EX-99.3 2 i00368_ex99-3.htm

KEYON COMMUNICATIONS HOLDINGS, INC. AND SUBSIDIARIES
INTRODUCTION TO PRO FORMA CONDENSED
COMBINED FINANCIAL STATEMENTS (Unaudited)

The following unaudited pro forma condensed combined financial statements give effect to the acquisition of substantially all of the assets and the assumption of certain liabilities of the wireless internet service provider business of Dynamic Broadband Corporation (“DYBB”), by KeyOn Communications Holdings, Inc. (“KeyOn” or the “Company”) completed on May 28, 2010.

On May 28, 2010, pursuant to the consummation of the Asset Purchase and Sale Agreement (the “Asset Purchase Agreement”), the Company’s acquisition of DYBB became effective, whereby the Company acquired substantially all of the wireless internet service provider assets and assumed certain of the liabilities of DYBB. The wireless broadband assets exclude DYBB’s managed service business known as “X-Wires.”

The unaudited pro forma information is presented for illustration purposes only in accordance with the assumptions set forth below and in the notes to the pro forma combined condensed financial statements.

The unaudited pro forma balance sheet and statements of operations should be read in conjunction with the separate historical financial statements of DYBB, appearing elsewhere herein. These pro forma condensed combined financial statements may not be indicative of what would have occurred if the acquisitions and Merger had actually occurred on the indicated dates and they should not be relied upon as an indication of future results of operations.

On May 28, 2010, pursuant to the Asset Purchase Agreement and in connection with the acquisition, the Company issued 2,005,306 shares of common stock valued at $.96 per share, either assumed or repaid obligations totaling approximately $381,000 and inherited a net working capital deficit of $182,237. The balance of the consideration of 32,268 shares of common stock valued at $.96 per share was issued on July 2, 2010 as a result of the final net working capital calculation, for an aggregate purchase price of $2,511,600.


 

KEYON COMMUNICATIONS HOLDINGS INC. AND SUBSIDIARIES

 

PROFORMA CONDENSED CONSOLIDATED BALANCE SHEETS

AS OF MARCH 31, 2010 (UNAUDITED)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

KeyOn

 

DYBB

 

X Wires

 

Dynamics

 

Adjustments

 

KeyOn pro forma

 

 

 

 

 

(a)

 

(b)

 

(c)

 

(d)

 

(e)

 

 

 

ASSETS

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

CURRENT ASSETS:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash

 

$

9,727,636

 

$

28,452

 

$

28,452

 

$

—

 

 

—

 

$

9,727,636

 

Accounts receivable, net of allowance for doubtful accounts

 

 

108,411

 

 

(9,138

)

 

(6,503

)

 

(2,635

)

 

—

 

 

105,776

 

Inventories

 

 

108,873

 

 

208,510

 

 

30,858

 

 

177,652

 

 

—

 

 

286,525

 

Prepaid expenses and other current assets

 

 

97,646

 

 

48,168

 

 

—

 

 

48,168

 

 

—

 

 

145,814

 

 

 

 

 

Total current assets

 

 

10,042,566

 

 

275,992

 

 

52,807

 

 

223,185

 

 

—

 

 

10,265,751

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

PROPERTY AND EQUIPMENT - Net

 

 

1,538,933

 

 

808,853

 

 

254,724

 

 

554,129

 

 

737,186

   (f)

 

2,830,248

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

OTHER ASSETS

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Goodwill

 

 

1,628,831

 

 

601,650

 

 

601,650

 

 

—

 

 

50,495

   (g)

 

1,679,326

 

Subscriber base -net

 

 

180,098

 

 

—

 

 

—

 

 

—

 

 

658,487

   (h)

 

838,585

 

Trademarks

 

 

16,667

 

 

—

 

 

—

 

 

—

 

 

—

 

 

16,667

 

Refundable deposits

 

 

70,416

 

 

70,747

 

 

70,747

 

 

—

 

 

—

 

 

70,416

 

Debt issuance costs - net

 

 

346,350

 

 

—

 

 

—

 

 

—

 

 

—

 

 

346,350

 

 

 

 

 

Total other assets

 

 

2,242,362

 

 

672,397

 

 

