Exhibit 99.1
UNAUDITED PRO FORMA CONDENSED FINANCIAL INFORMATION
The following unaudited pro forma condensed consolidated financial statements are derived from the historical consolidated financial statements of Marchex, Inc. (“Marchex” or the “Company”) as of and for the six months ended June 30, 2020, and for the years ended December 31, 2018 and 2019, which are incorporated by reference herein. The pro forma adjustments give effect to the disposal of the Marchex Carve Out, as described below.
These unaudited pro forma condensed consolidated financial statements include adjustments to reflect the following:
| • | the sale of all of Marchex’s interest in the Marchex Carve Out assets, liabilities, and operations; |
| • | the proceeds received from the sale, including a 10% equity interest in the entity purchasing the Marchex Carve Out; |
| • | the effects of the anticipated Support Services Agreement between Marchex and the Purchaser of Marchex Carve Out at the level of services expected during the first year of the Support Services Agreement term. |
The pro forma financial information reflects the accounting treatment of the Marchex Carve Out as discontinued operations within Marchex’s pro forma historical balance sheet and statement of operations. The basis of accounting applied to discontinued operations can differ from the basis of accounting used in preparing the unaudited special purpose combined financial statement of the Marchex Carve Out, included elsewhere in this proxy statement. Furthermore, amounts reflected within discontinued operations reflect anticipated accounting treatment and, in some cases, are based on estimates of expected value. Final values may differ significantly in the event the Transaction closes and are expected to reflect changes that occur from now until closing of the transaction.
The unaudited pro forma consolidated balance sheet as of June 30, 2020, is presented to reflect adjustments Marchex’s balance sheet as if the Transaction were completed on June 30, 2020. Marchex believes that the cash balance that ultimately will be transferred to the Purchaser at the closing of the Transaction will be significantly below the balance that existed as of June 30, 2020.
The unaudited pro forma consolidated statements of operations for the six months ended June 30, 2020, and for the years ended December 31, 2018 and 2019 are presented as if the Transaction were completed on January 1, 2018. The discontinued operations column in the pro forma consolidated statements of operations reflects the operations of Marchex Carve Out excluding any allocation of corporate overhead. Pro Forma adjustments reflect aspects of the Support Services Agreement that are expected to be received by the Company for providing overhead-related services post Transaction. Part of the Transaction consideration includes cancellation of stock-based awards, which have a total unamortized expense amount of approximately $350,000 as of June 30, 2020. No entries have been made to the pro forma statement of operations for the cancellations.
The following unaudited pro forma condensed consolidated financial statements should be read in conjunction with:
| • | the accompanying notes to the unaudited pro forma consolidated financial statements; |
| • | the audited consolidated financial statements and accompanying notes of Marchex, Inc., incorporated by reference herein; |
| • | the unaudited special purpose combined financial statements of the Marchex Carve Out contained elsewhere in this proxy statement. |
The unaudited pro forma condensed consolidated financial data has been presented for informational purposes only. The assumptions used and pro forma adjustments derived from such assumptions are based on currently available information, and the Company believes such assumptions are reasonable under the circumstances. The pro forma data is not necessarily indicative of our results of operations or financial condition had the Transaction been completed on the dates assumed. In addition, they are not necessarily indicative of our future results of operations or financial condition.
1
Marchex, Inc.
