Attached files
| file | filename |
|---|---|
| 8-K/A - 8-K/A - root9B Holdings, Inc. | pag08312010_8ka.htm |
| EX-99.1 - Q5GROUP FINANCIAL STATEMENTS - root9B Holdings, Inc. | q5audit.htm |
Exhibit 99.2
PREMIER ALLIANCE GROUP, INC.
INTRODUCTION TO PRO-FORMA CONSOLIDATED FINANCIAL STATEMENTS AS OF JUNE 30 2010, AND THE SIX MONTHS ENDED JUNE 30, 2010 AND THE YEAR ENDED DECEMBER 31, 2009
The following unaudited pro-forma consolidated balance sheet, pro-forma income statements and the explanatory notes give effect to the merger of Q5Group (Q5) by Premier Alliance Group, Inc.
The pro-forma consolidated balance sheet, pro-forma consolidated income statements and explanatory notes are based on the estimates and assumptions set forth in the explanatory notes. These pro-forma consolidated balance sheet and pro-forma consolidated income statements have been prepared utilizing the historical financial statements of Premier Alliance Group, Inc., and. Q5Group and should be read in conjunction with the historical financial statements and notes thereto included elsewhere in this filing.
The pro-forma consolidated income statements have been prepared as if the merger had been consummated on January 1, 2009 under the purchase method
of accounting and carried through to June 30, 2010. The pro-forma consolidated balance sheet has been prepared as if the acquisition was consummated on June 30, 2010.
This pro-forma consolidated financial data is provided for comparative purposes only, and does not purport to be indicative of the actual financial position or results of operations had the acquisition occurred at the beginning of the periods presented, nor are they necessarily indicative of the results of future operations.
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PREMIER ALLIANCE GROUP, INC.
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PRO FORMA BALANCE SHEET
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June 30, 2010
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ASSETS
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Historical
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unaudited
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unaudited
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unaudited
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Premier Alliance
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Q5Group
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adjustments
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combined pro forma
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CURRENT ASSETS:
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Cash
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$ | 607,801 | $ | 130,689 | (125,000 | ) | $ | 613,490.00 | ||||||||
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Accounts receivable
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1,908,247 | 197,414 | 2,105,661 | |||||||||||||
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Unbilled work in process
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38,728 | 38,728 | ||||||||||||||
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Marketable securities
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29,511 | 0 | 29,511 | |||||||||||||
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Deferred tax asset - current portion
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28,000 | 0 | 28,000 | |||||||||||||
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Prepaid expenses and
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other current assets
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71,377 | 76,896 | - | 148,273 | ||||||||||||
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Total current assets
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2,644,936 | 443,727 | (125,000 | ) | 2,963,663 | |||||||||||
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PROPERTY AND EQUIPMENT - at
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cost less accumulated depreciation & fees
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28,718 | 27,635 | - | 56,353 | ||||||||||||
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OTHER ASSETS:
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Goodwill
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2,363,578 | 0 | 829,974 | 3,193,552 | ||||||||||||
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Intangibles
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138,400 | 107,300 | 245,700 | |||||||||||||
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Investment in equity-method investee
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182,265 | 0 | 182,265 | |||||||||||||
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Investment in cost-method investee
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100,000 | 0 | 100,000 | |||||||||||||
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Cash surrender value of officers'
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life insurance
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334,930 | 0 | 334,930 | |||||||||||||
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Deferred tax asset
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52,000 | 0 | 52,000 | |||||||||||||
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Loan Fees - net
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35,185 | 35,185 | ||||||||||||||
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Deposits and other assets
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6,100 | - | - | 6,100 | ||||||||||||
| 3,212,458 | - | 937,274 | 4,149,732 | |||||||||||||
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Total Assets
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$ | 5,886,112 | $ | 471,362 | $ | 812,274 | $ | 7,169,748 | ||||||||
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LIABILITIES AND STOCKHOLDERS' EQUITY
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CURRENT LIABILITIES:
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Note payable
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$ | 626,000 | $ | $ | 626,000 | |||||||||||
| LOC payable to stockholder | 45,000 | (45,000 | ) | |||||||||||||
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Current portion of long-term debt
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122,611 | - | 122,611 | |||||||||||||
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Accounts payable
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417,143 | 16,340 | - | 433,483 | ||||||||||||
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Accrued expenses
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657,494 | 95,600 | - | 753,094 | ||||||||||||
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Deferred tax liability
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- | 0 | ||||||||||||||
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Income taxes payable
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22,827 | - | 18,938 | 41,765 | ||||||||||||
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Total current liabilities
