CLARITI TELECOMMUNICATIONS INTERNATIONAL, LTD.
UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENT
Prior to November 1998, Chadwell Hall Holdings, Ltd. ("CHH") owned
approximately 25% of GlobalFirst Holdings, Ltd. ("GlobalFirst"). In November
1998, CHH acquired the remaining 75% majority interest in GlobalFirst held by
other parties. CHH entered this transaction in order to facilitate the
subsequent sale of GlobalFirst to Clariti Telecommunications International,
Ltd. ("Clariti") in December 1998.
The following unaudited pro forma combined financial statement is based on
the historical financial statements of Clariti Telecommunications
International, Ltd. ("Clariti") and GlobalFirst Holdings, Ltd. ("GlobalFirst")
adjusted to give effect to the purchase by CHH of the 75% majority interest in
GlobalFirst and the subsequent acquisition of GlobalFirst by Clariti. The
unaudited pro forma combined financial statement gives effect to the
acquisition of GlobalFirst by Clariti in a transaction to be accounted for as a
reverse acquisition under the purchase method of accounting. The pro forma
adjustments are based upon preliminary allocations of purchase price and upon
the assumptions described in the accompanying notes. Actual allocations of
purchase price are likely to be different from that reflected in this pro forma
financial statement. References in this document to data presented on a "pro
forma basis" as of any date or for any period shall have the meaning set forth
above with respect to such date or period.
The unaudited pro forma combined financial statement should be read in
conjunction with the consolidated financial statements of Clariti appearing
elsewhere in this document. The unaudited pro forma combined financial
statement is presented for information purposes only and is not necessarily
indicative of the results that would have been reported had such events
occurred on the dates specified, nor is it indicative of Clariti's future
results.
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UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED DECEMBER 31, 1998
(Dollars and Shares in Thousands, Except Per Share Amounts)
As Restated
(a) As
----------- Pro Forma Restated
Historical Historical Adjustments (a)
Clariti GlobalFirst for the ---------
Telecoms. Holdings Acquisitions Pro Forma
Int'l Ltd. Ltd. (b) Combined
---------- ----------- ----------- ---------
Revenue $ - $ 16,870 $ - $ 16,870
Cost of revenue - 23,105 - 23,105
------- -------- -------- --------
Gross profit (loss) - ( 6,235) - ( 6,235)
Sales and marketing - 1,013 - 1,013
Research and development 867 - - 867
General and administrative 1,861 10,986 - 12,847
Amortization - - 14,244(c) 14,244
------- -------- -------- --------
Net loss (2,728) (18,234) (14,244) (35,206)
Other comprehensive loss:
Foreign currency trans-
lation adjustments - 235 - 235
------- -------- -------- --------
Comprehensive loss $(2,728) $(17,999) $(14,244) $(34,971)
======= ======== ======== ========
Weighted average number
of shares outstanding 111,945
Basic and diluted loss
per common share $( 0.31)
========
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NOTES TO UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
- --------------------------------------------------------------
(a) Subsequent to the issuance of the Company's unaudited pro forma combined
statement of operations for the six ended December 31, 1998, it was
determined that GlobalFirst had recognized certain revenue improperly.
GlobalFirst's systems lacked the capability to generate reports detailing
the used and unused minutes on outstanding prepaid calling cards, which
required management to estimate the minutes used during the reporting
periods. Subsequent to the filing of the December 31, 1998 Form 10-QSB,
reporting capabilities were developed and analyses indicated that the
original estimates made by GlobalFirst management overstated the minutes
used on outstanding prepaid calling cards and earned revenues for the
period. As a result, the accompanying unaudited pro forma combined
statement of operations for the six months ended December 31, 1998 presents
restated results. A summary of the effects of the restatement follows (in
thousands, except per share data):
Historical GlobalFirst Pro Forma Combined
------------------------ -----------------------
Amounts Amounts
Restated Previously Restated Previously
Amounts Reported Amounts Reported
---------- ---------- ---------- ----------
Revenue $ 16,870 $ 20,536 $ 16,870 $ 20,536
Gross loss $( 6,235) $( 2,569) $( 6,235) $( 2,569)
Net loss $( 18,234) $( 14,568) $( 35,206) $( 31,540)
Comprehensive loss $( 17,999) $( 14,333) $( 34,971) $( 31,305)
Net loss per share -
basic and diluted $( 0.31) $( 0.28)
(b) The Unaudited Pro Forma Combined Statement of Operations has been
prepared to reflect the December 1998 business combination between
Clariti and GlobalFirst as a reverse acquisition in which GlobalFirst is
considered the acquiror and Clariti is considered the acquired company.
Under the terms of the transaction, Clariti acquired 100% of the capital
stock of GlobalFirst in exchange for 76,571,500 shares of Clariti common
stock. In conjunction with the acquisition, GlobalFirst's parent company,
Chadwell Hall Holdings, Ltd. ("CHH") and an affiliated company, Corporate
and Legal Nominees, Ltd., combined to purchase a total of 11,428,500 shares
of Clariti's restricted common stock for $20,000,000.
Additionally, the Unaudited Pro Forma Combined Statement of Operations
reflects the November 1998 acquisition of the 75% majority interest in
Global First by CHH, for consideration which approximated $100 million.
(b) Pro forma adjustment reflects amortization of intangible assets resulting
from the acquisitions on a straight-line basis over a useful life of five
years. Management has not yet allocated any of the excess purchase price of
either acquisition to identifiable intangible assets such as technology,
in-process research and development, or goodwill, as final valuations of
any potential intangible assets are not currently available. Appropriate
revisions will be made when the final valuations are available. The useful
life of any individual asset so identified may differ from the five-year
amortization period reflected in this Pro Forma Combined Statement of
Operations.
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