Exhibit 99.3.
UNAUDITED PRO FORMA COMBINED CONSOLIDATED FINANCIAL INFORMATION
The accompanying unaudited pro forma combined consolidated financial statements present financial information from the ISCO and Clarity unaudited pro forma combined consolidated statement of operations for the nine months ended September 30, 2007 and for the year ended December 31, 2006 and the unaudited pro forma combined consolidated balance sheet as of September 30, 2007 is based on the historical balance sheets of ISCO and Clarity as of that date. The unaudited pro forma combined consolidated statement of operations is presented as if the Merger had occurred on the first day of the period (i.e., October 1, 2007). The unaudited pro forma combined consolidated balance sheet gives effect to the transaction as if it occurred on September 30, 2007. The unaudited pro forma combined consolidated financial data are based on estimates and assumptions, which are preliminary and subject to change, as set forth in the notes to such statements and which are provided for information purposes only. The unaudited pro forma combined consolidated financial data are not necessarily indicative of the financial position or operating results that would have been achieved had the Merger been consummated as of the dates indicated, nor are they necessarily indicative of future financial position or operating results. This information should be read in conjunction with the historical financial statements and related notes of ISCO included in ISCO's Annual Report on Form 10-K and Quarterly Reports on Form 10-Q and Clarity included this Current Report on Form 8-K.
As of September 30, 2007 | ||||||||||||||
Historical | Pro Forma | |||||||||||||
ISCO | Clarity | Adjustments | Combined | |||||||||||
Assets: | ||||||||||||||
Current Assets: | ||||||||||||||
Cash and Equivalents | ||||||||||||||
Inventory | 2,782,761 | 199,537 | (375,000) | A | 2,607,298 | |||||||||
Accounts Receivable, net | 3,820,067 | - | 3,820,067 | |||||||||||
Prepaid Expenses and Other | 889,908 | 274,524 | 1,164,432 | |||||||||||
Total Current Assets | 80,485 | 74,925 | 155,410 | |||||||||||
Property and Equipment | 7,573,221 | 548,986 | (375,000) | 7,747,207 | ||||||||||
Less: Accumulated Depreciation | 1,407,530 | 819,421 | (99,183) | B | 2,127,768 | |||||||||
Net Property and Equipment | (909,363) | (588,303) | 20,347 | B,K | (1,477,319) | |||||||||
Restricted Certificates of Deposit | 498,167 | 231,118 | (78,836) | 650,449 | ||||||||||
Goodwill | 170,648 | - | 170,648 | |||||||||||
Intangible assets, net | 13,370,000 | - | 7,525,353 | C | 20,895,353 | |||||||||
Total Assets | 848,617 | 72,500 | 100,000 | C | 1,021,117 | |||||||||
22,460,653 | 852,604 | 7,171,517 | 30,484,774 | |||||||||||
Liabilities and Stockholders’ Equity: | ||||||||||||||
Current Liabilities: | ||||||||||||||
Accounts Payable | ||||||||||||||
Inventory-related material purchase accrual | 224,087 | 172,543 | 396,630 | |||||||||||
Employee-related accrued liability | 84,607 | - | 84,607 | |||||||||||
Accrued professional services | 184,730 | 350,635 | 535,365 | |||||||||||
Other accrued liabilities and current deferred revenue | 46,000 | - | 400,000 | D | 446,000 | |||||||||
Current Portion of LT Debt, including related interest, with related parties | 217,342 | 350,191 | 567,533 | |||||||||||
Total Current Liabilities | - | 2,074,712 | (2,074,712) | E | - | |||||||||
