Attached files
| file | filename |
|---|---|
| 8-K/A - Tri-Mark MFG, Inc. | v208425_8ka.htm |
| EX-16.1 - LETTER FROM GUMBINER SAVETT, INC - Tri-Mark MFG, Inc. | v208425_ex16-1.htm |
| EX-99.2 - FINANCIAL STATEMENTS OF BUSINESS ACQUIRED - Tri-Mark MFG, Inc. | v208425_ex99-2.htm |
5to1
Holding Corp.
INTRODUCTION
TO PRO FORMA CONDENSED
COMBINED
FINANCIAL STATEMENTS
(Unaudited)
The
following unaudited pro forma condensed combined financial statements give
effect to the merger between 5to1.Com, Inc. (“5to1”) and FTOH Corp. (“FTOH”) and
certain other transactions that 5to1 and FTOH completed as of November 3, 2010.
On
November 3, 2010, 5to1 merged into FTOH whereby 100% of the shares of 5to1were
exchanged for 17,986,234 shares of FTOH, a public company with nominal
operations. As a result of the transaction, the former owners of 5to1 became the
controlling stockholders of FTOH. Accordingly, the merger of 5to1and FTOH
is a reverse merger that has been accounted for as a recapitalization of 5to1.
Upon completion of the merger, FTOH changed its name to 5to1 Holding Corp.
(“5to1
Holding”) 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 condensed combined financial statements.
The
unaudited pro forma condensed combined balance sheet as of September 30,
2010 combines the balance sheets of 5to1and FTOH and gives pro forma effect
to (i) 5to1’s and FTOH’s issuances of notes in various bridge financing
transactions that each had completed, completed prior to the merger, (ii) the
reverse merger between 5to1and FTOH in which 5to1is deemed to be the
acquiring entity for accounting purposes (iii) a financing transaction involving
the issuance of 3,575,000 shares of common stock in a private placement
transaction upon the completion of the reverse merger, (iv) issuances of shares
to certain employees and executives that are subject to recall provisions due to
time based vesting and specified performance conditions (v) the conversion of
bridge notes and preferred shares into common stock and (vi) certain other
transactions completed at the time of the merger as if 5to1and FTOH completed
such transactions as of September 30, 2010. The unaudited pro forma condensed
combined statements of operations for the year end December 31, 2009 and nine
months ended September 30, 2010 combine the statement of operations of
5to1and FTOH for each of those periods and give pro forma effect to these
transactions as if they were completed on January 1, 2009 and January 1, 2010,
respectively.
The
unaudited pro forma balance sheet and statements of operations should be read in
conjunction with the separate historical financial statements of 5to1appearing
elsewhere herein, and the historical financial statements of FTOH, as filed with
the Securities and Exchange Commission and issued in Form 10K for the year ended
December 31, 2009. These pro forma condensed combined financial statements
may not be indicative of what would have occurred if the reverse acquisition had
actually occurred on the indicated dates and they should not be relied upon
as an indication of future results of operations.
5to1
Holding Corp.
