 2011, and the historical statements of operations of Adsparq for the year ended March 31, 2011 and three months ended March 31, 2011.
 
The unaudited pro forma condensed consolidated balance sheet gives effect to the acquisition as if it had been completed on March 31, 2011, and consolidates the unaudited condensed balance sheets of CommerceTel and the assets acquired from Adsparq. The unaudited pro forma condensed consolidated statements of operations for the years ended December 31, 2010 and three months ended March 31, 2011 give effect to the acquisition as if it had occurred on January 1, 2010.
 
The unaudited pro forma condensed consolidated financial statements presented are based on the assumptions and adjustments described in the accompanying notes. The unaudited pro forma condensed consolidated financial statements are presented for illustrative purposes and do not purport to represent what the financial position or results of operations actually would have been if the events described above occurred as of the dates indicated or what such financial position or results would be for any future periods. The pro forma information does not reflect cost savings expected to be realized from the elimination of certain expenses and from synergies expected to be created or the costs to achieve such cost savings or synergies.  No assurance can be given that cost savings or synergies will be realized.  The unaudited pro forma condensed consolidated financial statements, and the accompanying notes, are based upon the respective historical consolidated financial statements of CommerceTel and Adsparq, and should be read in conjunction with CommerceTel’s historical financial statements and related notes, CommerceTel’s "Management's Discussion and Analysis of Financial Condition and Results of Operation" contained in CommerceTel’s Annual Report on Form 10-K for the year ended December 31, 2010, and Adsparq’s financial statements presented as Exhibit 99.1 to this Current Report Form 8-K/A.

 
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CommerceTel Corporation
 
Unaudited Pro Forma Condensed Consolidated Balance Sheet
 
As of March 31, 2011
 
                           
                           
   
Historical
   
Pro Forma
         
   
CommerceTel
   
Adsparq
   
Adjustments
     
Pro-Forma
 
                           
Current assets
                         
Cash
  $ 205,191     $ -     $ (26,184 )
(a)
  $ 179,007  
Accounts receivable
    50,227       131,215       (131,215 )
(b)
    50,227  
Other current assets
    91,708       13,333       (3,149 )
(c)
    101,892  
Total current assets
    347,126       144,548       (160,548 )       331,126  
                                   
Equipment, net
    2,737       40,597       (9,367 )
(d)
    33,967  
Goodwill
    -       -       1,426,730  
(e)
    1,426,730  
Intangible assets, net
    77,105       -       1,245,000  
(f)
    1,322,105  
Other assets
    46,317       377       (377 )
(b)
    46,317  
Total Assets
  $ 473,285     $ 185,522     $ 2,501,438       $ 3,160,245  
                                   
                                   
Current liabilities
                                 
Accounts payable
  $ 233,307     $ 116,561     $ (116,561 )
(b)
  $ 233,307  
Accrued interest
    64,499       17,901       (17,901 )
(b)
    64,499  
Accrued and deferred personnel compensation
    113,285       539,196       (539,196 )
(b)
    113,285  
Deferred revenue and customer deposits
    286,677       55,988       (35,988 )
(g)
    306,677  
Notes payable, net of discount
    889,283       119,340       (119,340 )
(b)
    889,283  
Cash payment obligation, net of discount
    -       -       241,960  
(h)
    241,960  
Derivative liabilities
    289,504       -       -         289,504  
Other current liabilities
    68,692       207,399       (207,399 )
(b)
    68,692  
Total current liabilities
    1,945,247       1,056,385       (794,425 )       2,207,207  
                                   
Non-current liabilities
                                 
Common Stock Liability
    128,030       -       -         128,030  
Derivative liabilities
    81,794       -       -         81,794  
Total non-current liabilities
    209,824       -       -         209,824  
Total liabilities
    2,155,071       1,056,385       (794,425 )       2,417,031  
                                   
                                   
Stockholders' equity (deficit)
                                 
     Common stock
    17,854       -       2,425  
(i)
    20,279  
     Other comprehensive loss
    -       (138,502 )     138,502  
(b)
    -  
     Additional paid-in capital
    7,202,830       298,082       2,124,493  
(i)
    9,625,405  
     Accumulated deficit
    (8,902,470 )     (1,030,443 )     1,030,443  
(b)
    (8,902,470 )
Total stockholders' equity (deficit)
    (1,681,786 )     (870,863 )     3,295,863         743,214  
Total liabilities and stockholders' equity (deficit)
  $ 473,285     $ 185,522     $ 2,501,438       $ 3,160,245  
                                   
See accompanying notes to Unaudited Pro Forma Condensed Consolidated Financial Statements.
 
 
 
 
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CommerceTel Corporation
 
Unaudited Pro Forma Condensed Consolidated Statement of Operations
 
For the Three Months Ended March 31, 2011
 
                           
   
Historical
   
Pro Forma
         
   
CommerceTel
   
Adsparq
   
Adjustments
     
Pro Forma
 
Revenues
                         
                           
Revenues
  $ 140,638     $ 240,058     $ -       $ 380,696  
Cost of revenues
    79,837       21,892       -         101,729  
Gross margin
    60,801       218,166       -         278,967  
                                   
Operating expenses
                                 
General & administrative
    545,039       150,785       (3,589 )
(j)
    692,235  
Sales & marketing
    57,851       70,462       -         128,313  
Engineering, research, & development
    128,571       23,847       -         152,418  
Depreciation & amortization
    -       -       67,530  
(k)
    67,530  
Total operating expenses
    731,461       245,094       63,941         1,040,496  
                                   
Loss from operations
    (670,660 )     (26,928 )     (63,941 )       (761,529 )
                                   
Other income/(expense)
                                 
