EXHIBIT 99.3
NAVISITE, INC.
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
JANUARY 31, 2004 (UNAUDITED)
(IN THOUSANDS)
CONSOLIDATED
NAVISITE SUREBRIDGE PRO FORMA PRO FORMA
1/31/2004 12/31/2003 ADJUSTMENTS TOTAL
------------- ---------- ----------- ---------
ASSETS
Current assets:
Cash and cash equivalents $ 7,719 $ 2,520 $ - $ 10,239
Accounts receivable, net 16,244 4,340 - 20,584
Costs and estimated earnings in excess of billings - 279 - 279
Prepaid expenses and other current assets 4,200 494 - 4,694
--------- ------- -------- --------
Total current assets 28,163 7,633 - 35,796
Property and equipment, net 17,750 8,302 - 26,052
Intangible assets 10,335 4,638 - 14,973
Goodwill 3,206 6,291 39,674 (a) 49,171
Other assets 6,194 190 - 6,384
Restricted cash 1,948 520 - 2,468
--------- ------- -------- --------
Total assets $ 67,596 $27,574 $ 39,674 $134,844
========= ======= ======== ========
LIABILITIES, REDEEMABLE CONVERTIBLE PREFERRED STOCK
AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts receivable financing line 11,667 - - 11,667
Current notes payable 1,744 2,576 - 4,320
Capital lease obligations, current portion 2,409 309 - 2,718
Current note payable to related party 3,000 - - 3,000
Accounts payable 6,252 4,440 - 10,692
Accrued expenses 15,184 3,006 500(b) 18,690
Deferred revenue 2,452 948 - 3,400
Customer deposits 127 163 - 290
--------- ------- -------- --------
Total current liabilities 42,835 11,442 500 54,777
Capital lease obligations, less current portion 1,187 5 - 1,192
Accrued impairment, less current portion 2,497 - - 2,497
Note to AppliedTheory Estate 6,000 - - 6,000
Notes payable 1,429 1,561 39,300(b) 42,290
Other long-term liabilities 2,022 70 - 2,092
--------- ------- -------- --------
55,970 13,078 39,800 108,848
Redeemable convertible preferred stock - 61,705 (61,705)(b) -
Shareholders' equity (deficit):
Treasury stock - (465) 465 (b) -
Common stock 249 109 (79)(b) 279
Deferred compensation (1,768) - - (1,768)
Accumulated other comprehensive income 30 - - 30
Additional paid in capital 438,410 9,923 4,417(b) 452,750
Accumulated deficit (425,295) (56,776) 56,776(b) (425,295)
--------- ------- -------- --------
Total shareholders' equity (deficit) 11,626 (47,209) 61,579 25,996
--------- ------- -------- --------
Total liabilities, redeemable convertible
preferred stock and shareholders'
equity (deficit) $ 67,596 $27,574 $ 39,674 $134,844
========= ======= ======== ========
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NAVISITE, INC.
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
SIX MONTHS ENDED JANUARY 31, 2004 (UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
CONSOLIDATED
NAVISITE SUREBRIDGE PRO FORMA PRO FORMA
6-MOS. 1/31/04 6-MOS. 12/31/03 ADJUSTMENTS TOTAL
-------------- --------------- ----------- ---------
Total revenue $ 45,802 $ 21,139 $ - $ 66,941
Cost of revenue
Cost of revenue 34,682 15,148 - 49,830
Impairment, restructuring and other 633 - - 633
-------- -------- -------- --------
Total cost of revenue 35,315 15,148 - 50,463
Gross profit 10,487 5,991 - 16,478
Operating expenses:
Product development 660 - - 660
Selling and marketing 3,876 4,572 - 8,448
General and administrative 10,245 6,099 - 16,344
Impairment, restructuring and other 1,402 - - 1,402
-------- -------- -------- --------
Total operating expenses 16,183 10,671 - 26,854
Loss from operations (5,696) (4,680) - (10,376)
Other income (expense):
Interest income 97 8 - 105
Interest expense (1,279) (161) (1,965)(c) (3,405)
Other income (expense), net 86 - - 86
-------- -------- -------- --------
Net loss $ (6,792) $ (4,833) $ (1,965) $(13,590)
======== ======== ======== ========
Basic and diluted loss per share $ (0.28) $ (0.49)
======== ========
Weighted average basic and diluted shares
used in computing loss per share 24,624 3,000(b) 27,624
======== ========
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NAVISITE, INC.