Proforma
Balance Sheet
September
30, 2010
(Unaudited)
|
5to1 Holding Corp. (1)
|
5to1.Com, Inc (2)
|
Proforma
Adjustments
|
Proforma As
Adjusted
|
|||||||||||||
|
ASSETS
|
||||||||||||||||
|
Current
Assets:
|
||||||||||||||||
|
Cash
and cash equivalents
|
$ | - | $ | 424,068 | $ | 250,000 | (c) | $ | 6,443,465 | |||||||
| 1,089 | (f) | |||||||||||||||
| 54,757 | (g) | |||||||||||||||
| 38,551 | (h) | |||||||||||||||
| 2,100,000 | (j) | |||||||||||||||
| 3,575,000 | (o) | |||||||||||||||
|
Accounts
receivable
|
325,642 | 325,642 | ||||||||||||||
|
Prepaid
expenses and other current assets
|
73,891 | 73,891 | ||||||||||||||
|
Total
current assets
|
- | 823,601 | 6,019,397 | 6,842,998 | ||||||||||||
|
Property
and Equipment, net
|
162,013 | 34,045 | (162,013 | )(d) | 34,045 | |||||||||||
|
Security
deposits
|
44,561 | 44,561 | ||||||||||||||
|
Debt
Issue Costs
|
23,361 | 50,000 | (c) | 73,361 | ||||||||||||
|
Total
Assets
|
$ | 162,013 | $ | 925,568 | $ | 5,907,384 | $ | 6,994,965 | ||||||||
|
LIABILITIES
AND STOCKHOLDERS' EQUITY (DEFICIT)
|
||||||||||||||||
|
Current
Liabilities:
|
||||||||||||||||
|
Accounts
payable
|
$ | - | $ | 525,405 | $ | 525,405 | ||||||||||
|
Accrued
expenses and taxes payable
|
150,194 | 150,194 | ||||||||||||||
|
Note
Payable Bank
|
166,656 | 166,656 | ||||||||||||||
|
Bridge
Notes Payable
|
600,000 | 300,000 | (c) | - | ||||||||||||
| (900,000 | )(i) | |||||||||||||||
|
Convertible
Notes Payable
|
2,042,345 | (2,042,345 | )(e) | - | ||||||||||||
| 2,100,000 | (j) | |||||||||||||||
| (2,100,000 | )(k) | |||||||||||||||
|
Loan
payable to officer
|
93,210 | (93,210 | )(d) | - | ||||||||||||
|
Derivative
Liabilities
|
599,870 | (599,870 | )(e) | - | ||||||||||||
|
Common
stock subject to repurchase
|
16,530 | (16,530 | )(a) | - | ||||||||||||
| 93,308 | (n) | 93,308 | ||||||||||||||
|
Total
current liabilities
|
93,210 | 4,101,000 | (3,258,647 | ) | 935,563 | |||||||||||
|
Notes
Payable, less current portion
|
250,011 | 250,011 | ||||||||||||||
|
Total
liabilities
|
93,210 | 4,351,011 | (3,258,647 | ) | 1,185,574 | |||||||||||
|
STOCKHOLDERS'
EQUITY (DEFICIT)
|
||||||||||||||||
|
Series
A Preferred stock
|
13 | (13 | )(l) | - | ||||||||||||
|
Common
stock
|
7,510 | 5 | 5 | (a) | 3,341 | |||||||||||
| 3 | (b) | |||||||||||||||
| 328 | (e) | |||||||||||||||
| 17 | (f) | |||||||||||||||
| 838 | (g) | |||||||||||||||
| 590 | (h) | |||||||||||||||
| 13 | (l) | |||||||||||||||
| (6,675 | )(d) | |||||||||||||||
| 200 | (i) | |||||||||||||||
| 150 | (k) | |||||||||||||||
| 358 | (o) | |||||||||||||||
|
Additional
paid-in capital
|
252,665 | 6,413,038 | 16,525 | (a) | 16,870,749 | |||||||||||
| (3 | )(b) | |||||||||||||||
| (62,128 | )(d) | |||||||||||||||
| 2,674,202 | (e) | |||||||||||||||
| 1,650 | (f) | |||||||||||||||
| 53,919 | (g) | |||||||||||||||
| 37,961 | (h) | |||||||||||||||
| 1,999,800 | (i) | |||||||||||||||
| 2,099,850 | (k) | |||||||||||||||
| (191,372 | )(m) | |||||||||||||||
| 3,574,642 | (o) | |||||||||||||||
|
Share
liability adjustment
|
(93,308 | )(n) | (93,308 | ) | ||||||||||||
|
Accumulated
deficit
|
(191,372 | ) | (9,838,499 | ) | (32,315 | )(e) | (10,971,392 | ) | ||||||||
| (578 | )(f) | |||||||||||||||
| (1,100,000 | )(i) | |||||||||||||||
| 191,372 | (m) | |||||||||||||||
|
Total
stockholders' equity (deficit)
|
68,803 | (3,425,443 | ) | 9,166,031 | 5,809,391 | |||||||||||
|
TOTAL
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
|
$ | 162,013 | $ | 925,568 | $ | 5,907,384 | $ | 6,994,965 | ||||||||
(1)
Derived from the historical balance sheet of 5to1 Holding Corp which has been
retroactively adjusted to give effect to a forward stock split of 8.344159089 to
1
(2)
Revised from the historical balance sheet of 5to1 appearing elsewhere in this
form 8-K
5to1Holding,
Corp.