Interest income
    158       -       -         158  
Interest expense
    (105,408 )     -       -         (105,408 )
Change in fair market value of derivative liabilities
    47,693       -       -         47,693  
Total other income/(expense)
    (57,557 )     -       -         (57,557 )
                                   
Income tax benefit/(expense)
    -       -       -         -  
                                   
Net loss
  $ (728,217 )   $ (26,928 )   $ (63,941 )     $ (819,086 )
                                   
Net loss per share - basic and diluted
  $ (0.04 )                     $ (0.04 )
                                   
Weighted average number of shares
                                 
    during the period - basic and diluted
    17,711,048               2,425,000  
(l)
    20,136,048  
                                   
See accompanying notes to Unaudited Pro Forma Condensed Consolidated Financial Statements
 

 
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CommerceTel Corporation
 
Unaudited Pro Forma Condensed Consolidated Statement of Operations
 
For the Year Ended December 31, 2010
 
                           
   
Historical
   
Pro Forma
         
   
CommerceTel
   
Adsparq
   
Adjustments
     
Pro Forma
 
Revenues
                         
                           
Revenues
  $ 919,216     $ 960,231     $ -       $ 1,879,447  
Cost of revenues
    417,870       87,567       -         505,437  
Gross margin
    501,346       872,664       -         1,374,010  
                                   
Operating expenses
                                 
General & administrative
    1,163,479       603,139       (14,356 )
 (m)
    1,752,262  
Sales & marketing
    225,783       281,848       -         507,631  
Engineering, research, & development
    405,819       95,388       -         501,207  
Depreciation & amortization
    -       -       270,120  
 (n)
    270,120  
Total operating expenses
    1,795,081       980,375       255,764         3,031,220  
                                   
Loss from operations
    (1,293,735 )     (107,711 )     (255,764 )       (1,657,210 )
                                   
Other income/(expense)
                                 
Interest expense
    (120,388 )     -       (8,040 )
 (o)
    (128,428 )
Change in fair market value of derivative liabilities
    (14,861 )     -       -         (14,861 )
Gain on debt extinguishment
    199,401       -       -         199,401  
Total other income/(expense)
    64,152       -       (8,040 )       56,112  
                                   
Income tax benefit/(expense)
    -       -       -         -  
                                   
Net loss
  $ (1,229,583 )   $ (107,711 )   $ (263,804 )     $ (1,601,098 )
                                   
Net loss per share - basic and diluted
  $ (0.14 )                 $   $ (0.14 )
                                   
Weighted average number of shares during the period - basic and diluted
    8,950,585               2,425,000  
 (q)
    11,375,585  
 
See accompanying notes to Unaudited Pro Forma Condensed Consolidated Financial Statements
 
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CommerceTel Corporation
Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements

Note 1.   Basis of Presentation
 
The accompanying unaudited pro forma condensed consolidated financial statements present the pro forma results of operations and financial position of CommerceTel and Adsparq on a combined basis based on the historical financial information of each company and after giving effect to the acquisition of Adsparq by CommerceTel. The acquisition was recorded using the acquisition method of accounting.
 
The unaudited pro forma condensed combined consolidated balance sheet as of March 31, 2011 combines the historical results for CommerceTel as of March 31, 2011 and the historical results for Adsparq as of March 31, 2011, as if the acquisition had occurred on March 31, 2011. The unaudited pro forma condensed consolidated statement of operations for the three months ended March 31, 2011, combines the historical results for CommerceTel for the three months ended March 31, 2011 and the historical results for Adsparq for the three months ended March 31, 2011, as if the acquisition had occurred on January 1, 2010. The unaudited pro forma condensed consolidated statement of operations for the year ended December 31, 2010 combines the historical results for CommerceTel for the twelve months ended December 31, 2010 and the historical results for Adsparq for the twelve months ended March 31, 2011, as if the acquisition had occurred on January 1, 2010.
 
Note 2.   Pro Forma Adjustments
  
(a)  
Represents the cash paid at closing of the acquisition
 
(b)  
Represents elimination of the assets, liabilities and equity that were not acquired in the transaction
 
(c)  
Represents the current assets of $10,184 acquired in the acquisition net of the current assets not acquired.
 
(d)  
To reflect the estimated fair value of fixed assets acquired in the acquisition.
 
(e)  
To reflect the estimated amount of goodwill resulting from the excess of the purchase price over the fair value of net tangible and identifiable intangible assets acquired.
 
(f)  
To reflect the estimated fair value of identifiable intangible assets acquired in the acquisition.
 
(g)  
To reflect the $20,000 of assumed liabilities net of the liabilities not assumed in the acquisition.
 
(h)  
To reflect the $241,960 obligation recorded at closing which represented the present value of the $250,000 cash payment obligation over the subsequent periods.
 
(i)  
To reflect the common stock issued as consideration in the acquisition net of Adsparq additional paid in capital not acquired in the transaction.
 
(j)  
To reflect the elimination of depreciation expense within Adsparq historical financial statements for the three months ended March 31, 2011.
 
(k)  
Represents the amortization and depreciation of $62,325 and $5,205, respectively, related to the fair value of identifiable amortizable intangible assets and fixed assets acquired in the transaction, as if the acquisition had been completed on January 1, 2010.
 
(l)  
To reflect the issuance of 2,425,000 shares of common stock on the date of acquisition.
 
(m)  
To reflect the elimination of depreciation expense within Adsparq historical financial statements for the year ended December 31, 2011.
 
(n)  
Represents the amortization and depreciation of $249,300 and $20,820, respectively, related to the fair value of identifiable amortizable intangible assets and fixed assets acquired in the transaction, as if the acquisition had been completed on January 1, 2010.
 
(o)  
To reflect the issuance of 2,425,000 shares of common stock on the date of acquisition.

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