672,397

 

 

—

 

 

708,982

 

 

2,951,344

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

TOTAL ASSETS

 

$

13,823,861

 

$

1,757,242

 

$

979,928

 

 

777,314

 

 

1,446,168

 

 

16,047,343

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS’ (DEFICIT)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

CURRENT LIABILITIES:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accounts payable and accrued expenses

 

$

1,625,433

 

$

583,032

 

$

226,462

 

$

411,532

 

$

(262,045

)  (i)

$

1,774,920

 

Current portion of notes payable

 

 

148,223

 

 

483,505

 

 

483,505

 

 

—

 

 

—

 

 

148,223

 

Current portion of notes payable - related party

 

 

—

 

 

176,142

 

 

176,142

 

 

—

 

 

—

 

 

—

 

Current portion of deferred rent liability

 

 

64,706

 

 

—

 

 

—

 

 

—

 

 

—

 

 

64,706

 

Current portion of capital lease obligations

 

 

700,296

 

 

311,110

 

 

118,222

 

 

192,888

 

 

—

 

 

893,184

 

Deferred revenue

 

 

196,856

 

 

120,159

 

 

45,394

 

 

74,765

 

 

—

 

 

271,621

 

 

 

 

 

Total current liabilities

 

 

2,735,514

 

 

1,673,948

 

 

1,049,725

 

 

679,185

 

 

(262,045

)

 

3,152,654

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

LONG-TERM LIABILITIES:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Deferred rent liability, less current maturities

 

 

64,593

 

 

—

 

 

—

 

 

—

 

 

—

 

 

64,593

 

Derivative liability

 

 

10,450,642

 

 

—

 

 

—

 

 

—

 

 

—

 

 

10,450,642

 

Notes payable, less current maturities

 

 

332,956

 

 

682,853

 

 

682,853

 

 

—

 

 

—

 

 

332,956

 

Capital lease obligations, less current maturities

 

 

375,110

 

 

158,272

 

 

60,143

 

 

98,129

 

 

—

 

 

473,239

 

 

 

 

 

Total long term liabilities

 

 

11,223,301

 

 

841,125

 

 

742,996

 

 

98,129

 

 

—

 

 

11,321,430

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

COMMITMENTS AND CONTINGENCIES

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

STOCKHOLDERS’ (DEFICIT):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Series A preferred stock, $0.001 par value; 60,000,000 shares authorized;
0 shares issued and outstanding at December 31, 2009 and at March 31, 2010

 

 

—

 

 

7,072,222

 

 

7,072,222

 

 

—

 

 

—

 

 

—

 

Common stock, $0.001 par value; 115,000,000 shares authorized;

 

 

 

 

 

 

 

 

—

 

 

—

 

 

—

 

 

—

 

20,686,056 shares issued and outstanding at December 31, 2009;

 

 

 

 

 

 

 

 

—

 

 

—

 

 

—

 

 

—

 

21,181,439 shares issued and outstanding at March 31, 2010

 

 

21,181

 

 

642,430

 

 

642,430

 

 

—

 

 

2,038

   (j)

 

23,219

 

Common stock payable for exercised options

 

 

187,500

 

 

—

 

 

—

 

 

—

 

 

—

 

 

187,500

 

Additional paid-in capital

 

 

26,137,071

 

 

1,311,941

 

 

1,311,941

 

 

—

 

 

1,706,175

   (k)

 

27,843,246

 

Deferred compensation

 

 

(429,431

)

 

—

 

 

—

 

 

—

 

 

—

 

 

(429,431

)

Accumulated deficit

 

 

(26,051,275

)

 

(9,784,424

)

 

(9,784,424

)

 

—

 

 

—

 

 

(26,051,275

)

 

 

 

 

Total stockholders’ (deficit)

 

 

(134,954

)

 

(757,831

)

 

(757,831

)

 

—

 

 

1,708,213

 

 

1,573,259

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

TOTAL LIABILITIES AND STOCKHOLDERS’ (DEFICIT)

 

$

13,823,861

 

$

1,757,242

 

$

1,034,890

 

$

777,314

 

$

1,446,168

 

$

16,047,343

 

 

 

 

 

(a) Derived from the unaudited balance sheet of KeyOn as of March 31, 2010. KeyOn’s balance sheet as of March 31, 2010 has been adjusted for the effects of the embedded derivative feature of its $15,000,000 convertible promissory note. The March 2010 amounts include the effects of an adjustment that was made for an embedded conversion option subject to derivative accounting. The adjustment and restated amounts will be reflected in KeyOn’s financial statements that will be included in a form 10Q/A to be filed with the Securities and Exchange Commission as soon as practicable and following the completion of a SAS 100 review by KeyOn’s independent registered public accountants.

