Exhibit 99.1
ANTS SOFTWARE INC.
UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS (RESTATED)
We are amending our pro forma combined condensed financial statements included in our Form 8-K/A as filed on August 13, 2008 as a result of an adjusted valuation of the common shares issued in connection with the Inventa acquisition and the accounting for the convertible promissory notes issued in the acquisition on May 30, 2008.
The following restated unaudited pro forma combined condensed financial statements are based on the historical financial statements of ANTs software, inc. (“ANTs”) and Inventa Technologies, Inc. (“Inventa”) after giving effect to our acquisition of Inventa (Acquisition) and the assumptions and adjustments described in the accompanying notes to the unaudited pro forma combined condensed financial statements. We acquired all of the outstanding shares of Inventa on May 30, 2008.
For the purposes of these restated unaudited pro forma combined condensed financial statements, the Acquisition is assumed to have occurred as of January 1, 2006 with respect to the unaudited pro forma combined condensed statement of operations for the three months ended March 31, 2008 and twelve months ended December 31, 2007 and as of March 31, 2008 with respect to the unaudited pro forma combined condensed balance sheet.
Because these restated unaudited pro forma combined condensed financial statements have been prepared based on preliminary estimates of fair values attributable to the Acquisition, the actual amounts recorded for the Acquisition may differ materially from the information presented in these restated unaudited pro forma combined condensed financial statements. The total purchase price has been allocated on a preliminary basis to assets acquired and liabilities assumed based on management’s best estimates of fair value, with the excess cost over net tangible and identifiable intangible assets acquired being allocated to goodwill. We retained the services of third parties to assist in the preliminary valuation of the intangible assets. These allocations are subject to change pending a final analysis of the fair value of the assets acquired and liabilities assumed, which could result in material changes from the information presented.
The pro forma information presented is for illustrative purposes only and is not necessarily indicative of the operating results or financial position that would have been achieved if the Acquisition had occurred on January 1, 2006, nor is it indicative of future operating results or financial position. The restated unaudited pro forma combined condensed financial statements do not reflect any operating efficiencies and cost savings that we may achieve with respect to the combined companies, nor do they include the effects of certain restructuring activities which may occur. The pro forma information should be read in conjunction with the accompanying notes thereto, in conjunction with the historical consolidated financial statements and accompanying notes included in our annual report on Form 10-K and quarterly reports on Form 10-Q and the Inventa audited and unaudited financial statements included in our Form 8-K/A as originally filed on August 13, 2008. The pro forma adjustments are based upon available information and certain assumptions that we believe are reasonable.
ANTs software inc. | ||||||||||||||||||||
Unaudited Pro Forma Condensed Combined Statement of Operations | ||||||||||||||||||||
Three Months Ended March 31, 2008 (Restated) | ||||||||||||||||||||
Proforma | See | ANTs | ||||||||||||||||||
