Exhibit 99.2
Unaudited Interim Financial Statements
PATHFIRE, INC.
Balance Sheets
March 31, 2007 and 2006
|
| 2007 |
| 2006 |
| ||
Assets |
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|
|
| ||
Current assets: |
|
|
|
|
| ||
Cash and cash equivalents |
| $ | 1,739,610 |
| $ | 2,119,348 |
|
Accounts receivable, less allowances of $105,017 in 2007 and $95,447 in 2006 |
| 2,566,648 |
| 2,323,896 |
| ||
Inventory |
| 46,273 |
| 375,425 |
| ||
Prepaid and other current assets |
| 322,690 |
| 346,908 |
| ||
Total current assets |
| 4,675,221 |
| 5,165,577 |
| ||
Property and equipment, net |
| 3,271,460 |
| 3,601,989 |
| ||
Other assets |
| 1,479,958 |
| 1,827,049 |
| ||
|
| $ | 9,426,639 |
| $ | 10,594,615 |
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|
|
|
|
| ||
Liabilities, Convertible Preferred Stock and Warrants,and Stockholders’ Deficit |
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|
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|
| ||
Current liabilities: |
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|
|
|
| ||
Accounts payable |
| $ | 860,221 |
| $ | 666,361 |
|
Accrued expenses |
| 1,067,350 |
| 498,528 |
| ||
Deferred revenue |
| 2,020,821 |
| 3,806,069 |
| ||
Capital lease obligations |
| 36,843 |
| 9,011 |
| ||
Long-term Debt |
| 2,389,668 |
| 1,309,006 |
| ||
Total current liabilities |
| 6,374,903 |
| 6,288,975 |
| ||
|
|
|
|
|
| ||
Long-term debt, less current portion |
| 2,227,777 |
| 2,051,243 |
| ||
Deferred revenue, less current portion |
| 1,452,962 |
| — |
| ||
Capital lease obligations, less current portion |
| 125,287 |
| 3,571,003 |
| ||
Total long-term liabilities |
| 3,806,026 |
| 5,622,246 |
| ||
Total liabilities |
| 10,180,929 |
| 11,911,221 |
| ||
Total redeemable convertible preferred stock and warrants |
| 131,933,358 |
| 125,843,440 |
| ||
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|
|
| ||
Stockholders’ deficit: |
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|
|
|
| ||
Series E convertible preferred stock, no par value; |
| 273,188 |
| 273,188 |
| ||
Series E-1 convertible preferred stock, no par value |
| — |
| — |
| ||
Unamortized contract incentive, Series E, Series F and Series K |
| (11,817 | ) | (449,445 | ) | ||
Common stock, no par value |
| 232,985 |
| 232,905 |
| ||
Additional paid-in capital |
| 4,674,620 |
| 7,263,528 |
| ||
Accumulated deficit |
| (137,856,283 | ) | (134,479,881 | ) | ||
Treasury stock, at cost |
| (341 | ) | (341 | ) | ||
Total stockholders’ deficit |
| (132,687,648 | ) | (127,160,046 | ) | ||
|
| $ | 9,426,639 |
| $ | 10,594,615 |
|
Unaudited Interim Financial Statements
PATHFIRE, INC.
Statements of Operations
Three Months Ended March 31, 2007 and 2006
|
| 2007 |
| 2006 |
| ||
Revenue |
| $ | 4,267,144 |
| $ | 3,204,730 |
|
|
|
|
|
|
| ||
Costs and expenses: |
|
|
|
|
| ||
Delivery and material costs |
| 648,768 |
| 470,239 |
| ||
Customer support operations |
| 1,321,100 |
| 1,337,140 |
| ||
Engineering, research, and development |
| 757,528 |
| 779,608 |
| ||
Sales and marketing |
| 598,658 |
| 623,168 |
| ||
General and administrative |
| 685,353 |
| 439,631 |
| ||
Depreciation and amortization |
| 611,980 |
| 608,048 |
| ||
Loss from operations |
| (356,243 | ) | (1,053,104 | ) | ||
Other income (expense) |
|
|
|
|
| ||
Interest income |
| 29,458 |
| 22,109 |
| ||
Interest expense |
| (176,526 | ) | (165,291 | ) | ||
Gain(loss) on sale of property and equipment |
| — |
| — |
| ||
Total other income (expense) |
| (147,068 | ) | (143,182 | ) | ||
Net loss |
| $ | (503,311 | ) | $ | (1,196,286 | ) |
Unaudited Interim Financial Statements
PATHFIRE, INC.