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1,846,075 | 156,940 | (26,062 | ) | 1,976,953 | |||||||||||
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LONG-TERM DEBT
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$ | 152,998 | - | 375,000 | $ | 527,998 | ||||||||||
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COMMITMENTS AND CONTINGENCIES
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- | - | - | - | ||||||||||||
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STOCKHOLDERS' EQUITY:
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Class A convertible preferred stock,
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liquidation preference of $0.05 per share,
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$.001 par value, 5,000,000 shares authorized,
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95,613 shares issued and outstanding
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69 | 69 | ||||||||||||||
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Class B convertible preferred stock, $.001
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par value, 5,000,000 shares authorized
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960,000 Pref B shares issued and Outstanding
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960 | 960 | ||||||||||||||
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Common stock, $.001 par value, 45,000,000
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shares authorized, 7,398,220 shares
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issued and outstanding
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7,398 | 12 | 488 | 7,898 | ||||||||||||
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Additional paid-in capital
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5,090,235 | 563,465 | 37,895 | 5,691,595 | ||||||||||||
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Accumulated deficit
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(1,211,623 | ) | (249,055 | ) | 424,953 | (1,035,725 | ) | |||||||||
| 3,887,039 | 314,422 | 463,336 | 4,664,797 | |||||||||||||
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Total Liabilities and Stockholder equity
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$ | 5,886,112 | $ | 471,362 | $ | 812,274 | $ | 7,169,748 | ||||||||
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PREMIER ALLIANCE GROUP, INC.
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PRO FORMA STATEMENT OF OPERATIONS
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FOR THE PERIOD ENDED JUNE 30, 2010
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Historical
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unaudited
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unaudited
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unaudited
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Premier Alliance
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Q5GROUP
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adjustments
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Combined Pro forma
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NET REVENUES
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$ | 6,847,286 | $ | 1,135,109 | $ | 7,982,395 | ||||||||||
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OPERATING EXPENSES:
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Cost of revenues
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5,359,023 | 851,907 | 6,210,930 | |||||||||||||
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Selling, general and administrative
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1,454,704 | 510,627 | 1,965,331 | |||||||||||||
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Depreciation and amortization
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3,010 | 7,076 | 13,314 | 23,400 | ||||||||||||
| 6,816,737 | 1,369,610 | 13,314 | 8,199,661 | |||||||||||||
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INCOME FROM OPERATIONS
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30,549 | (234,502 | ) | (13,314 | ) | (217,267 | ) | |||||||||
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OTHER INCOME (EXPENSE):
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Interest expense, net
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(37,913 | ) | (2,869 | ) | - | (40,782 | ) | |||||||||
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Goodwill impairment loss
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- | - | - | - | ||||||||||||
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Gain (Loss) on marketable securities
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(1,408 | ) | - | - | (1,408 | ) | ||||||||||
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Officers' life insurance income
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(35,101 | ) | - | - | (35,101 | ) | ||||||||||
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Equity in net loss of equity-method investee
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(8,167 | ) | - | - | (8,167 | ) | ||||||||||
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Other income
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2,474 | - | - | 2,474 | ||||||||||||
| (80,115 | ) | (2,869 | ) | - | (82,984 | ) | ||||||||||
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NET INCOME BEFORE INCOME TAXES
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(49,566 | ) | (237,370 | ) | (13,314 | ) | (300,250 | ) | ||||||||
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INCOME TAX BENEFIT (EXPENSE)
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(2,918 | ) | 53,810 | 5,192 | 56,084 | |||||||||||
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NET INCOME (LOSS)
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(52,484 | ) | (183,560 | ) | (8,122 | ) | (244,166 | ) | ||||||||
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PREFERRED STOCK DIVIDEND
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- | - | - | - | ||||||||||||
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NET INCOME AVAILABLE FOR
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COMMON STOCKHOLDERS
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$ | (52,484 | ) | $ | (183,560 | ) | $ | (8,122 | ) | $ | (244,166 | ) | ||||
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Net Income (loss) per share
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basic
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(0.01 | ) | (0.03 | ) | ||||||||||||
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diluted
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$ | (0.01 | ) | $ | (0.03 | ) | ||||||||||
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Weighted average number of shares,
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basic
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7,111,009 | 750,000 | 7,861,009 | |||||||||||||
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diluted
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7,111,009 | - | 750,000 | 7,861,009 | ||||||||||||
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PREMIER ALLIANCE GROUP, INC.
