TOWERSTREAM CORPORATION AND SUBSIDIARY
PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
(Unaudited)
TOWERSTREAM CORPORATION AND SUBSIDIARY
INTRODUCTION TO PRO FORMA CONDENSED
COMBINED FINANCIAL STATEMENTS
(Unaudited)
The following unaudited pro forma condensed combined financial statements give
effect to the merger transaction between Towerstream Corporation ("Towerstream")
and University Girls Calendar, Ltd. ("UGC").
On January 12, 2007, Towerstream merged into a newly formed subsidiary of UGC, a
publicly traded shell company. In connection with the merger 1,900,000 of UGC
common shares will remain outstanding and all other shares of UGC outstanding
were cancelled. Also, in connection with the merger, UGC issued 15,000,000
shares of its common stock for all the outstanding common stock of Towerstream.
As a result of the transaction, the former owners of Towerstream became the
controlling stockholders of UGC and UGC changed its name to Towerstream
Corporation. Accordingly, the merger of Towerstream and UGC (the "Merger") is a
reverse merger that has been accounted for as a recapitalization of Towerstream.
Concurrent with the merger, certain stockholders collectively transferred an
aggregate of $1,616,753 in outstanding promissory notes and other payables due
from Towerstream to a group of third party investors. In connection with these
notes transfers, Towerstream issued a new promissory note of approximately $1.6
million and cancelled the aforementioned obligations. As part of the
arrangement, Towerstream granted to the investors the right to automatically
convert the note into shares of common stock of UGC in conjunction with the
Merger at a conversion price of $1.50 per share. In addition, a stockholder with
a $250,000 convertible note exercised his right to convert the note into shares
of common stock at $1.43 per share in conjunction with the Merger.
Concurrent with the Merger, UGC sold 5,110,056 shares of common stock for gross
proceeds of $11,497,625 (at $2.25 per share) through a Private Placement. In
addition, these investors received warrants to purchase 2,555,028 shares of
common stock for a period of five years at an exercise price of $4.50 per share.
In connection with the Private Placement, UGC incurred placement agent fees
totaling approximately $446,400, and issued 140,917 warrants to the placement
agent at an exercise price of $4.50 per share for a period of five years. In
addition, UGC incurred other professional fees and expenses totaling
approximately $522,300 in connection with the Merger transaction.
In conjunction with the Merger, UGC sold $3,500,000 of senior convertible
debentures (the "Debentures"). The Debentures require quarterly interest only
payments of 8% per annum and mature on December 31, 2009. The Debentures are
convertible into shares of common stock of UGC at $2.75 per share. In addition,
holders of the Debentures received warrants to purchase 636,364 shares of common
stock at an exercise price of $4.00 per share and warrants to purchase 636,364
shares of common stock at an exercise price of $6.00 per share, for a period of
five years. The holders of the Debentures have certain conversion limitation and
registration rights as defined under the agreement.
In connection with the Debentures, UGC incurred placement agent fees totaling
approximately $140,000, and issued 63,634 warrants with an estimated fair value
of $34,750 to the placement agent at an exercise price of $4.50 per share for a
period of five years.
1
The following unaudited pro forma condensed combined balance sheet combines the
balance sheet of Towerstream with UGC as of September 30, 2006, as if the
recapitalization of Towerstream occurred on that date.
The unaudited pro forma condensed combined balance sheet and earnings per share
data should be read in conjunction with the separate historical financial
statements of Towerstream, appearing elsewhere herein, and the historical
financial statements of UGC, as filed and included in form 10-QSB for the
quarterly period ended August 30, 2006 and Form SB-2 for the period April 27,
2005 (date of inception) through the year ended November 30, 2005. The fiscal
year of Towerstream and UGC is December 31, and November 30, respectively. The
unaudited pro forma condensed combined balance sheet is not necessarily
indicative of the combined financial position had the acquisition occurred on
September 30, 2006. The unaudited pro forma earnings per share data are not
necessarily indicative as if the merger occurred at the beginning of the
respective periods.