Statements of Cash Flows
Three Months Ended March 31, 2007 and 2006
|
| 2007 |
| 2006 |
| ||
Cash flows from operating activities: |
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|
|
|
| ||
Net loss |
| $ | (503,311 | ) | $ | (1,196,286 | ) |
Adjustments to reconcile net loss to net cash used in operating activities: |
|
|
|
|
| ||
Depreciation and amortization of property and equipment |
| 611,980 |
| 608,048 |
| ||
Amortization of debt discount |
| 16,578 |
| 24,678 |
| ||
Other noncash charges |
| 275,547 |
| 114,027 |
| ||
(Gain) Loss on sale assets |
| — |
| — |
| ||
Changes in operating assets and liabilities: |
|
|
|
|
| ||
Accounts receivable |
| 148,611 |
| (462,826 | ) | ||
Inventory |
| 91,214 |
| 12,274 |
| ||
Prepaid expenses and other current assets |
| (122,134 | ) | 113,318 |
| ||
Accounts payable and other liabilities |
| (319,641 | ) | (569,254 | ) | ||
Deferred revenue |
| (1,478,161 | ) | 436,589 |
| ||
Net cash used in operating activities |
| (1,279,317 | ) | (919,432 | ) | ||
Cash flows used in investing activities: |
|
|
|
|
| ||
Purchase of property and equipment |
| (121,556 | ) | (194,945 | ) | ||
Proceeds from sale of property and equipment |
|
|
|
|
| ||
Net cash used in investing activities |
| (121,556 | ) | (194,945 | ) | ||
Cash flows from financing activities: |
|
|
|
|
| ||
Proceeds from issuance of common stock |
| — |
| 981 |
| ||
Proceeds from issuance of convertible preferred stock, net of issuance costs |
| — |
| — |
| ||
Proceeds from the issuance of long-term debt |
| — |
| — |
| ||
Short-term borrowings (payments) on revolving line of credit |
| — |
| — |
| ||
Payments on long-term debt and capital lease obligations |
| (19,280 | ) | (13,452 | ) | ||
Net cash used in financing activities |
| (19,280 | ) | (12,471 | ) | ||
Net change in cash and cash equivalents |
| (1,420,153 | ) | (1,126,848 | ) | ||
Cash and cash equivalents at beginning of period |
| 3,159,763 |
| 3,246,196 |
| ||
Cash and cash equivalents at end of period |
| $ | 1,739,610 |
| $ | 2,119,348 |
|
Unaudited Interim Financial Statements
PATHFIRE, INC.
Statements of Stockholders’ Deficit
For the three-month period ended March 31, 2007
|
| Series E |
| Unamortized |
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|
| Additional |
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| convertible preferred stock |
| contract |
| Common stock |
| paid-in |
| Accumulated |
| Treasury stock |
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| Shares |
| Amount |
| incentive |
| Shares |
| Amount |
| capital |
| deficit |
| Shares |
| Amount |
| Total |
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Balance at December 31, 2006 |
| 1,743,756 |
| 273,188 |
| (120,939 | ) | 7,033,986 |
| 232,985 |
| 5,619,161 |
| (137,312,972 | ) | 1,024,998 |
| (341 | ) | (131,308,918 | ) | |||||||
Amortization of contract incentive |
| — |
| — |
| 109,122 |
| — |
| — |
| — |
| — |
| — |
| — |
| 109,122 |
| |||||||
Accrued dividends on Series L preferred stock |
| — |
| — |
| — |
| — |
| — |
| — |
| (40,000 | ) | — |
| — |
| (40,000 | ) | |||||||
Accretion on convertible preferred stock and warrants |
| — |
| — |
| — |
| — |
| — |
| (944,541 | ) | — |
| — |
| — |
| (944,541 | ) | |||||||
Net loss |
| — |
| — |
| — |
| — |
| — |
| — |
| (503,311 | ) | — |
| — |
| (503,311 | ) | |||||||
Balance at March 31, 2007 |
| 1,743,756 |
| $ | 273,188 |
| $ | (11,817 | ) | 7,033,986 |
| $ | 232,985 |
| $ | 4,674,620 |
| $ | (137,856,283 | ) | 1,024,998 |
| $ | (341 | ) | $ | (132,687,648 | ) |
Unaudited Interim Financial Statements
PATHFIRE, INC.
Notes to Interim Financial Statements
Description of Business
Pathfire, Inc. (the Company) was incorporated as Video Networks, Inc. on November 26, 1996 to develop and provide digital media distribution and management solutions. The Company changed its name to Pathfire, Inc. in January 2001. Pathfire presently serves customers in the television, media and entertainment sectors located principally throughout the United States and Canada.
Basis of Presentation
The interim financial statements have been prepared by the Company without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations. However, the Company believes that the disclosures are adequate to make the information presented not misleading. The unaudited condensed consolidated financial statements reflect all adjustments, which are, in the opinion of management, of a normal and recurring nature and necessary to fairly state Pathfire’s financial position, results of operations and cash flows for the periods presented. These financial statements of Pathfire should be read in conjunction with the financial statements and the notes thereto of Pathfire that are included in this current report on Form 8-K/A.
New Accounting Pronouncements
In July 2006, the Financial Accounting Standards Board (“FASB”) issued Interpretation No. 48. Interpretation No. 48 clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements in accordance with SFAS No. 109, “Accounting for Income Taxes.” Interpretation No. 48 prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. Interpretation No. 48 also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. FASB Interpretation No. 48 became effective for Pathfire as of January 1, 2007, and did not have a material impact its financial statements.