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
YEAR ENDED JULY 31, 2003 (UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
CONSOLIDATED
NAVISITE SUREBRIDGE CBT CBTM
12-MOS. ENDED 12-MOS. ENDED 8/1/02 - 8/1/02 -
7/31/03 6/30/03 8/31/02 8/31/02
------------- ------------- --------- ----------
Total revenue $ 76,591 $ 34,343 $ 1,437 $ 2,536
Total cost of revenue 70,781 22,386 1,263 1,850
--------- --------- --------- ---------
Gross profit (deficit) 5,810 11,957 174 686
Operating expenses:
Product development 950 - - -
Selling and marketing 5,960 6,702 9 157
General and administrative 20,207 9,728 237 500
Impairment, restructuring and other 8,882 - - -
--------- --------- --------- ---------
Total operating expenses 35,999 16,430 246 657
(Loss) income from operations (30,189) (4,473) (72) 29
Other income (expense):
Interest income 851 102 - -
Interest expense (43,403) (299) - (140)
Other income (expense), net (733) (111) - (21)
--------- --------- --------- ---------
Loss before income taxes (73,474) (4,781) (72) (132)
Provision for income taxes (153) (237) - -
--------- --------- --------- ---------
Net loss $ (73,627) $ (5,018) $ (72) $ (132)
========= ========= ========= =========
Basic and diluted loss per share $ (6.32)
=========
Weighted average basic and diluted
shares used in computing loss
per share 11,654
=========
CONXION INTERLIANT
8/1/02 - 8/1/02 - PRO FORMA PRO FORMA
3/31/03 5/15/03 ADJUSTMENTS TOTAL
---------- ---------- ----------- ---------
Total revenue $ 12,241 $ 20,654 $ - $ 147,802
Total cost of revenue 19,057 11,517 - 126,854
--------- --------- ---------- ---------
Gross profit (deficit) (6,816) 9,137 - 20,948
Operating expenses:
Product development - 958 - 1,908
Selling and marketing 4,104 1,853 - 18,785
General and administrative 1,590 16,479 - 48,741
Impairment, restructuring and other (4,135) - - 4,747
--------- --------- ---------- ---------
Total operating expenses 1,559 19,290 - 74,181
(Loss) income from operations (8,375) (10,153) - (53,233)
Other income (expense):
Interest income 99 32 - 1,084
Interest expense - (3,284) (3,930)(c) (51,056)
Other income (expense), net (209) 6,149 - 5,075
--------- --------- ---------- ---------
Loss before income taxes (8,485) (7,256) (3,930) (98,130)
Provision for income taxes - - - (390)
--------- --------- ---------- ---------
Net loss $ (8,485) $ (7,256) $ (3,930) $ (98,520)
========= ========= ========== =========
Basic and diluted loss per share $ (6.72)
=========
Weighted average basic and diluted
shares used in computing loss
per share 3,000 (b) 14,654
=========
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NAVISITE, INC.
NOTES TO THE UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION
PRO FORMA ADJUSTMENTS AND ASSUMPTIONS
(a) Purchase Price Allocation
The following represents the preliminary allocation of the estimated purchase
price for NaviSite's acquisition of Surebridge over the historical net book
values of the acquired assets and assumed liabilities of Surebridge as of the
date of the pro forma balance sheet, and is for illustrative purposes only.
Assuming the transaction occurred on January 31, 2004, the estimated purchase
price allocation for the acquisition of Surebridge would have been as follows
(in thousands):
Working capital, including cash acquired $ (3,809)
Property & equipment 8,302
Other non-current assets 5,348
Long-term debt (1,561)
Non-current liabilities (75)
Goodwill 45,965
-------------
Purchase price $ 54,170
=============
The goodwill adjustment in the pro forma condensed combined balance sheet
was determined as follows (in thousands):
Elimination of pre-existing Surebridge goodwill $ (6,291)
Goodwill resulting from the acquisition (see above) 45,965
-------------
Goodwill adjustment $ 39,674
=============
The purchase price allocation for the acquisition of Surebridge is preliminary
and is subject to adjustment upon finalization of the purchase accounting as of
the date of consummation of the acquisition. In addition, NaviSite has not
completed its valuation of intangible assets to be acquired. As a result, the
final allocation of the excess of the purchase price over the book value of the
net assets acquired could differ materially. Upon completion of its valuation of
the intangible assets to be acquired, certain identifiable intangible assets may
be recorded and would be subject to amortization. Assuming a five-year life,
every $1.0 million of identifiable intangible assets recorded would result in
approximately $200,000 of annual amortization expense in the pro forma
statements of operations.
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(b) Components of the Estimated Purchase Consideration
The pro forma financial information reflects NaviSite's acquisition of
substantially all the assets and liabilities of Surebridge for consideration
valued at approximately $54.2 million. The pro forma adjustments reconcile the
historical balance sheet of NaviSite to the allocated purchase price above and
include the purchase consideration. The description of the components of the
estimated purchase price consideration is as follows (in thousands):
Two promissory notes payable $ 39,300
Fair value of 3 million shares of NaviSite common stock 14,370
Estimated direct acquisition costs 500
------------
Total estimated purchase price $ 54,170
============
The fair value of the shares of NaviSite common stock noted in the table
above was determined as follows (in thousands, except per share value):
Issuance of 3 million shares 3,000
Per share price of NaviSite common stock on 6/7/04 $ 4.79
------------
Fair value of the common stock issued $ 14,370
============
The equity components of the common stock issued which is noted in the
table above are as follows (in thousands):
Common stock (assumes $.01 par value) $ 30
Additional paid-in capital 14,340
------------
Fair value of the common stock issued $ 14,370
============
For pro forma purposes, all equity accounts of Surebridge were eliminated.
The adjustments to both common stock and additional paid-in capital in the
pro forma condensed combined balance sheet were determined as follows (in
thousands):
Elimination of pre-existing Surebridge common stock $ (109)
Common stock (at par value) resulting from Navisite shares issued 30
------------
Common stock adjustment $ (79)
============
Elimination of pre-existing Surebridge additional paid-in capital $ (9,923)
Additional paid-capital resulting from NaviSite shares issued 14,340
------------
Additional paid-in capital adjustment $ 4,417
============
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(c) Interest Expense on the Promissory Notes
Interest expense on the two promissory notes payable is calculated at 10%
annually. The pro forma statements of operations assume interest will be paid in
full. However, the promissory notes provide that no interest shall accrue or be
payable on any principal paid within nine months. The interest expense recorded
in the pro forma condensed combined statements of operations was calculated as
follows (in thousands):
SIX MONTHS YEAR
ENDED ENDED
JANUARY 31, JULY 31,
2004 2003
Promissory notes principal $ 39,300 $ 39,300
Interest rate 10% 10%
------------- -------------
Monthly interest expense $ 328 $ 328
Months 6 12
------------- -------------
Interest expense recorded $ 1,965 $ 3,930
============= =============
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