ANTs | Inventa | Adjustments | Note 3 | pro forma | ||||||||||||||||
Revenues: | ||||||||||||||||||||
Products | $ | 32,384 | $ | - | $ | - | $ | 32,384 | ||||||||||||
Services | - | 1,346,010 | - | 1,346,010 | ||||||||||||||||
Total revenues | 32,384 | 1,346,010 | - | 1,378,394 | ||||||||||||||||
Cost of Revenues: | ||||||||||||||||||||
Products | - | - | - | - | ||||||||||||||||
Services | - | 1,111,722 | - | 1,111,722 | ||||||||||||||||
Gross profit | 32,384 | 234,288 | - | 266,672 | ||||||||||||||||
Operating Expenses: | ||||||||||||||||||||
Unclassified operating expenses | - | 260,231 | - | 260,231 | ||||||||||||||||
Sales and marketing | 371,311 | - | - | 371,311 | ||||||||||||||||
Research and development | 2,601,123 | - | - | 2,601,123 | ||||||||||||||||
General and administrative | 1,101,883 | - | 109,807 | j) | 1,211,690 | |||||||||||||||
Total operating expenses | 4,074,317 | 260,231 | 109,807 | 4,444,355 | ||||||||||||||||
Loss from operations | (4,041,933 | ) | (25,943 | ) | (109,807 | ) | (4,177,683 | ) | ||||||||||||
Other income (expense): | ||||||||||||||||||||
Interest income | 27,002 | - | (25,479 | ) | k) | 1,523 | ||||||||||||||
Other expense | - | (9,564 | ) | - | (9,564 | ) | ||||||||||||||
Interest expense | (161,112 | ) | (13,385 | ) | (38,002 | ) | l) | (212,499 | ) | |||||||||||
Other loss, net | (134,110 | ) | (22,949 | ) | (63,481 | ) | (220,540 | ) | ||||||||||||
Income before income tax benefit | (4,176,043 | ) | (48,892 | ) | (173,288 | ) | (4,398,223 | ) | ||||||||||||
Income tax benefit | - | - | - | - | ||||||||||||||||
Net loss | $ | (4,176,043 | ) | $ | (48,892 | ) | $ | (173,288 | ) | $ | (4,398,223 | ) | ||||||||
Basic and diluted net loss per common share | $ | (0.07 | ) | $ | (0.06 | ) | ||||||||||||||
Shares used in computing basic and diluted | ||||||||||||||||||||
net loss per share | 57,792,266 | 20,000,000 | m) | 77,792,266 |
See accompanying notes to pro forma condensed consolidated financial statements
ANTs software inc. | ||||||||||||||||||||
Unaudited Pro Forma Condensed Combined Balance Sheet | ||||||||||||||||||||
March 31, 2008 (Restated) | ||||||||||||||||||||
Proforma | See | ANTs | ||||||||||||||||||
ANTs | Inventa | Adjustments | Note 3 | pro forma | ||||||||||||||||
Current assets: | ||||||||||||||||||||
Cash and cash equivalents | $ | 2,541,410 | $ | 2,077 | $ | (2,543,487 | ) | a) | $ | - | ||||||||||
Accounts receivable | 40,165 | 493,479 | - | 533,644 | ||||||||||||||||
Current portion of prepaid debt issuance cost | 373,759 | - | - | 373,759 | ||||||||||||||||
Restricted cash | 125,000 | 4,581 | - | 129,581 | ||||||||||||||||
Other receivable | - | 145,250 | (145,250 | ) | b) | - | ||||||||||||||
Deferred direct costs | - | 108,784 | - | 108,784 | ||||||||||||||||
Prepaid expenses and other current assets | 145,059 | 34,857 | - | 179,916 | ||||||||||||||||
Prepaid expense from warrant issued to customer, net | 43,255 | - | - | 43,255 | ||||||||||||||||
Total current assets | 3,268,648 | 789,028 | (2,688,737 | ) | 1,368,939 | |||||||||||||||
Long-term portion of prepaid debt issuance cost | - | - | - | |||||||||||||||||
Property and equipment, net | 441,665 | 94,666 | 18,292 | c) | 554,623 | |||||||||||||||
Capitalized software development costs, net | - | 1,500,858 | (1,500,858 | ) | f) | - | ||||||||||||||
Goodwill | - | - | 23,416,684 | d) | 23,416,684 | |||||||||||||||
Intangible assets | - | - | 3,697,000 | e) | 3,697,000 | |||||||||||||||
Security deposits | 34,420 | 20,015 | - | 54,435 | ||||||||||||||||
Total assets | $ | 3,744,733 | $ | 2,404,567 | $ | 22,942,381 | $ | 29,091,681 | ||||||||||||