Notes to Unaudited Pro-Forma
Balance Sheet as of September 30, 2010
|
(a)
|
Represents
the reclassification of 5to1 shares to stockholders’ equity (deficit) that
were previously subject to recall provisions under restricted stock
purchase agreements that were cancelled immediately prior to the
Merger
|
|
(b)
|
Represents
5to1 shares held in treasury, which were exchanged for 5to1 Holding shares
in connection with the Merger.
|
|
(c)
|
Represents the issuance, on
October 1, 2010, of $300,000 principal amount of notes payable by 5to1,
net of $50,000 in debt issue
costs
|
|
(d)
|
Represents
the (i) distribution (immediately prior to the Merger) of assets that were
used in a business not being operated by the combined entity to certain
former stockholders 5to1 Holding and (ii) cancellation of a loan payable
to a former officer of 5to1 Holding in exchange for the surrender of
66,753,273 shares of 5to1 Holding common
stock.
|
|
(e)
|
Represents
the issuance, on October 14, 2010, of 3,275,000 shares of 5to1 common
stock in exchange for the cancellation of $2,042,345 of notes payable,
originally convertible into 43,761 shares and the reclassification of the
derivative liability that was recorded upon bifurcating the
embedded conversion option from the note. The fair value of
5to1's common stock on that date as determined by management was $0.01 per
share. An amount equal to the fair value of 3,231,239 shares (the number
of shares in excess of the contractual number of shares issuable upon
conversion of the note) has been charged to the accumulated
deficit.
|
|
(f)
|
Represents
the issuance, on October 14, 2010, of 166,727 shares of 5to1 common stock
to certain service providers for purchase price of
$1,089. The difference between the fair value of these shares
and the proceeds received is presented as an increase in the accumulated
deficit.
|
|
(g)
|
Represents
the issuance, on October 14, 2010, of 8,380,147 shares of 5to1 common
stock to management, subject to repurchase agreements, for total proceeds
of $54,757. The Company maintains a call provision with respect to these
shares that provides for it to repurchase these shares upon the
termination of the employee unless the Company, within a fixed period of
time, notifies the employee that it will not repurchase the shares.
Accordingly, the shares are being presented as a liability due to the
recall provisions of the applicable purchase
agreements.
|
|
(h)
|
Represents
the issuance, on October 14, 2010, of 5,899,958 shares of 5to1 common
stock to management and employees for total proceeds of $38,551 upon the
early exercise of incentive stock options with a nominal fair value.
The stock options were granted an October 14, 2010. Vesting of these
shares is subject to the attainment of certain performance conditions
based on specific revenue and earnings targets. The
issuance of these shares has been classified as a liability due to the
Company’s obligation to refund the proceeds received upon the forfeiture
of these shares.
|
|
(i)
|
Represents
the issuance, on November 3, 2010, of 2,000,000 shares of 5to1 Holding
common stock in exchange for the cancellation of $900,000 of Bridge Notes
payable by 5to1 The Company determined the fair value of its common stock
on that day to be $1 per share by using the price per share paid by the
investors in the private placement described below (Note O). The
difference between the carrying value of the Notes and the aggregate fair
value of the stock, which amounted to $1,100,000, is presented an increase
in the accumulated deficit.
|
|
(j)
|
On
October 15, 2010, 5to1 Holding issued $2,100,000 of convertible notes due
6 months from the issue date, with a conversion price of $1.40 per share,
for gross proceeds of $2,100,000.
|
|
(k)
|
Represents
the issuance, on November 3, 2010, of $2,100,000 of Notes for 1,500,000
shares of 5to1 Holding common stock at the contractual conversion price of
$1.40 per share.
|
|
(l)
|
Represents
the issuance, prior to the Merger, of 135,199 shares of 5to1 common stock
to holders of its outstanding Series A Preferred Stock upon conversion of
the Preferred shares at their contractual conversion price of $46.67 per
share.