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STATEMENT OF OPERATIONS
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FOR THE YEAR ENDED DECEMBER 31, 2009
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Historical
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Premier Alliance
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Q5Group
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adjustments
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Combined Pro forma
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NET REVENUES
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$ | 9,347,993 | $ | 611,407 | $ | 9,959,400 | ||||||||||
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OPERATING EXPENSES:
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Cost of revenues
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6,926,166 | 420,410 | 7,346,576 | |||||||||||||
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Selling, general and administrative
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2,117,122 | 296,418 | 2,413,540 | |||||||||||||
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Depreciation and amortization
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9,699 | 2,572 | 6,657 | 18,928 | ||||||||||||
| 9,052,987 | 719,400 | 6,657 | 9,779,044 | |||||||||||||
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INCOME FROM OPERATIONS
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295,006 | (107,993 | ) | (6,657 | ) | 180,356 | ||||||||||
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OTHER INCOME (EXPENSE):
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Interest expense, net
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(12,232 | ) | 171 | (12,061 | ) | |||||||||||
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Goodwill impairment loss
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- | - | ||||||||||||||
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Gain/(Loss) on marketable securities
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12,522 | - | 12,522 | |||||||||||||
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Officers' life insurance income
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76,274 | - | 76,274 | |||||||||||||
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Equity in net loss of equity-method investee
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(9,607 | ) | - | (9,607 | ) | |||||||||||
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Other income
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4,800 | - | - | 4,800 | ||||||||||||
| 71,757 | 171 | - | 71,928 | |||||||||||||
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NET INCOME BEFORE INCOME TAXES
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366,763 | (108,164 | ) | - | 258,599 | |||||||||||
| - | ||||||||||||||||
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INCOME TAX BENEFIT (EXPENSE)
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(115,175 | ) | 42,669 | 2,596 | (69,910 | ) | ||||||||||
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NET INCOME (LOSS)
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251,588 | (65,495 | ) | 2,596 | 188,689 | |||||||||||
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PREFERRED STOCK DIVIDEND
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- | - | - | - | ||||||||||||
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NET INCOME AVAILABLE FOR
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COMMON STOCKHOLDERS
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$ | 251,588 | $ | (65,495 | ) | $ | (4,061 | ) | $ | 182,032 | ||||||
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Net Income (loss) per share
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basic
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$ | 0.04 | $ | 0.03 | ||||||||||||
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diluted
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$ | 0.03 | $ | 0.02 | ||||||||||||
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Weighted average number of shares,
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basic
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5,926,438 | 500,000 | 6,426,438 | |||||||||||||
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diluted
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6,487,184 | - | 500,000 | 6,987,184 | ||||||||||||
Notes and assumptions to Pro-Forma Consolidated Financial Statements
Organization and basis of presentation:
The unaudited pro-forma consolidated balance sheet and consolidated income statements have been based on historical financial information, using accounting
principles generally accepted in the United States of America, of Premier Alliance Group, Inc. and Q5Group for the six months ended June 30, 2010 and the year ended December 31, 2009, considering the effects of the merger of Q5Group by Premier Alliance Group, Inc. was completed effective January 1, 2009 in the case of the pro-forma consolidated income statements, and effective June 30, 2010 in the case of the pro-forma consolidated balance sheet.
On August 31, 2010 Premier Alliance Group, Inc. purchased all shares of stock of Q5Group. The purchase included fixed assets in the amount of $25,562, net assets of $412,121, net liabilities of $155,857, goodwill in the amount of $829,974 which included stock options which were valued at $104,100 using the black scholes method of valuation, intangibles in the amount of $49,800, non competition allocation of $57,500, sign on bonuses of $57,500.
Pro-Forma adjustments:
The intangibles acquired from the purchase of Q5Group are being amortized for book purposes over a period of three to five years. Fixed assets purchased are being depreciated over five years. No impairment of Goodwill has occurred.
Intangibles consisted of Q5Group’s customer lists and was valued using the Discounted Cash Flow method, the value was determined to be $49,800. Fixed assets were valued based on Fair Market Value and were valued at $25,562.
Provision for income taxes has been provided for Q5Group which assumes a corporate tax rate for year ended December 31, 2009 and six months ended June 30, 2010 respectively.
Stock Issuance: In consideration of the merger, the Registrant paid to Q5Group (a) the sum of $125,000 in cash at closing; and (b) issued to Q5Group shareholders 500,000 shares of Registrant's common stock, equal to $500,000 based on the five-day average closing price of the common stock 5 days prior to the closing of $1.00 (“close price”), delivered within 10 days after Closing. At the thirteenth month after closing, based on a revenue and gross margin goal being met, 300,000 additional shares of common stock, equal to $300,000 based on the close price, will be issued to Q5Group shareholders and an additional sum of $75,000 in cash will be distributed.