756,766 | 2,948,081 | (1,674,712) | 2,030,135 | |||||||||||
Deferred facility reimbursement | 91,250 | - | 91,250 | |||||||||||
Deferred revenue - non current | 128,040 | - | 128,040 | |||||||||||
Notes and related accrued interest with related parties | 15,363,070 | - | 15,363,070 | |||||||||||
Accued interest payable, with related parties | 324,150 | - | 324,150 | |||||||||||
Stockholders’ equity: | ||||||||||||||
Preferred stock | - | |||||||||||||
Common stock | 200,508 | 1,000 | 24,000 | F,G | 225,508 | |||||||||
Treasury Stock | (64,600) | (64,600) | ||||||||||||
Additional paid-in capital | 175,086,385 | 9,000 | 6,716,000 | F,G | 181,811,384 | |||||||||
Accumulated deficit | (169,425,256) | (2,105,477) | 2,106,229 | F,K | (169,424,504) | |||||||||
Total Shareholders’ Equity | 5,797,377 | (2,095,477) | 8,846,229 | 12,548,129 | ||||||||||
Total Liabilities and Shareholders’ Equity | 22,460,653 | 852,604 | 7,171,517 | 30,484,774 | ||||||||||
- | ||||||||||||||
A - $375,000 to be paid upon closing for Clarity’s reimbursable transaction costs | Asset | Liability | Equity | |||||||||||
B - Assets that are not expected to be included in the transaction (leased autos), net of accumulated depreciation | (375,000) | |||||||||||||
C - Total cost estimated at $7,525,000, including $6,750,000 in equity value (20 million up front shares plus 5 million time vest shares x $0.27 per share closing price of ISCO stock on AMEX) | (79,588) | |||||||||||||
plus $375,000 paid for Clarity’s closing reimbursable costs plus an estimated $400,000 of transaction fees | 7,525,353 | Goodwill | ||||||||||||
to be paid directly by ISCO | 100,000 | Other Intang | ||||||||||||
D - Estimated transaction fees to be paid directly by ISCO | ||||||||||||||
E - Liabilities that are excluded from the transaction - notes and related accrued interest to related party (sole shareholder) of Clarity. | 400,000 | |||||||||||||
(2,074,712) | ||||||||||||||
F - Termination of historical capital accounts of seller ($1,000 common stock, $9,000 APIC, and $2,105,477 of negative retained earnings. | 2,095,477 | |||||||||||||
G - Recording of newly issued stock of $25,000 common stock and $6,725,000 of APIC. | 6,750,000 | |||||||||||||
K - Impact of adjustments in the income statement for the period. | 752 | 752 | ||||||||||||
Average of five closing days prior to September 30, 2007 was $0.27 per share on AMEX. | 7,171,517 | (1,674,712) | 8,846,229 | - | ||||||||||
Nine Month Period Ended September 30, 2007 | |||||||||||||||||||
Historical | Pro Forma | ||||||||||||||||||
ISCO | Clarity | Adjustments | Combined | ||||||||||||||||
Net Sales | 6,300,357 | 2,852,911 | 9,153,268 | ||||||||||||||||
Costs and Expenses: | |||||||||||||||||||
Cost of Sales | 3,633,283 | 1,180,516 | 4,813,799 | ||||||||||||||||
Research and Development | 2,004,003 | 2,330,075 | 10,000 | B,C | 4,344,078 | ||||||||||||||
Selling and Marketing | 1,808,800 | 269,185 | 2,077,985 | ||||||||||||||||
General and Administrative | 3,185,141 | 930,088 | (10,752 | ) | B,C | 4,104,477 | |||||||||||||
Total Costs and Expenses | 10,631,227 | 4,709,864 | (752 | ) | 15,340,339 | ||||||||||||||
Operating (Loss) Income | (4,330,870 | ) | (1,856,953 | ) | 752 | (6,187,071 | ) | ||||||||||||
Other Income (Expense): | |||||||||||||||||||
Interest Expense, net of interest income | (689,114 | ) | (58,578 | ) | 74,712 | E | (672,980 | ) | |||||||||||