|
|
(m)
|
At
the closing of the Merger, each share of 5to1 common stock issued and
outstanding immediately prior to the closing of the Merger was exchanged
for the right to receive 1 share of 5to1 Holding common stock. An
aggregate of 17,986,234 shares of 5to1 Holding common stock were issued to
the holders of our common stock. The aggregate number of shares of 5to1
Holding common stock that were outstanding upon the closing of the Merger
was 26,337,234 shares, excluding shares issued upon the settlement of
notes and shares issued to participants in the private placement described
in Note O. Accordingly, immediately following the Merger, the former 5to1,
stockholders owned approximately 68% of 5to1 Holding common stock. The
accumulated deficit of 5to1 holding was eliminated to reflect the legal
capitalization of the combined entity upon the completion of the
Merger.
|
|
(n)
|
Represents
the classification of shares subject to repurchase as a
liability.
|
|
(o)
|
On
November 3, 2010, 5to1 Holding issued 3,575,000 shares of common
stock in a private placement at $1.00 per share to 19 accredited
investors.
|
5to1
Holding Corp.
Proforma
Statement of Operations
Nine
Months Ended Sptember 30, 2010
(Unaudited)
|
5to1 Holding
Corp. (1)
|
5to1.Com, Inc (2)
|
Proforma Adjujstments
|
Proforma
|
|||||||||||||
|
Revenue
|
$ | 741,892 | $ | 741,892 | ||||||||||||
|
Cost
of Revenue
|
601,340 | 601,340 | ||||||||||||||
|
Gross
Profit (loss)
|
- | 140,552 | - | 140,552 | ||||||||||||
|
Operating
Expenses
|
||||||||||||||||
|
Compensation
|
3,210,660 | 10,892 | (d) | 3,221,552 | ||||||||||||
|
Other
operating expenses
|
1,459,807 | 578 | (c) | 1,460,385 | ||||||||||||
| - | 4,670,467 | 11,470 | 4,681,937 | |||||||||||||
| - | ||||||||||||||||
|
Loss
from Operations
|
- | (4,529,915 | ) | (11,470 | ) | (4,541,385 | ) | |||||||||
|
Other
Income/(Expenses):
|
||||||||||||||||
|
Provision
for taxes
|
- | |||||||||||||||
|
Interest
income
|
19 | 19 | ||||||||||||||
|
Interest
expense
|
(889,795 | ) | 860,004 | (a) | (29,791 | ) | ||||||||||
|
Debt
conversion inducement charge
|
(1,100,000 | )(e) | (1,132,315 | ) | ||||||||||||
| (32,315 | )(b) | |||||||||||||||
|
Change
in fair value of derivative liabilities
|
21,280 | (21,280 | )(a) | - | ||||||||||||
| - | (868,496 | ) | (293,591 | ) | (1,162,087 | ) | ||||||||||
| - | ||||||||||||||||
|
Loss
from continuing operations
|
- | (5,398,411 | ) | (305,061 | ) | (5,703,472 | ) | |||||||||
|
Loss
from discontinued operations
|
(67,550 | ) | 67,550 | (f) | - | |||||||||||
|
Net
loss
|
$ | (67,550 | ) | $ | (5,398,411 | ) | $ | (237,511 | ) | $ | (5,703,472 | ) | ||||
|
Net
Loss per share
|
||||||||||||||||
|
Continuing
operations
|
$ | - | $ | (0.39 | ) | |||||||||||
|
Discontinued
operations
|
$ | (0.00 | ) | $ | - | |||||||||||
|
Net
loss
|
$ | (0.00 | ) | $ | (0.39 | ) | ||||||||||
|
Weighted
average shares outstanding
|
67,449,167 |
|
(g) | 14,619,578 | ||||||||||||
(1)
Derived from the historical statement of operations of 5 to 1 Holding which has
been retroactively adjusted to give effect to a forward stock split of
8.344159089 to 1, and the elimination of historical operations that are not
being continued with the combined entitiy following the merger.
(2)
Derived from the historical statement of operations of 5to1
5to1
Holding Corp.
Proforma
Statement of Operations
Year
ended December 31, 2009
(Unaudited)
|
5to1 Holding Corp.