LIABILITIES AND STOCKHOLDERS' (DEFICIT) EQUITY | ||||||||||||||||||||
Current liabilities: | ||||||||||||||||||||
Demand note payable | $ | - | $ | 125,000 | $ | - | $ | 125,000 | ||||||||||||
Notes payable - related party | - | 925,000 | (925,000 | ) | g) | - | ||||||||||||||
Accounts payable and other accrued expenses | 835,801 | 246,972 | 513,870 | a) | 1,596,643 | |||||||||||||||
Accrued bonuses and commissions payable | 18,750 | 21,717 | - | 40,467 | ||||||||||||||||
Accrued vacation payable | 104,966 | - | - | 104,966 | ||||||||||||||||
Current portion of convertible promisory notes, includes | ||||||||||||||||||||
premium of $339,924 | 6,839,924 | - | - | 6,839,924 | ||||||||||||||||
Accrued interest on convertible promissory notes | 237,581 | - | - | 237,581 | ||||||||||||||||
Deferred revenues | 56,999 | 439,389 | - | 496,388 | ||||||||||||||||
Total current liabilities | 8,094,021 | 1,758,078 | (411,130 | ) | 9,440,969 | |||||||||||||||
Commitments and contingencies | - | - | ||||||||||||||||||
Long-term liabilities: | ||||||||||||||||||||
Notes payable, related party | - | 4,045,032 | (4,045,032 | ) | h) | - | ||||||||||||||
Convertible promissory notes, net of debt discount of $217,509 | 2,785,716 | - | 2,000,000 | n) | 4,785,716 | |||||||||||||||
Total liabilities | 10,879,737 | 5,803,110 | (2,456,162 | ) | 14,226,685 | |||||||||||||||
Total stockholders’ (deficit) equity | (7,135,004 | ) | (3,398,543 | ) | 25,398,543 | i) | 14,864,996 | |||||||||||||
Total liabilities and stockholders' (deficit) equity | $ | 3,744,733 | $ | 2,404,567 | $ | 22,942,381 | $ | 29,091,681 |
See accompanying notes to pro forma condensed consolidated financial statements
ANTs software inc. | ||||||||||||||||||||
Unaudited Pro Forma Condensed Combined Statement of Operations | ||||||||||||||||||||
Year Ended December 31, 2007 (Restated) | ||||||||||||||||||||
Proforma | See | ANTs | ||||||||||||||||||
ANTs | Inventa | Adjustments | Note 3 | pro forma | ||||||||||||||||
Revenues: | ||||||||||||||||||||
Products | $ | 359,706 | $ | - | $ | - | $ | 359,706 | ||||||||||||
Services | - | 5,392,201 | - | 5,392,201 | ||||||||||||||||
Total revenues | 359,706 | 5,392,201 | - | 5,751,907 | ||||||||||||||||
Cost of Revenues: | - | |||||||||||||||||||
Products | 12,677 | - | - | 12,677 | ||||||||||||||||
Services | - | 4,658,928 | - | 4,658,928 | ||||||||||||||||
Gross profit | 347,029 | 733,273 | - | 1,080,302 | ||||||||||||||||
Operating Expenses: | ||||||||||||||||||||
Unclassified operating expenses | - | 1,156,391 | - | 1,156,391 | ||||||||||||||||
Sales and marketing | 2,939,481 | - | - | 2,939,481 | ||||||||||||||||
Research and development | 9,442,521 | - | - | 9,442,521 | ||||||||||||||||
General and administrative | 4,310,141 | - | 439,228 | j) | 4,749,369 | |||||||||||||||
Total operating expenses | 16,692,143 | 1,156,391 | 439,228 | 18,287,762 | ||||||||||||||||
Loss from operations | (16,345,114 | ) | (423,118 | ) | (439,228 | ) | (17,207,460 | ) | ||||||||||||
Other income (expense): | ||||||||||||||||||||
Interest income | 320,928 | - | (101,914 | ) | k) | 219,014 | ||||||||||||||
Other expense | 2,667 | (33,256 | ) | - | (30,589 | ) | ||||||||||||||
Interest expense | (291,704 | ) | (99,030 | ) | (877,720 | ) | l) | (1,268,454 | ) | |||||||||||
Other (loss) income, net | 31,891 | (132,286 | ) | (979,634 | ) | (1,080,029 | ) | |||||||||||||
Income before income tax benefit | (16,313,223 | ) | (555,404 | ) | (1,418,862 | ) | (18,287,489 | ) | ||||||||||||
Income tax benefit | - | 569,823 | - | 569,823 | ||||||||||||||||
Net loss (income) | $ | (16,313,223 | ) | $ | 14,419 | $ | (1,418,862 | ) | $ | (17,717,666 | ) | |||||||||