2
TOWERSTREAM CORPORATION AND SUBSIDIARY
(UNAUDITED) PRO FORMA CONDENSED COMBINED BALANCE SHEET
September 30, 2006
Pro Forma Adjustments
-------------------------------
University University
Towerstream Girls Towerstream Girls Pro Forma
Corporation Calendar, Ltd. Corporation Calendar, Ltd. Combined
----------- -------------- ----------- -------------- ------------
(a) (b)
Assets
Current Assets
Cash and cash equivalents $ 405,640 $ 36,179 $ $14,411,237(j) $14,853,056
Accounts receivable, net 172,643 686 173,329
Prepaid expenses 19,386 19,386
---------- -------- ----------- -----------
Total Current Assets 597,669 36,865 14,411,237 15,045,771
Property and equipment, net 3,578,282 3,578,282
Other assets 64,185 140,000(j) 238,935
34,750(k)
---------- -------- ----------- ----------- -----------
TOTAL ASSETS $4,240,136 $ 36,865 $ $14,585,987 $18,862,988
========== ======== =========== =========== ===========
Liabilities and Stockholders' Equity
Current Liabilities
Revolving note, stockholder $ 250,000 $ $ $ $ 250,000
Current maturities of long-term debt 11,784 11,784
Current maturities of capital lease obligations 31,407 31,407
Current maturities of notes payable, stockholders 1,471,352 (1,471,352)(c)
Accounts payable and accrued expenses 446,470 6,728 522,256(d) 975,454
Deferred compensation 180,000 (170,000)(c) 10,000
Deferred compensation accrued interest 18,384 (18,384)(c)
Deferred revenues 386,127 386,127
---------- -------- ----------- -----------
Total Current Liabilities 2,795,524 6,728 (1,137,480) 1,664,772
Other Liabilities
Capital lease obligations, net of current
maturities 80,136 80,136
Senior convertible debentures 3,500,000(j) 2,973,073
(526,927)(l)
Notes payable, stockholders, net of current
maturities 230,368 (230,368)(c)
---------- -------- ----------- ----------- -----------
TOTAL LIABILITIES 3,106,028 6,728 (1,367,848) 2,973,073 4,717,981
---------- -------- ----------- ----------- -----------
Commitments and contingencies
Stockholders' Equity
Preferred stock, par value $0.001 (none issued)
Common stock, par value $0.001 21,337 4,450 (21,337)(e) (2,550)(m) 23,313
15,000(n)
1,303(f) 5,110(o)
Additional paid-in capital 8,786,139 70,558 21,337(e) 11,046,127(j,o) 14,121,694
(1,303)(f) 2,550(m)
1,890,104(c) (15,000)(n)
(35,000)(g) 34,750(k)
461,752(h) 526,927(l)
(8,622,376)(i) (49,037)(q)
4,166(p)
Accumulated other comprehensive income 4,166 (4,166)(p)
Accumulated deficit (7,638,368) (49,037) (461,752)(h) 49,037(q)
(522,256)(d)
8,622,376(i)
---------- -------- ----------- ----------- -----------
1,169,108 30,137 1,332,848 11,612,914 14,145,007
Less treasury stock, at cost (35,000) 35,000(g)
---------- -------- ----------- ----------- -----------
TOTAL STOCKHOLDERS' EQUITY 1,134,108 30,137 1,367,848 11,612,914 14,145,007
---------- -------- ----------- ----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $4,240,136 $ 36,865 $ $14,585,987 $18,862,988
========== ======== =========== =========== ===========
See accompanying (unaudited) notes to pro forma condensed combined
financial statements.
3
TOWERSTREAM CORPORATION AND SUBSIDIARY
(Unaudited) Notes to Pro Forma Condensed Combined Financial Statements
NOTE 1 - Merger Transaction
On January 12, 2007, Towerstream merged into a newly formed subsidiary of UGC, a
publicly traded shell company. In connection with the merger 1,900,000 of UGC
common shares will remain outstanding and all other shares of UGC outstanding
were cancelled. Also, in connection with the merger, UGC issued 15,000,000
shares of its common stock for all the outstanding common stock of Towerstream.
As a result of the transaction, the former owners of Towerstream became the
controlling stockholders of UGC and UGC changed its name to Towerstream
Corporation. Accordingly, the merger of Towerstream and UGC (the "Merger") is a
reverse merger that has been accounted for as a recapitalization of Towerstream.
NOTE 2 - Pro forma Adjustments
The pro forma adjustments to the unaudited condensed combined balance sheet
give effect to the recapitalization of Towerstream as if the transactions
had occurred on September 30, 2006.
Balance Sheet - September 30, 2006
a. Derived from the unaudited balance sheet of Towerstream as of
September 30, 2006.
b. Derived from the unaudited balance sheet of UGC as of August 31, 2006.
c. To record as of September 30, 2006, the conversion of $1,890,104 of
stockholders' obligations for the issuance of 1,302,583 common shares.
The debt converted is as follows:
Notes payable, stockholders $1,701,720
Deferred compensation 170,000
Accrued interest on deferred compensation 18,384
----------
Total amount of stockholder obligations converted into shares of common stock $1,890,104
==========
d. To record professional fees and other expenses of approximately
$522,300 related to the Merger.
e. Elimination of Towerstream common stock upon closing of the Merger.
f. To record par value for issuance of 1,302,583 shares of common stock
related to conversion of stockholders' obligations into shares of
common stock.
g. Elimination of Towerstream treasury stock upon closing of the Merger.
h. To record the beneficial conversion feature granted to the holders of
$923,505 of stockholders' obligations at $1.50 per share which did not
originally have conversion rights and were converted into shares of
common stock in connection with the Merger.
i. Reclassification of accumulated deficit due to conversion from "S"
corporation to "C" corporation.