(b) Derived from the unaudited balance sheet of Dynamic Broadband (DYBB) as of March 31, 2010.

(c) Derived from the unaudited balance sheet of DYBB as of March 31, 2010 for the managed service business known as X-Wires that is not part of the purchase agreement with KeyOn that is eliminated from DYBB for this pro forma.

(d) Derived from the unaudited balance sheet of DYBB as of March 31, 2010 for the wireless service provider business “Dynamics” that is part of the purchase agreement with KeyOn.

(e) Amounts presented differ in accounts receivable, accounts payable and accrued expenses, and notes payable from the closing calculations due to the timing difference of this balance sheet, March 31, 2010, and the actual consummation of the acquistion on May 28, 2010.

(f) Represents the fair value for the acquired assets valued by utilizing current purchase prices for used items of the same type from our vendor base.

(g) Reflects KeyOn’s purchase price for the Dynamics assets of $1,528,181 at fair value on the date of consummation. The assets at fair market value totaled $2,153,838 less assumed liabilities of $676,153 netted to $1,477,686. The difference between the purchase price at fair value of $1,528,181 and the net fair value $1,477,686 of $50,495 is booked as goodwill..

(h) Reflects KeyOn’s fair market valuation of the acquired Dynamics subcriber base of approximately 1,800 customers based upon the present value of the anticipated net cash flows over four years.

(i) Reflects the open accounts payable operating liabilities that KeyOn accepted as part of the purchase agreement of Dynamics of approximately $150k.

(j) Reflects KeyOn common stock at $.001 par value to be issued upon the purchase of the Dynamics assets based upon a VWAP of KeyOn stock for 30 days ending the day before the transaction was announced plus 15% with a value paid of $1,400 per customer.

(k) Reflects the KeyOn fair market value of stock on the date of consummation for the Dynamics acquisition.

          The following table provides a breakdown of the purchase price of the acquired assets of Dynamics by KeyOn including the fair value of the purchase consideration issued to the seller.

KEYON COMMUNICATIONS HOLDINGS INC. AND SUBSIDIARIES
DYNAMICS ACQUISITION ASSET VALUATION SUMMARY (as of 05/28/10)

Calculation of Acquisition Accounting

 

 

 

 

 

Stock value on date of transfer (May 28, 2010)

 

$

0.75

 

Net Purchase Price for 2,037,574 shares as of 05/28/10

 

$

1,528,181

 

 

 

 

Accounts Receivable due from subscribers at closing

 

 

18,075

 

Prepaid expenses

 

 

8,309

 

Fixed assets

 

 

1,468,967

 

 

 

 

Net tangible assets acquired

 

 

1,495,351

 

Liabilities assumed

 

 

(676,152

)

 

 

 

Allocated purchase price

 

 

819,199

 

Purchase price remaining to be allocated to intangible assets

 

 

708,982

 

Subscriber base allocation

 

 

658,487

 

 

 

 

Goodwill allocations

 

$

50,495

 

 

 

 

Purchase price allocation is preliminary and subject to adjustment based upon further analysis to be performed by management within the one year measurement period prescribed under the acquisition method of accounting.