Other Income (Expense) | 91,806 | 91,806 | |||||||||||||||||
Other Income (Expense), net | (689,114 | ) | 33,228 | 74,712 | (581,174 | ) | |||||||||||||
Net Loss (Income) | (5,019,984 | ) | (1,823,725 | ) | 75,464 | (6,768,245 | ) | ||||||||||||
Basic and diluted loss per share | $ | (0.03 | ) | $ | (0.09 | ) | $ | (0.03 | ) | ||||||||||
Weighted average number of common shares outstanding | 193,433,000 | 20,000,000 | 213,433,000 | ||||||||||||||||
E - Eliminate interest on note receivable with related party that would not relate to the combined entity | |||||||||||||||||||
B,C - Reduced amortization related to fixed assets not included in the transaction less estimated additional intangible asset amortization | |||||||||||||||||||
Historical | Pro Forma | |||||||||||||||||||||
ISCO | Clarity | Adjustments | Combined | |||||||||||||||||||
Assets: | ||||||||||||||||||||||
Current Assets: | ||||||||||||||||||||||
Cash and Equivalents | 2,886,476 | 1,547,831 | (375,000) | A | 4,059,307 | |||||||||||||||||
Inventory | 6,368,599 | - | 6,368,599 | |||||||||||||||||||
Accounts Receivable, net | 2,554,716 | 734,014 | 3,288,730 | |||||||||||||||||||
Prepaid Expenses and Other | 168,741 | 107,802 | 276,543 | |||||||||||||||||||
Total Current Assets | 11,978,532 | 2,389,647 | (375,000) | 13,993,179 | ||||||||||||||||||
Property and Equipment | 1,334,203 | 819,421 | (99,183) | B | 2,054,441 | |||||||||||||||||
Less: Accumulated Depreciation | (811,167) | (573,996) | 15,320 | B,K | (1,369,843) | |||||||||||||||||
Net Property and Equipment | 523,036 | 245,425 | (83,863) | 684,598 | ||||||||||||||||||
Restricted Certificates of Deposit | 162,440 | - | 162,440 | |||||||||||||||||||
Goodwill | 13,370,000 | - | 7,525,552 | C | 20,895,552 | |||||||||||||||||
Intangible assets, net | 841,187 | 95,000 | 100,000 | C | 1,036,187 | |||||||||||||||||
Total Assets | 26,875,195 | 2,730,072 | 7,166,689 | 36,771,956 | ||||||||||||||||||
Liabilities and Stockholders’ Equity: | ||||||||||||||||||||||
Current Liabilities: | ||||||||||||||||||||||
Accounts Payable | 1,172,844 | 82,280 | 1,255,124 | |||||||||||||||||||
Inventory-related material purchase accrual | 328,663 | - | 328,663 | |||||||||||||||||||
Employee-related accrued liability | 284,653 | 302,505 | 587,158 | |||||||||||||||||||
Accrued professional services | 93,000 | - | 400,000 | D | 493,000 | |||||||||||||||||
Other accrued liabilities and current deferred revenue | 225,724 | 611,976 | 837,700 | |||||||||||||||||||
Current Portion of LT Debt, including related interest, with related parties | 11,295,957 | 2,000,000 | (2,000,000) | E | 11,295,957 | |||||||||||||||||
Total Current Liabilities | 13,400,841 | 2,996,761 | (1,600,000) | 14,797,602 | ||||||||||||||||||
Deferred facility reimbursement | 102,500 | - | 102,500 | |||||||||||||||||||
Deferred revenue - non current | 75,900 | - | 75,900 | |||||||||||||||||||
Notes and related accrued interest with related parties | 5,131,762 | - | 5,131,762 | |||||||||||||||||||
Stockholders’ equity: | ||||||||||||||||||||||
Preferred stock | - | |||||||||||||||||||||
Common stock | 189,622 | 1,000 | 24,000 | F,G | 214,622 | |||||||||||||||||
Treasury Stock | - | - | ||||||||||||||||||||
Additional paid-in capital (net of unearned compensation) | 172,379,842 | 9,000 | 8,466,000 | F,G | 180,854,842 | |||||||||||||||||