Unaudited Pro Forma Condensed Consolidated Balance Sheet
As of June 30, 2020
(in thousands)
|
| Marchex, Inc. Historical |
|
| Discontinued Operations |
|
| Pro Forma Adjustments |
|
|
|
| Marchex, Inc. Pro Forma |
| |||||
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Current assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Cash and cash equivalents |
| $ | 46,777 |
|
| $ | (666 | ) |
| $ | 2,250 |
|
| (a) |
| $ | 48,361 |
| |
Accounts receivable, net |
|
| 16,148 |
|
|
| (9,121 | ) |
|
| — |
|
|
|
|
| 7,027 |
| |
Prepaid expenses and other current assets |
|
| 2,444 |
|
|
| (92 | ) |
|
| — |
|
|
|
|
| 2,352 |
| |
Total current assets |
|
| 65,369 |
|
|
| (9,879 | ) |
|
| 2,250 |
|
|
|
|
| 57,740 |
| |
Property and equipment, net |
|
| 3,206 |
|
|
| (75 | ) |
|
| — |
|
|
|
|
| 3,131 |
| |
Right-of-use lease asset |
|
| 6,221 |
|
|
| — |
|
|
| — |
|
|
|
|
| 6,221 |
| |
Other assets, net |
|
| 1,076 |
|
|
| — |
|
|
| 120 |
|
| (b) |
|
| 1,196 |
| |
Equity Investment |
|
| — |
|
|
| — |
|
|
| 281 |
|
| (c) |
|
| 281 |
| |
Goodwill |
|
| 19,132 |
|
|
| (1,535 | ) |
|
| — |
|
|
|
|
| 17,597 |
| |
Intangible assets from acquisitions, net |
|
| 10,614 |
|
|
| — |
|
|
| — |
|
|
|
|
| 10,614 |
| |
Total assets |
| $ | 105,618 |
|
| $ | (11,489 | ) |
| $ | 2,651 |
|
|
|
| $ | 96,780 |
| |
Liabilities and Stockholders’ Equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Current liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Accounts payable |
| $ | 8,321 |
|
| $ | (6,120 | ) |
| $ | — |
|
|
|
| $ | 2,201 |
| |
Accrued expenses and other current liabilities |
|
| 9,700 |
|
|
| (681 | ) |
|
| 220 |
|
| (d) |
|
| 9,239 |
| |
Current portion of acquisition related liabilities |
|
| 277 |
|
|
| — |
|
|
| — |
|
|
|
|
| 277 |
| |
Deferred revenue and deposits |
|
| 1,911 |
|
|
| (214 | ) |
|
| — |
|
|
|
|
| 1,697 |
| |
Lease liability, current |
|
| 1,675 |
|
|
| — |
|
|
| — |
|
|
|
|
| 1,675 |
| |
Loan obligation, current |
|
| 5,292 |
|
|
| (127 | ) |
|
| — |
|
|
|
|
| 5,165 |
| |
Total current liabilities |
|
| 27,176 |
|
|
| (7,142 | ) |
|
| 220 |
|
|
|
|
| 20,254 |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Deferred tax liabilities |
|
| 162 |
|
|
| — |
|
|
| — |
|
|
|
|
| 162 |
| |
Lease liability, non-current |
|
| 5,834 |
|
|
| — |
|
|
| — |
|
|
|
|
| 5,834 |
| |
Total liabilities |
|
| 33,172 |
|
|
| (7,142 | ) |
|
| 220 |
|
|
|
|
| 26,250 |
| |
Commitments and contingencies |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Stockholders' equity |
|
| 72,446 |
|
|
| (4,347 | ) |
|
| 2,431 |
|
| (e) |
|
| 70,530 |
| |
Total liabilities and stockholders' equity |
| $ | 105,618 |
|
| $ | (11,489 | ) |
| $ | 2,651 |
|
|
|
| $ | 96,780 |
|
2
Unaudited Pro Forma Consolidated Statement of Operations
For the six months ended June 30, 2020
(in thousands, except per share amounts)
|
| Marchex, Inc. Historical |
|
| Discontinued Operations |
|
| Pro Forma Adjustments |
|
|
|
| Marchex, Inc. Pro Forma |
| ||||
Revenue |
| $ | 50,632 |
|
| $ | (25,908 | ) |
|
| — |
|
|
|
| $ | 24,724 |
|
Expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Service costs (1) |
|
| 29,702 |
|
|
| (19,439 | ) |
|
| (100 | ) |
| (f) |
|
| 10,163 |
|
Sales and marketing (1) |
|
| 10,429 |
|
|
| (1,777 | ) |
|
| (50 | ) |
| (f) |
|
| 8,602 |
|
Product development (1) |
|
| 11,929 |
|
|
| (1,334 | ) |
|
| (50 | ) |
| (f) |
|
| 10,545 |
|
General and administrative (1) |
|
| 6,775 |
|
|
| (277 | ) |
|
| (1,550 | ) |
| (f) |
|
| 4,948 |
|
Amortization of intangible assets from acquisitions (2) |
|
| 2,969 |
|
|
| — |
|
|
| — |
|
|
|
|
| 2,969 |
|
Acquisition related costs (benefit) |
|
| (996 | ) |
|
| — |
|
|
| — |
|
|
|
|
| (996 | ) |
Total operating expenses |
|
| 60,808 |
|
|
| (22,827 | ) |
|
| (1,750 | ) |