Fair Market Value of Acquired Assets

 

 

 

 

 

Equipment

 

 

 

 

Network Equipment and Customer Premise Equipment

 

$

1,243,212

 

Inventory

 

 

177,652

 

Vehicles

 

 

18,925

 

Office Equipment

 

 

29,178

 

 

 

 

Subtotal assets

 

 

1,468,967

 

Subscriber Base

 

 

658,487

 

 

 

 

TOTAL FMV OF ASSETS

 

$

2,127,454

 

 

 

 

Reconcilation of Purchase Price

 

 

 

 

 

Purchase Value (1,794 customers at $1,400 per customer)

 

$

2,511,600

 

Accounts Receivable due from subscribers at closing

 

 

18,075

 

Prepaid Expenses

 

 

8,309

 

Accounts Payable at closing

 

 

(186,008

)

Accrued Expenses

 

 

(22,613

)

Notes payable

 

 

(380,620

)

Estimated Net Working Capital Credit (Deficit) at Closing

 

 

(562,857

)

 

 

 

Purchase Price at 05/28/10

 

$

1,948,743

 

 

 

 

Number of Keyon shares to be issued at VWAP + 15%

 

 

2,037,574

 

 

 

 


 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

KEYON COMMUNICATIONS HOLDINGS INC. AND SUBSIDIARIES

 

PROFORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2009 (UNAUDITED)

 

 

 

 

KeyOn

 

DYBB

 

X Wires

 

Dynamics

 

Adjustments

 

KeyOn pro forma

 

 

 

 

 

 

(a)

 

(b)

 

(c)

 

(d)

 

 

 

 

 

REVENUES:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Service and installation revenue

 

$

6,724,710

 

$

2,746,678

 

$

750,000

 

$

1,996,678

 

$

63,480

   (e)

$

8,784,868

 

Support and other revenue

 

 

173,522

 

 

76,029

 

 

3,230

 

 

72,799

 

 

—

 

 

246,321

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total revenues

 

 

6,898,232

 

 

2,822,707

 

 

753,230

 

 

2,069,477

 

 

63,480

 

 

9,031,189

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

OPERATING COSTS AND EXPENSES:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Payroll, bonuses and taxes

 

 

3,505,812

 

 

1,168,672

 

 

—

 

 

1,168,672

 

 

(859,464

)  (f)

 

3,815,020

 

Professional fees

 

 

1,022,631

 

 

30,415

 

 

1,209

 

 

29,206

 

 

(29,206

)  (g)

 

1,022,631

 

Network operating costs

 

 

2,804,905

 

 

984,515

 

 

188,811

 

 

795,704

 

 

—

 

 

3,600,609

 

Depreciation and amortization

 

 

2,423,657

 

 

350,557

 

 

133,212

 

 

217,345

 

 

487,911

   (h)

 

3,128,914

 

Other general and administrative expense

 

 

1,256,053

 

 

337,535

 

 

42,324

 

 

295,211

 

 

(185,095

)  (i)

 

1,366,169

 

Installation expense

 

 

168,761

 

 

178,298

 

 

9,535

 

 

168,763

 

 

—

 

 

337,524

 

Marketing and advertising

 

 

86,209

 

 

37,203

 

 

21,008

 

 

16,195

 

 

—

 

 

102,404

 

Goodwill asset impairment

 

 

299,322

 

 

—

 

 

—

 

 

—

 

 

—

 

 

299,322

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total operating costs and expenses

 

 

11,567,350

 

 

3,087,195

 

 

396,099

 

 

2,691,096

 

 

(585,854

)

 

13,672,593

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

LOSS FROM OPERATIONS

 

 

(4,669,118

)

 

(264,488

)

 

357,131

 

 

(621,619

)

 

649,334

 

 

(4,641,404

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

OTHER INCOME (EXPENSE):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gain/(loss) on disposal of equipment

 

 

(88

)

 

71,528

 

 

—

 

 

71,528

 

 

—

 

 

71,440

 

Gain on acquisition

 

 

21,686

 

 

 

 

 

 

 

 

 

 

 

—

 

 

21,686

 

Other income - other

 

 

307,887

 

 

38,167

 

 

14,503

 

 

23,664

 

 

—

 

 

331,551

 

Interest income

 

 

2

 

 

—

 

 

 

 

 

—

 

 

—

 

 

2

 

Interest expense

 

 

(2,256,071

)

 

(274,005

)

 

(104,122

)

 

(169,883

)

 

169,883

   (j)

 

(2,256,071

)

 

 

 

 

Total other income (expense)

 

 

(1,926,584

)

 

(164,310

)

 

(89,618

)

 

(74,692

)

 

169,883

 

 