(Accumulated deficit)/Retained Earnings | (164,405,272) | (276,689) | 276,689 | F,K | (164,405,272) | |||||||||||||||||
Total Shareholders’ Equity | 8,164,192 | (266,689) | 8,766,689 | 16,664,192 | ||||||||||||||||||
Total Liabilities and Shareholders’ Equity | 26,875,195 | 2,730,072 | 7,166,689 | 36,771,956 | ||||||||||||||||||
Asset | Liability | Equity | ||||||||||||||||||||
A - $375,000 to be paid upon closing for Clarity’s reimbursable transaction costs | (375,000) | |||||||||||||||||||||
B - Assets that are not expected to be included in the transaction (leased autos), net of accumulated depreciation | (83,863) | |||||||||||||||||||||
C - Total cost estimated at $9,275,000, including $8,500,000 in equity value (20 million up front shares plus 5 million time vest shares x $0.34 per share closing | 7,525,552 | Goodwill | ||||||||||||||||||||
price of ISCO stock on AMEX) plus $375,000 paid for Clarity’s reimbursable closing costs plus estimated $400,000 of transaction fees | 100,000 | Other Intang | ||||||||||||||||||||
to be paid directly by ISCO. | ||||||||||||||||||||||
D - Estimated transaction fees to be paid directly by ISCO | 400,000 | |||||||||||||||||||||
E - Liabilities that are excluded from the transaction - notes and related accrued interest to related party (sole shareholder) of Clarity. | (2,000,000) | |||||||||||||||||||||
F - Termination of historical capital accounts of seller ($1,000 common stock, $9,000 APIC, and $276,689 of negative retained earnings. | 266,689 | |||||||||||||||||||||
G - Recording of newly issued stock of $25,000 common stock and $8,475,000 of APIC. | 8,500,000 | |||||||||||||||||||||
K - Impact of adjustments in the income statement for the period. | - | - | ||||||||||||||||||||
7,166,689 | (1,600,000) | 8,766,689 | - | |||||||||||||||||||
Average of five closing days prior to December 31, 2007 was $0.34 per share on AMEX. |
Twelve Month Period Ended December 31, 2006 | |||||||||||||||||||
Historical | Pro Forma | ||||||||||||||||||
ISCO | Clarity | Adjustments | Combined | ||||||||||||||||
Net Sales | 14,997,320 | 8,983,165 | 23,980,485 | ||||||||||||||||
Costs and Expenses: | |||||||||||||||||||
Cost of Sales | 9,066,929 | 3,025,314 | 12,092,243 | ||||||||||||||||
Research and Development | 2,011,652 | 4,131,878 | 15,320 | B,C | 6,158,850 | ||||||||||||||
Selling and Marketing | 3,207,882 | 383,774 | 3,591,656 | ||||||||||||||||
General and Administrative | 4,287,080 | 1,402,909 | (15,320 | ) | B,C | 5,674,669 | |||||||||||||
Total Costs and Expenses | 18,573,543 | 8,943,875 | - | 27,517,418 | |||||||||||||||
Operating (Loss) Income | (3,576,223 | ) | 39,290 | - | (3,536,933 | ) | |||||||||||||
Other Income (Expense): | |||||||||||||||||||
Interest Expense, net of interest income | (788,761 | ) | 29,324 | - | (759,437 | ) | |||||||||||||
Other Income (Expense) | - | - | - | ||||||||||||||||
Other Income (Expense), net | (788,761 | ) | 29,324 | - | (759,437 | ) | |||||||||||||
Net Loss (Income) | (4,364,984 | ) | 68,614 | - | (4,296,370 | ) | |||||||||||||
Basic and diluted loss per share | $ | (0.02 | ) | $ | 0.00 | $ | (0.02 | ) | |||||||||||
Weighted average number of common shares outstanding | 185,506,000 | 20,000,000 | 205,506,000 | ||||||||||||||||
B,C - Reduced amortization related to fixed assets not included in the transaction less estimated additional intangible asset amortization | |||||||||||||||||||