|
|
|
| 36,231 |
|
Impairment of goodwill |
|
| (14,213 | ) |
|
| 1,141 |
|
| — |
|
|
|
|
| (13,072 | ) | |
Impairment of intangible assets from acquisitions |
|
| (5,903 | ) |
|
| — |
|
| — |
|
|
|
|
| (5,903 | ) | |
Income (loss) from operations |
|
| (30,292 | ) |
|
| (1,940 | ) |
|
| 1,750 |
|
|
|
|
| (30,482 | ) |
Other income (loss) |
|
| — |
|
|
|
|
|
|
| 104 |
|
| (g) |
|
| 104 |
|
Interest income, net |
|
| 142 |
|
| — |
|
| — |
|
|
|
|
| 142 |
| ||
Income (loss) before provision for income taxes |
|
| (30,150 | ) |
|
| (1,940 | ) |
|
| 1,854 |
|
|
|
|
| (30,236 | ) |
Income tax (benefit) expense |
|
| (767 | ) |
| — |
|
| — |
|
| (h) |
|
| (767 | ) | ||
Net loss applicable to common stockholders |
| $ | (29,383 | ) |
| $ | (1,940 | ) |
| $ | 1,854 |
|
|
|
| $ | (29,469 | ) |
Earnings (Loss) Per Common Share (“EPS”): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted net loss per Class A share applicable to common stockholders |
| $ | (0.62 | ) |
|
|
|
|
|
|
|
|
|
|
| $ | (0.63 | ) |
Basic and diluted net loss per Class B share applicable to common stockholders |
| $ | (0.62 | ) |
|
|
|
|
|
|
|
|
|
|
| $ | (0.63 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares outstanding for basic EPS: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Class A |
|
| 4,661 |
|
|
|
|
|
|
|
|
|
|
|
|
| 4,661 |
|
Class B |
|
| 42,382 |
|
|
|
|
|
|
|
|
|
|
|
|
| 42,382 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares outstanding for diluted EPS: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Class A |
|
| 4,661 |
|
|
|
|
|
|
|
|
|
|
|
|
| 4,661 |
|
Class B |
|
| 47,043 |
|
|
|
|
|
|
|
|
|
|
|
|
| 47,043 |
|
(1) Excludes amortization of intangibles from acquisitions |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2) Components of amortization of intangibles from acquisitions |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Service costs |
| $ | 1,384 |
|
|
| — |
|
|
| — |
|
|
| $ |
| 1,384 |
|
Sales and marketing |
|
| 1,179 |
|
|
| — |
|
|
| — |
|
|
|
|
| 1,179 |
|
General and administrative |
|
| 406 |
|
|
| — |
|
|
| — |
|
|
|
|
| 406 |
|
Total |
| $ | 2,969 |
|
| $ | — |
|
| $ | — |
|
|
|
| $ | 2.969 |
|
3
Unaudited Pro Forma Consolidated Statement of Operations
Year Ended December 31, 2019
(in thousands, except per share data)
|
| Marchex, Inc. Historical |
|
| Discontinued Operations |
|
| Pro Forma Adjustments |
|
|
|
| Marchex, Inc. Pro Forma |
| ||||
Revenue |
| $ | 106,132 |
|
| $ | (51,643 | ) |
|
|
|
|
|
|
| $ | 54,489 |
|
Expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Service costs (1) |
|
| 56,537 |
|
|
| (37,560 | ) |
|
| (200 | ) |
| (f) |
|
| 18,777 |
|
Sales and marketing (1) |
|
| 16,651 |
|
|
| (3,803 | ) |
|
| (100 | ) |
| (f) |
|
| 12,748 |
|
Product development (1) |
|
| 20,127 |
|
|
| (2,675 | ) |
|
| (100 | ) |
| (f) |
|
| 17,352 |
|
General and administrative (1) |
|
| 13,516 |
|
|
| (496 | ) |
|
| (3,100 | ) |
| (f) |
|
| 9,920 |
|
Amortization of intangible assets from acquisitions (2) |
|
| 6,263 |
|
|
| — |
|
|
| — |
|
|
|
|
| 6,263 |
|
Acquisition and disposition-related costs (benefit) |
|
| (447 | ) |
|
| — |
|
|
| — |
|
|
|
|
| (447 | ) |
Total operating expenses |
|
| 112,647 |
|
|
| (44,534 | ) |
|
| (3,500 | ) |
|
|
|
| 64,613 |
|
Impairment of goodwill |
| — |
|
| — |
|
|
| — |
|
|
|
| — |
| |||
Impairment of intangible assets from acquisitions |
| — |
|
| — |
|
|
| — |
|
|
|
| — |
| |||
Income (loss) from operations |
|
| (6,515 | ) |
|
| (7,109 | ) |
|
| 3,500 |
|
|
|
|
| (10,124 | ) |
Other income (loss) |
|
| (27 | ) |
|
| — |
|
|
| 282 |
|
| (g) |
|
| 255 |
|
Interest income |
|
| 779 |
|
|
| — |
|
|
| — |
|
|
|
|
| 779 |
|
Income (loss) before provision for income taxes |
|
| (5,763 | ) |
|
| (7,109 | ) |
|
| 3,782 |
|
|