Basic and diluted net loss per common share | $ | (0.29 | ) | $ | (0.23 | ) | ||||||||||||||
Shares used in computing basic and diluted | ||||||||||||||||||||
net loss per share | 56,618,971 | 20,000,000 | m) | 76,618,971 |
See accompanying notes to pro forma condensed consolidated financial statements
Notes to the Unaudited Pro Forma Condensed Combined Financial Statements (Restated)
1. | Description of the Transaction and Basis of Presentation |
Description of Transaction
On May 30, 2008, ANTs software inc. ("ANTs" or the "Company") closed the Agreement and Plan of Merger (the "Agreement") by and among ANTs software, inc., ANTs Holdings, Inc., (the "Sub") a Delaware corporation and wholly owned direct subsidiary of ANTs, Inventa Technologies, Inc., a Delaware corporation ("Inventa"), and Robert T. Healey, solely in his capacity as Stockholders' Representative of Inventa. ANTs had entered into the Agreement on May 15, 2008. At the Effective Time as defined in the Agreement, the Sub was merged with and into Inventa (the "Merger"). In connection with the Merger, Inventa's outstanding shares of capital stock were exchanged for and converted into an aggregate of 20,000,000 unregistered shares of ANTs common stock, ANTs made cash payments totaling $3,000,000 and ANTs issued two promissory notes in the aggregate initial principal face amount of $2,000,000, bearing 10% interest per annum, payable quarterly, and convertible into shares of ANTs common stock at a conversion price of $0.80, with maturity at January 31, 2011. Following the Merger, Inventa continued as the surviving corporation as a wholly owned subsidiary of ANTs and the separate corporate existence of the Sub ceased. The Certificate of Incorporation of the Sub in effect at the Effective Time became the certificate of incorporation of Inventa except that Article I of the Survivor's Certificate of Incorporation was amended at the Effective Time to provide that the name of the Surviving Corporation was "Inventa Technologies, Inc."
2. | Purchase Price |
The purchase method of accounting has been used in the preparation of the accompanying unaudited pro forma condensed combined financial statements. Under this method of accounting, the purchase consideration is allocated to the tangible and identifiable intangible assets acquired and liabilities assumed according to their respective fair values, with the excess purchase consideration being recorded as goodwill.
The purchase price of the acquisition has been amended in this Form 8-K/A as follows:
Fair value of common stock issued | $ | 22,000,000 | ||
Fair value of convertible notes payable issued | 2,000,000 | |||
Cash paid | 3,000,000 | |||
Transaction costs | 57,357 | |||
Total purchase price | $ | 27,057,357 |
The purchase price allocation included in these pro forma financial statements is based on a preliminary valuation of identifiable intangible assets, goodwill, and certain other assets and liabilities. The purchase price includes a valuation of our common stock issued as part of the transaction. Both the purchase price and the allocation thereof is subject to change; should these changes be material this Form 8-K/A may be amended. We are amending this Form 8-K/A to reflect a change in the value of our common stock from $0.60 per share to $1.10 per share, which is the fair market value of our free trading shares at the time the terms of the acquisition were agreed to and announced. The purchase price allocation is preliminary and subject to change as we evaluate the value and estimated lives of other identifiable intangibles.