(1)
|
5to1.Com, Inc
|
Proforma
Adjustments
|
Proforma
|
|||||||||||||
|
Revenue
|
$ | 117,855 | $ | 117,855 | ||||||||||||
|
Cost
of Revenue
|
126,827 | 126,827 | ||||||||||||||
|
Gross
Profit (loss)
|
- | (8,972 | ) | - | (8,972 | ) | ||||||||||
|
Operating
Expenses
|
||||||||||||||||
|
Compensation
|
2,913,964 | 14,522 | (d) | 2,928,486 | ||||||||||||
|
Other
operating expenses
|
1,177,777 | 578 | (c) | 1,178,355 | ||||||||||||
| - | 4,091,741 | 15,100 | 4,106,841 | |||||||||||||
|
Loss
from Operations
|
- | (4,100,713 | ) | (15,100 | ) | (4,115,813 | ) | |||||||||
|
Other
Income/(Expenses):
|
||||||||||||||||
|
Provision
for taxes
|
- | |||||||||||||||
|
Interest
income
|
1,594 | 1,594 | ||||||||||||||
|
Interest
expense
|
(13,230 | ) | 1,069 | (a) | (12,161 | ) | ||||||||||
|
Debt
conversion inducement charge
|
(1,100,000 | )(e) | (1,132,315 | ) | ||||||||||||
| (32,315 | )(b) | |||||||||||||||
|
Change
in fair value of derivative liabilities
|
76 | (76 | )(a) | - | ||||||||||||
| - | (11,560 | ) | (1,131,322 | ) | (1,142,882 | ) | ||||||||||
| - | ||||||||||||||||
|
Loss
from continuing operations
|
$ | - | $ | (4,112,273 | ) | $ | (1,146,422 | ) | (5,258,695 | ) | ||||||
|
Loss
from discontinued operations
|
$ | (46,089 | ) | 46,089 | - | |||||||||||
|
Net
loss
|
$ | (46,089 | ) | $ | (4,112,273 | ) | $ | (1,100,333 | ) | $ | (5,258,695 | ) | ||||
|
Net
Loss per share
|
||||||||||||||||
|
Continuing
operations
|
$ | - | $ | (0.23 | ) | |||||||||||
|
Discontinued
operations
|
(0.00 | ) | - | |||||||||||||
|
Net
loss
|
$ | (0.00 | ) | $ | (0.23 | ) | ||||||||||
|
Weighted
average shares outstanding
|
67,449,109 |
|
(g) | 23,321,202 | ||||||||||||
(1)
Derived from the historical statement of operations of 5 to 1 Holding Corp.
which has been retroactively adjusted to give effect to a forward stock split of
8.344159089 to 1, and the elimination of historical operations that are not
being continued with the combined entitiy following the merger.
(2)
Derived from the historical statement of operations of 5to1
5to1 Holding,
Inc.
Notes to Unaudited ProForma
Statement of Operations
|
(a)
|
Represents
the elimination of historical interest expense and change in the fair
value of derivative liabilities recorded by 5to1 in connection with
$2,042,345 of bridge notes that were converted into common stock on
October 14, 2010.
|
|
(b)
|
Represents
the issuance of 3,275,000 shares of 5to1, common stock on October 14, 2010
in exchange for the cancellation of $2,042,345 of notes payable (see Note
(a) above), originally convertible into 43,761 shares. The fair
value of the Company's common stock on that date as determined by
management was $0.01 per share. An amount equal to the fair value of
3,231,239 shares (the number of shares in excess of the contractual number
of shares issuable upon conversion of the note) is presented as a debt
conversion inducement charge.
|
|
(c)
|
Represents
the issuance, on October 14, 2010, of 166,727 shares of 5to1 common stock
to service providers who advise the Company on advertising and strategic
related issues at a total purchase price of $1,089. The
difference between the fair value of these shares and the proceeds
received is presented as a charge to
operations.