|
|
| (9,090 | ) |
Income tax (benefit) expense |
|
| (1,721 | ) |
|
| — |
|
|
| — |
|
| (h) |
|
| (1,721 | ) |
Net income (loss) applicable to common stockholders |
| $ | (4,042 | ) |
| $ | (7,109 | ) |
| $ | 3,782 |
|
|
|
| $ | (7,369 | ) |
Earnings (Loss) Per Common Share (“EPS”): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted net loss per Class A share applicable to common stockholders |
| $ | (0.09 | ) |
|
|
|
|
|
|
|
|
|
|
| $ | (0.16 | ) |
Basic and diluted net loss per Class B share applicable to common stockholders |
| $ | (0.09 | ) |
|
|
|
|
|
|
|
|
|
|
| $ | (0.16 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares outstanding for basic EPS: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Class A |
|
| 4,793 |
|
|
|
|
|
|
|
|
|
|
|
|
| 4,793 |
|
Class B |
|
| 40,667 |
|
|
|
|
|
|
|
|
|
|
|
|
| 40,667 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares outstanding for diluted EPS: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Class A |
|
| 4,793 |
|
|
|
|
|
|
|
|
|
|
|
|
| 4,793 |
|
Class B |
|
| 45,460 |
|
|
|
|
|
|
|
|
|
|
|
|
| 45,460 |
|
(1) Excludes amortization of intangibles from acquisitions |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2) Components of amortization of intangibles from acquisitions: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Service costs |
| $ | 2,331 |
|
| — |
|
| — |
|
|
|
| $ | 2,331 |
| ||
Sales and marketing |
|
| 2,497 |
|
| — |
|
| — |
|
|
|
|
| 2,497 |
| ||
General and administrative |
|
| 1,435 |
|
| — |
|
| — |
|
|
|
|
| 1,435 |
| ||
Total |
| $ | 6,263 |
|
| $ | — |
|
| $ | — |
|
|
|
| $ | 6,263 |
|
4
Unaudited Pro Forma Consolidated Statement of Operations
Year Ended December 31, 2018
(in thousands, except per share data)
|
| Marchex, Inc. Historical |
|
| Discontinued Operations |
|
| Pro Forma Adjustments |
|
|
|
| Marchex, Inc. Pro Forma |
| ||||
Revenue |
| $ | 85,251 |
|
| $ | (45,489 | ) |
|
|
|
|
|
|
| $ | 39,762 |
|
Expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Service costs (1) |
|
| 47,804 |
|
|
| (33,166 | ) |
|
| (200 | ) |
| (f) |
|
| 14,438 |
|
Sales and marketing (1) |
|
| 13,788 |
|
|
| (3,642 | ) |
|
| (100 | ) |
| (f) |
|
| 10,046 |
|
Product development (1) |
|
| 15,423 |
|
|
| (2,090 | ) |
|
| (100 | ) |
| (f) |
|
| 13,233 |
|
General and administrative (1) |
|
| 10,881 |
|
|
| — |
|
|
| (3,100 | ) |
| (f) |
|
| 7,781 |
|
Amortization of intangible assets from acquisitions (2) |
|
| 781 |
|
|
| — |
|
|
| — |
|
|
|
|
| 781 |
|
Acquisition and disposition-related costs (benefit) |
|
| 462 |
|
|
| — |
|
|
| — |
|
|
|
|
| 462 |
|
Total operating expenses |
|
| 89,139 |
|
|
| (38,898 | ) |
|
| (3,500 | ) |
|
|
|
| 46,741 |
|
Impairment of goodwill |
|
| — |
|
|
| — |
|
|
| — |
|
|
|
|
| — |
|
Impairment of intangible assets from acquisitions |
|
| — |
|
|
| — |
|
|
| — |
|
|
|
|
| — |
|
Income (loss) from operations |
|
| (3,888 | ) |
|
| (6,592 | ) |
|
| 3,500 |
|
|
|
|
| (6,980 | ) |
Other income (loss) |
|
| (20 | ) |
|
| — |
|
|
| 241 |
|
| (g) |
|
| 221 |
|
Interest income |
|
| 1,074 |
|
|
| — |
|
|
| — |
|
|
|
|
| 1,074 |
|
Income (loss) before provision for income taxes |
|
| (2,834 | ) |
|
| (6,592 | ) |
|
| 3,741 |
|
|
|
|
| (5,685 | ) |
Income tax (benefit) expense |
|
| (156 | ) |
|
| — |
|
|
| — |
|
| (h) |
|
| (156 | ) |
Net income (loss) applicable to common stockholders |
| $ | (2,678 | ) |
| $ | (6,592 | ) |
| $ | 3,741 |
|
|
|
| $ | (5,529 | ) |
Earnings (Loss) Per Common Share (“EPS”): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted net loss per Class A share applicable to common stockholders |
| $ | (0.06 | ) |
|
|
|
|
|
|
|
|
|
|
| $ | (0.13 | ) |
Basic and diluted net loss per Class B share applicable to common stockholders |
| $ | (0.06 | ) |
|
|
|
|
|