(1,831,393

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

PROVISION FOR INCOME TAXES

 

 

—

 

 

—

 

 

—

 

 

—

 

 

—

 

 

—

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

NET INCOME/(LOSS)

 

$

(6,595,702

)

$

(428,798

)

$

267,513

 

$

(696,311

)

$

819,217

 

$

(6,472,796

)

 

 

 

 

 

Net income (loss) per common share—basic and diluted

 

$

(0.49

)

 

 

 

 

 

 

 

 

 

 

 

 

$

(0.42

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average common shares outstanding—basic and diluted

 

 

13,496,761

 

 

 

 

 

 

 

 

 

 

 

 

 

 

15,534,335

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(a) Derived from the audited statement of financial operations of KeyOn for the year ended December 31, 2009.

 

(b) Derived from the audited statement of financial operations of Dynamic Broadband (DYBB) for the year ended December 31, 2009.

 

(c) Derived from the audited statement of operations of DYBB for the year ended December 31, 2009 for the managed service business known as X-Wires that is not part of the purchase agreement with KeyOn that is eliminated from DYBB for this pro forma.

 

(d) Derived from the audited statement of operations of DYBB for the year ended December 31, 2009 for the wireless internet service provider business “Dynamics” that is part the purchase agreement with KeyOn.

 

(e) Reflects revenue billing to the X-Wires line of business that was intercompany when the two businesses were combined under DYBB.

 

(f) Reflects the elimination of all payroll and payroll related expenses with the exception of six retained employees.

 

(g) Relects the elimination of all professional fees that are duplicative services in KeyOn, i.e., accounting, legal, and consulting professional services.

 

(h) Reflects the increase in depreciation and amortization due to the fair market valuation of the assets acquired by KeyOn with the Dynamics asset purchase. This includes the valuation of tower assets, customer premise equipment, vehicles, office equipment, network equipment, and the valuaton of the subscriber base, an intangible asset. The amortizable life of the subscriber base was determined by using the historical churn of the customer base provided by DYBB in regards to the Dynamics customer base. This churn of 2.1% per month calulates to be a four year life on the subscriber base purchased by KeyOn.

 

(i) Reflects the elimination of duplicate G&A expenses including insurance, bank charges, IRA and other employee related expenses.

 

(j) Reflects the elimination of all interest expense due to all debt being paid off on the date of consummation of the purchase agreement.


 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

KEYON COMMUNICATIONS HOLDINGS INC. AND SUBSIDIARIES

 

PROFORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 2010 (UNAUDITED)

 

 

 

 

KeyOn

 

DYBB

 

X Wires

 

Dynamics

 

Adjustments

 

KeyOn pro forma

 

 

 

 

 

 

(a)

 

(b)

 

(c)

 

(d)

 

 

 

 

 

REVENUES:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Service and installation revenue

 

$

1,554,428

 

$

668,729

 

$

210,517

 

$

458,212

 

$

15,870

   (e)

$

2,028,510

 

Support and other revenue

 

 

40,531

 

 

7,157

 

 

—

 

 

7,157

 

 

—

 

 

47,688

 

 

 

 

 

Total revenues

 

 

1,594,959

 

 

675,886

 

 

210,517

 

 

465,369

 

 

15,870

 

 

2,076,198

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

OPERATING COSTS AND EXPENSES:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Payroll, bonuses and taxes

 

 

1,077,292

 

 

237,133

 

 

—

 

 

237,133

 

 

(163,831

)  (f)

 

1,150,594

 

Professional fees

 

 

904,649

 

 

6,114

 

 

—

 

 

6,114

 

 

(6,114

)  (g)

 

904,649

 

Network operating costs

 

 

665,274

 

 

260,414

 

 

70,964

 

 

189,450

 

 

—

 

 

854,724

 

Depreciation and amortization

 

 

470,495

 

 

95,802

 

 

36,405

 

 

59,397

 

 

116,917

   (h)

 

646,809

 

Other general and administrative expense

 

 

290,040

 

 

73,485

 

 

6,786

 

 

66,699

 

 

(32,455

)  (i)

 

324,284

 

Installation expense

 

 

51,575

 

 

27,480

 

 

3,267

 