4
TOWERSTREAM CORPORATION AND SUBSIDIARY
(Unaudited) Notes to Pro Forma Condensed Combined Financial Statements
NOTE 2 - Pro forma Adjustments, continued
j. Concurrent with the Merger, UGC sold 5,110,056 shares of common stock
for gross proceeds of $11,497,625 (at $2.25 per share). In addition,
these investors received warrants to purchase 2,555,028 shares of
common stock for a period of five years at an exercise price of $4.50
per share, collectively the ("Private Placement").
In connection with the Private Placement, UGC incurred placement agent
fees totaling approximately $446,400, and issued 140,917 warrants to
the placement agent at an exercise price of $4.50 per share for a
period of five years. In addition, UGC incurred other professional
fees and expenses totaling approximately $522,300 in connection with
the Merger transaction.
In conjunction with the Merger, UGC sold $3,500,000 of senior
convertible debentures (the "Debentures"). The Debentures require
quarterly interest only payments of 8% per annum and mature on
December 31, 2009. The Debentures are convertible into shares of
common stock of UGC at $2.75 per share. In addition, holders of the
Debentures received warrants to purchase 636,364 shares of common
stock at an exercise price of $4.00 per share and warrants to purchase
636,364 shares of common stock at an exercise price of $6.00 per
share, for a period of five years.
In connection with the Debentures, UGC incurred placement agent fees
totaling approximately $140,000, and issued 63,634 warrants with an
estimated fair value of $34,750 to the placement agent at an exercise
price of $4.50 per share for a period of five years.
The above equity and debt offerings generated net proceeds of
$14,411,237 as computed below:
Gross proceeds received on sale of common stock $11,497,625
Less: placement agent fees on sale of Private Placement 446,388
-----------
$11,051,237
Gross proceeds received from issuance of Debentures $ 3,500,000
Less: placement agent fees on sale of Debentures 140,000
-----------
3,360,0000
-----------
Net Proceeds $14,411,237
===========
k. To record fair value of placement agent warrants associated with
issuance of Debentures.
l. To record a debt discount associated with warrants issued in
connection with the issuance of Debentures.
m. To reflect the reduction of 2,550,010 shares of UGC common stock, par
value $0.001.
n. Issuance of 15,000,000 shares of UGC common stock to former
Towerstream shareholders, par value $0.001.
o. Issuance of 5,110,056 shares of UGC common stock in connection with
Private Placement, par value $0.001.
p. Elimination of UGC accumulated other comprehensive income.
q. Elimination of UGC accumulated deficit.
5
TOWERSTREAM CORPORATION AND SUBSIDIARY
(Unaudited) Notes to Pro Forma Condensed Combined Financial Statements
NOTE 2 - Pro forma Adjustments, continued
The 23,312,639 shares of common stock issued and outstanding post merger
consist of 15,000,000 shares issued to the former owners of Towerstream,
1,900,000 shares held by the shareholders of UGC, 1,302,583 shares issued
upon the conversion of stockholders' obligation and 5,110,056 shares issued
in connection with the Private Placement.
NOTE 3 - Basic and diluted earnings per share for the nine months ended
September 30, 2006
The computation of pro forma basic and diluted earnings per share for the
nine months ended September 30, 2006, is calculated as if the Merger
occurred at the beginning of the period.
Pro Forma Adjustments
(a) (b) -------------------------------
Towerstream University Girls Towerstream University Girls Pro Forma
NINE MONTHS ENDED SEPTEMBER 30, 2006: Corporation Calendar, Ltd. Corporation Calendar, Ltd. Combined
- ------------------------------------- ----------- ---------------- ----------- ---------------- -----------
$ 105,274 (c) $ (35,000)(e)
(8,688)(f)
(131,732)(g)
(522,256)(j) (210,000)(h)
(461,752)(d) 39,816 (i)
---------- ---------- --------- ----------- -----------
Net Loss $ (236,898) $ (39,816) $(878,734) $ (345,604) $(1,501,052)
========== ========== ========= =========== ===========
Earnings per common and common equivalent
share:
Basic and Diluted: $ (0.01) $ (0.07)
========== ===========
Weighted average shares used in computing
earnings per common and common equivalent share:
Basic 4,450,010 (2,550,010)(k) 22,989,065
========== =========== ===========
14,898,777 (l)
===========
5,110,056 (m)
===========
1,080,232 (n)
===========
a. Derived from the unaudited statement of operations of Towerstream for
the nine months ended September 30, 2006.
b. Derived from the unaudited statement of operations of UGC for the nine
months ended August 30, 2006.
c. To eliminate interest expense on stockholders' obligations which were
converted to shares of common stock as part of the Merger for the nine
months ended September 30 2006.
d. To record additional interest expense related to the beneficial
conversion feature granted to the holders of the stockholders'
obligations in consideration for converting such debt to shares of
common stock upon the Merger.
e. Amortization of placement agent fees paid in connection with placement
of Debentures.