3. | Pro Forma Adjustments |
a) | Cash paid to seller | $ | (3,000,000 | ) | ||||||||||||||||||||||
Acquisition costs | (57,357 | ) | ||||||||||||||||||||||||
Reclassify cash overdraft to accrued expenses | 513,870 | |||||||||||||||||||||||||
$ | (2,543,487 | ) | ||||||||||||||||||||||||
b) | To eliminate advances to officer | (145,250 | ) | |||||||||||||||||||||||
c) | To adjust property and equipment to fair value | $ | 18,292 | |||||||||||||||||||||||
d) | Goodwill | 23,416,684 | ||||||||||||||||||||||||
e) | Recognition of identified intangibles: | |||||||||||||||||||||||||
Capitalized software valuation | $ | 2,085,000 | ||||||||||||||||||||||||
Customer relationships | 1,612,000 | |||||||||||||||||||||||||
Recognition of identified intangibles | $ | 3,697,000 | ||||||||||||||||||||||||
f) | Reclassification of capitalized software to intangible asset | (1,500,858 | ) | |||||||||||||||||||||||
g) | Eliminate related party note payable | $ | (925,000 | ) | ||||||||||||||||||||||
h) | Eliminate note payable to seller | $ | (4,045,032 | ) | ||||||||||||||||||||||
i) | Elimination of Inventa's shareholders equity balances at | |||||||||||||||||||||||||
March 31, 2008 and impact of debt and equity issuance | ||||||||||||||||||||||||||
Inventa stockholders' deficit | $ | 3,398,543 | ||||||||||||||||||||||||
Issuance of 20,000,000 shares of common stock | ||||||||||||||||||||||||||
at $1.10 per share | 22,000,000 | |||||||||||||||||||||||||
$ | 25,398,543 | |||||||||||||||||||||||||
3/31/2008 | 12/31/2007 | |||||||||||||||||||||||||
j) | To record amortization of Inventa identified intangibles | $ | 184,850 | $ | 739,400 | |||||||||||||||||||||
net of amortization of existing capitalized software | (75,043 | ) | $ | (300,172 | ) | |||||||||||||||||||||
Total adjustment to amortization | $ | 109,807 | $ | 439,228 | ||||||||||||||||||||||
Summary of amortization expense for intangible assets: | Fair Value | Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | ||||||||||||||||||||
Software | 2,085,000 | 417,000 | 417,000 | 417,000 | 417,000 | 417,000 | ||||||||||||||||||||
Customer relationships | 1,612,000 | 322,400 | 322,400 | 322,400 | 322,400 | 322,400 | ||||||||||||||||||||
3,697,000 | 739,400 | 739,400 | 739,400 | 739,400 | 739,400 | |||||||||||||||||||||
3/31/2008 | 12/31/2007 | |||||||||||||||||||||||||
k) | To reduce interest income related to reduction in cash | |||||||||||||||||||||||||
balances expended due to the acquisition based on the | ||||||||||||||||||||||||||
actual investment return yields of 3% and 3%, | ||||||||||||||||||||||||||
respectively | $ | (25,479 | ) | $ | (101,914 | ) | ||||||||||||||||||||
3/31/2008 | 12/31/2007 | |||||||||||||||||||||||||
l) | To reduce interest expense at LIBOR +2.5% for | |||||||||||||||||||||||||
elimination of note payable - related party | $ | 11,998 | $ | 72,280 | ||||||||||||||||||||||
To reflect interest payments of $50,000 per | ||||||||||||||||||||||||||
quarter on $2 million in convertible promissory | ||||||||||||||||||||||||||
notes at 10% per year | (50,000 | ) | (200,000 | ) | ||||||||||||||||||||||
To record interest expense relating to promissory | ||||||||||||||||||||||||||
notes that are convertible into 2.5 million shares | ||||||||||||||||||||||||||
of our common stock at $0.30 per share below | ||||||||||||||||||||||||||
the then-current market value. | - | (750,000 | ) | |||||||||||||||||||||||
Total | $ | (38,002 | ) | $ | (877,720 | ) | ||||||||||||||||||||
m) | Shares of common stock issued pursuant to acquisition | 20,000,000 | ||||||||||||||||||||||||
n) | To record issuance of convertible promissory note with a | |||||||||||||||||||||||||
principal value of $2,000,000 | $ | 2,000,000 |