 

24,213

 

 

—

 

 

75,788

 

Marketing and advertising

 

 

50,652

 

 

6,010

 

 

2,923

 

 

3,087

 

 

—

 

 

53,739

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total operating costs and expenses

 

 

3,509,977

 

 

706,438

 

 

120,345

 

 

586,093

 

 

(85,483

)

 

4,010,587

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

INCOME/(LOSS) FROM OPERATIONS

 

 

(1,915,018

)

 

(30,552

)

 

90,172

 

 

(120,724

)

 

101,353

 

 

(1,934,389

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

OTHER INCOME (EXPENSE):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gain/(loss) on disposal of equipment

 

 

1,459

 

 

—

 

 

—

 

 

—

 

 

—

 

 

1,459

 

Other income - other

 

 

151,897

 

 

—

 

 

—

 

 

—

 

 

—

 

 

151,897

 

Change in fair value of derivative instruments

 

 

4,549,358

 

 

—

 

 

—

 

 

—

 

 

—

 

 

4,549,358

 

Interest income

 

 

853

 

 

—

 

 

—

 

 

—

 

 

—

 

 

853

 

Interest expense

 

 

(535,100

)

 

(69,884

)

 

(26,556

)

 

(43,328

)

 

43,328

 

 

(535,100

)

 

 

 

 

Total other income (expense)

 

 

4,168,467

 

 

(69,884

)

 

(26,556

)

 

(43,328

)

 

43,328

   (j)

 

4,168,467

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

PROVISION FOR INCOME TAXES

 

 

—

 

 

—

 

 

—

 

 

—

 

 

—

 

 

—

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

NET INCOME/(LOSS)

 

$

2,253,449

 

$

(100,436

)

$

63,616

 

$

(164,052

)

$

144,681

 

$

2,234,078

 

 

 

 

 

 

Net income (loss) per common share—basic and diluted

 

$

0.11

 

 

 

 

 

 

 

 

 

 

 

 

 

$

0.10

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average common shares outstanding—basic and diluted

 

 

20,944,853

 

 

 

 

 

 

 

 

 

 

 

 

 

 

22,982,427

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(a) Derived from the unaudited statement of financial operations of KeyOn for the three months ended March 31, 2010. The March 2010 amounts include the effects of an adjustment that was made for an embedded conversion option subject to derivative accounting. The adjustment and restated amounts will be reflected in KeyOn’s financial statements that will be included in a form 10Q/A to be filed with the Securities and Exchange Commission as soon as practicable and following the completion of a SAS 100 review by KeyOn’s independent registered public accountants.

 

(b) Derived from the unaudited statement of financial operations of Dynamic Broadband (DYBB) for the three months ended March 31, 2010.

 

(c) Derived from the unaudited statement of operations of DYBB for the three months ended March 31, 2010 for the managed service business known as X-Wires that is not part of the purchase agreement with KeyOn that is eliminated from DYBB for this pro forma.

 

(d) Derived from the unaudited statement of operations of DYBB for the year ended March 31, 2010 for the wireless internet service provider business “Dynamics” that is part the purchase agreement with KeyOn.

 

(e) Reflects revenue billing to the X-Wires line of business that was intercompany when the two businesses were combined under DYBB.

 

(f) Reflects the elimination of all payroll and payroll related expenses with the exception of six retained employees.

 

(g) Relects the elimination of all professional fees that are duplicative services in KeyOn, i.e., accounting, legal, and consulting professional services.

 

(h) Reflects the increase in depreciation and amortization due to the fair market valuation of the assets acquired by KeyOn with the Dynamics asset purchase. This includes the valuation of tower assets, customer premise equipment, vehicles, office equipment, network equipment, and the valuaton of the subscriber base, an intangible asset. The amortizable life of the subscriber base was determined by using the historical churn of the customer base provided by DYBB in regards to the Dynamics customer base. This churn of 2.1% per month calulates to be a four year life on the subscriber base purchased by KeyOn.

 

(i) Reflects the elimination of duplicate G&A expenses including insurance, bank charges, IRA and other employee related expenses.

 

(j) Reflects the elimination of all interest expense due to all debt being paid off on the date of consummation of the purchase agreement.