6
TOWERSTREAM CORPORATION AND SUBSIDIARY
(Unaudited) Notes to Pro Forma Condensed Combined Financial Statements
NOTE 3 - Pro forma Adjustments, continued
f. Amortization of fair value of placement agent warrants issued in
connection with placement of Debentures.
g. Amortization of debt discount associated with warrants issued in
connection with the Debentures.
h. To record interest expense associated with issuance of the Debentures
for the nine months ended September 30, 2006.
i. Elimination of net loss of UGC, the public shell company.
j. To record professional fees and other expenses of $522,256 related to
the Merger.
k. Reduction of 2,550,010 shares of UGC common stock from 4,450,010 to
1,900,000 shares in connection with the Merger.
l. 14,898777 shares - weighted average calculation of 15,000,000 shares
issued by UGC for 100% of the outstanding stock of Towerstream in
connection with the Merger.
m. Issuance of 5,110,056 shares of UGC in connection with the Private
Placement resulting in gross proceeds of $11,497,625.
n. 1,080,232 shares - weighted average calculation of 1,302,583 shares of
UGC in settlement of stockholders' obligations that resulted in the
retirement and payment in full of $1,890,104 of debt upon the Merger.
7
TOWERSTREAM CORPORATION AND SUBSIDIARY
(Unaudited) Notes to Pro Forma Condensed Combined Financial Statements
NOTE 4 - Basic and diluted earnings per share for the year ended December 31,
2005
The computation of pro forma basic and diluted earnings per share for the
year ended December 31, 2005, is calculated as if the Merger occurred at
the beginning of the period.
Pro Forma Adjustments
(a) (b) -------------------------------
Towerstream University Girls Towerstream University Girls Pro Forma
YEAR ENDED DECEMBER 31, 2005: Corporation Calendar, Ltd. Corporation Calendar, Ltd. Combined
- ----------------------------- ----------- ---------------- ----------- ---------------- -----------
$ 70,084 (c) $ (46,666)(e)
(11,583)(f)
(175,642)(g)
(522,256)(j) (280,000)(h)
(461,752)(d) 9,221 (i)
---------- ---------- --------- ----------- -----------
Net Loss $ (947,205) $ (9,221) $(913,924) $ (504,670) $(2,375,020)
========== ========== ========= =========== ===========
Earnings per common and common equivalent
share:
Basic and Diluted: $ (0.00) $ (0.11)
========== ===========
Weighted average shares used in
computing earnings per common and
common equivalent share:
Basic and Diluted: 3,378,671 (1,478,671)(k) 22,150,928
========== =========== ===========
14,559,843 (l)
===========
5,110,056 (m)
===========
581,029 (n)
===========
a. Derived from the audited statement of operations of Towerstream for
the year ended December 31, 2005.
b. Derived from the audited statement of operations of UGC for the year
ended November 30, 2005.
c. To eliminate interest expense on stockholders' obligations which were
converted to shares of common stock as part of the Merger for the
twelve months ended December 31, 2005.
d. To record additional interest expense related to the beneficial
conversion feature granted to the holders of the stockholders'
obligations in consideration for converting such debt to shares of
common stock upon the Merger.
e. Amortization of placement agent fees paid in connection with placement
of Debentures.
f. Amortization of fair value of placement agent warrants issued in
connection with placement of Debentures.
g. Amortization of debt discount associated with warrants issued in
connection with the Debentures.
h. To record interest expense associated with issuance of the Debentures
for the twelve months ended December 31, 2005.
8
TOWERSTREAM CORPORATION AND SUBSIDIARY
(Unaudited) Notes to Pro Forma Condensed Combined Financial Statements
NOTE 4 - Pro forma Adjustments, continued
i. Elimination of net loss of UGC, the public shell company.
j. To record professional fees and other expenses of $522,256 related to
the Merger.
k. Reduction of 1,478,671 shares of UGC common stock, from 3,378,671 to
1,900,000 shares of common stock in connection with the Merger.
l. 14,559,843 - weighted average calculation of 15,000,000 shares issued
by UGC for 100% of the outstanding stock of Towerstream in connection
with the Merger.
m. Issuance of 5,110,056 shares of UGC in connection with the Private
Placement resulting in gross proceeds of $11,497,625.
n. 581,029 shares - weighted average calculation of 1,302,583 shares of
UGC in settlement of stockholders' obligations that resulted in the
retirement and payment in full of $1,890,104 of debt upon the Merger.
9