|
|
(d)
|
Represents
the amount of compensation that would have been recorded during the
periods presented for shares issued to employees that are subject to
certain recall provisions. The computations with respect to these charges
are as follows:
|
|
For the Year Ended
|
For the Nine Months
|
|||||||
|
December 31, 2009
|
Ended September 30, 2010
|
|||||||
|
Shares
subject to time based vesting under restricted stock purchase
agreements
|
8,380,147 | 8,380,147 | ||||||
|
Proforma
number of shares vested based on a two year vesting period
|
4,190,074 | 3,142,555 | ||||||
|
Fair
value of common stock
|
$ | 0.01 | $ | 0.01 | ||||
|
Pro-Forma
Compensation Charge
|
$ | 41,901 | $ | 31,426 | ||||
|
Less
amount paid by the employee upon receipt of such shares ($.0065 per
share)
|
(27,379 | ) | (20,534 | ) | ||||
|
Net
charge to operations
|
$ | 14,522 | $ | 10,892 | ||||
The
recall provisions become active in the event of the employees termination under
certain circumstances prior to the completion of specified services periods. The
shares get released from the recall provisions and are no longer subject to the
risk of forfeiture upon the attainment of specified service
conditions.
5to1, in
a separate transaction, also issued 5,899,958 shares of its common stock to
management and certain employees for total proceeds of $38,551 upon the early
exercise of incentive stock options described in balance shee Note (h). These
shares vest and get removed from the recall provisions upon the attainment of
specified performance conditions. 5to1 is obligated to refund the
cost of the shares to the applicable employee upon any such employee’s
forfeiture of their shares.
|
(e)
|
Represents
the issuance, on November 3, 2010, of 2,000,000 shares of 5to1 Holding
common stock in exchange for the cancellation of $900,000 of Bridge Notes
payable by 5to1. Management determined the fair value of the
common stock on that day to be $1 per share by using the price per share
paid by the investors in the private placement described below (Note O).
The difference between the carrying value of the Notes and the aggregate
fair value of the stock, which amounted to $1,100,000, is presented as a
debt conversion inducement charge.
|
|
(f)
|
Elimination
of operations of 5to1 Holding which have been characterized as
discontinued operations because they are not being continued in the
combined entity following the
Merger.
|
|
(g)
|
The
computation of proforma weighted average number of shares outstanding
takes into account all of the proforma transactions enumerated in the
proforma financial statements as if the shares were issued at the
beginning of the periods presented, except that only the vested shares
which are subject to repurchase provisions described in Note (d) are
included from their vesting date. Shares subject to performance conditions
described in Note (d) are excluded from the computation of loss per share
due to the fact that the performance conditions would not have been met
during either of the periods presented. A reconciliation of shares
included in the computation is as
follows:
|
|
For the Year Ended
|
For the Nine Months
|
|||||||
|
December 31, 2009
|
Ended September 30, 2010
|
|||||||
|
Shares
of 5to1 Holding outstanding prior to Merger
|
75,103,273 | 67,449,167 | ||||||
|
Shares
surrendered by former 5to1 Holding stockholders upon the receipt of
distributed assets
|
(66,753,273 | ) | (66,753,273 | ) | ||||
|
Shares
of 5to1 Holding stock issued to stockholders of 5to1 in exchange for their
5to1 common shares (excluding shares subject to recall provisions
described in Note (d)
|
7,896,203 | 6,848,684 | ||||||
|
Shares
issued in settlement of Bridge Notes
|
2,000,000 | 2,000,000 | ||||||
|
Shares
issued upon the conversion of convertible notes
|
1,500,000 | 1,500,000 | ||||||
|
Shares
issued in the private placement transaction completed on November 3,
2010
|
3,575,000 | 3,575,000 | ||||||
| 23,321,202 | 14,619,578 | |||||||
A
reconciliation of 5to1 Holding stock issued to stockholders of 5to1 in exchange
for their 5to1 common shares excluding the shares subject to recall provisions
described in Note (d) is as follows:
|
For the Year Ended
|
For the Nine Months
|
|||||||
|
December 31, 2009
|
Ended September 30, 2010
|
|||||||
|
Shares
of 5to1 Holding stock issued to stockholders of 5to1 in exchange for their
5to1 common shares
|
17,986,234 | 17,986,234 | ||||||
|
Shares
subject to time based vesting under restricted stock purchase
agreements
|
(8,380,147 | ) | (8,380,147 | ) | ||||
|
Shares
subject to performance based vesting conditions
|
(5,899,958 | ) | (5,899,958 | ) | ||||
|
Pro-forma
number of shares vested based on a two year vesting period
|
4,190,074 | 3,142,555 | ||||||
| 7,896,203 | 6,848,684 | |||||||