|
|
|
|
|
| $ | (0.13 | ) |
Weighted average common shares outstanding for basic EPS: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Class A |
|
| 5,056 |
|
|
|
|
|
|
|
|
|
|
|
|
| 5,056 |
|
Class B |
|
| 37,390 |
|
|
|
|
|
|
|
|
|
|
|
|
| 37,390 |
|
Weighted average common shares outstanding for diluted EPS: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Class A |
|
| 5,056 |
|
|
|
|
|
|
|
|
|
|
|
|
| 5,056 |
|
Class B |
|
| 42,446 |
|
|
|
|
|
|
|
|
|
|
|
|
| 42,446 |
|
(1) Excludes amortization of intangibles from acquisitions |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2) Components of amortization of intangibles from acquisitions |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Service costs |
| $ | 302 |
|
|
| — |
|
|
| — |
|
|
|
| $ | 302 |
|
Sales and marketing |
|
| 295 |
|
|
| — |
|
|
| — |
|
|
|
|
| 295 |
|
General and administrative |
|
| 184 |
|
|
| — |
|
|
| — |
|
|
|
|
| 184 |
|
Total |
| $ | 781 |
|
| $ | — |
|
| $ | — |
|
|
|
| $ | 781 |
|
5
Notes to Unaudited Pro Forma Consolidated Condensed Financial Information
(a) | Reflects the cash consideration received as part of Transaction closing. |
(b) | The Company’s preliminary evaluation of the Transaction identified certain contingent consideration that qualifies as a derivative and that is not subject to the derivative accounting scope exception under U.S. generally accepted accounting principles. Accordingly, this derivative is reflected on the pro forma consolidated balance sheet at preliminary estimate of its fair value. |
(c) | Reflects Marchex’s estimate of its equity interest in the Purchaser, received as part of the Transaction consideration. Final values may differ significantly in the event the Transaction closes and are expected to reflect changes that occur from now until the closing of the transaction. |
(d) | Reflects costs incurred by Marchex directly attributable to the Transaction that are not yet reflected on Marchex’s balance sheet as of June 30, 2020. Such amounts are not included in the pro forma consolidated statements of operations, as these costs are considered to be nonrecurring in nature. |
(e) | Reflects the equity impact of assets and liabilities recorded as the result of the Transaction. |
(f) | Reflects estimated expense recovery from performing services under the Support Services Agreement, to the extent not already reflected as part of discontinued operations adjustments. Marchex estimated amounts it expects to receive for services provided to Purchaser for the first twelve months under the Support Services Agreement for purposes of the pro forma adjustment. The following table reflects Marchex’s pro forma pre-tax income (loss) assuming it receives different amounts for services: |
|
| Marchex, Inc. Pre-Tax Income (Loss) |
| |||||||||
|
| Year ended December 31, 2018 |
|
| Year ended December 31, 2019 |
|
| Six months ended June 30, 2020 |
| |||
Annual Support Service Agreement Proceeds* |
|
|
|
|
|
|
|
|
|
|
|
|
$4,500 |
| $ | (4,763 | ) |
| $ | (8,168 | ) |
| $ | (29,776) |
|
$3,500 |
|
| (5,685 | ) |
|
| (9,090 | ) |
|
| (30,237) |
|
$2,500 |
|
| (6,607 | ) |
|
| (10,012 | ) |
|
| (30,698) |
|
$1,500 |
|
| (7,529 | ) |
|
| (10,934 | ) |
|
| (31,159) |
|
$500 |
|
| (8,529 | ) |
|
| (11,934 | ) |
|
| (31,659) |
|
$0 |
|
| (9,029 | ) |
|
| (12,434 | ) |
|
| (31,909) |
|
| * | For services not already reflected within discontinued operations. |
(g) | Reflects Marchex’s equity interest in the net income of the Purchaser, which is part of the Transaction consideration to be received by Marchex at the closing of the Transaction. |
(h) | No tax effects of pro forma adjustments have been recorded due to the extent of the Company’s tax loss carryforwards reduced by valuation allowances. |
6