|
MRO
INTEGRATED SOLUTIONS, LLC
|
|
STATEMENTS
OF CASH FLOWS
|
.
|
|
|
|
|
|
|
For
the Period
|
|
|
|
|
|
|
|
|
from
Inception
|
|
|
|
|
|
For
the Year
|
|
|
(April
18, 2005
)
|
|
|
|
|
|
Ended
|
|
|
to
|
|
|
|
|
|
December
31,
|
|
|
December
31,
|
|
|
CASH
FLOWS FROM OPERATING ACTIVITIES
|
|
|
2006
|
|
|
2005
|
|
|
Net
loss
|
|
$
|
(504,310
|
)
|
$
|
(169,741
|
)
|
|
Adjustments
to reconcile net loss to net cash used in operating
activities:
|
|
|
|
|
|
|
|
|
Depreciation
|
|
|
8,761
|
|
|
5,186
|
|
|
Amortization
of deferred financing fees
|
|
|
2,000
|
|
|
-
|
|
|
Changes
in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
Accounts
receivable
|
|
|
(186,157
|
)
|
|
(141
|
)
|
|
Inventory
|
|
|
(125,790
|
)
|
|
(3,549
|
)
|
|
Prepaid
expenses
|
|
|
(1,353
|
)
|
|
(5,742
|
)
|
|
Accounts
payable
|
|
|
83,685
|
|
|
1,501
|
|
|
Accrued
expenses
|
|
|
62,787
|
|
|
3,995
|
|
|
|
|
|
|
|
|
|
|
|
NET
CASH USED IN OPERATING ACTIVITIES
|
|
|
(660,377
|
)
|
|
(168,491
|
)
|
|
|
|
|
|
|
|
|
|
|
CASH
FLOWS FROM INVESTING ACTIVITIES
|
|
|
|
|
|
|
|
|
Purchase
of property and equipment
|
|
|
-
|
|
|
(38,901
|
)
|
|
Payments
of security deposits
|
|
|
-
|
|
|
(11,713
|
)
|
|
|
|
|
|
|
|
|
|
|
NET
CASH USED IN INVESTING ACTIVITIES
|
|
|
-
|
|
|
(50,614
|
)
|
|
|
|
|
|
|
|
|
|
|
CASH
FLOWS FROM FINANCING ACTIVITIES
|
|
|
|
|
|
|
|
|
Gross
proceeds from convertible notes payable - related party
|
|
|
1,000,000
|
|
|
-
|
|
|
Deferred
financing fee in connection with convertible notes payable
|
|
|
(60,000
|
)
|
|
-
|
|
|
Proceeds
from note payable
|
|
|
250,000
|
|
|
-
|
|
|
Principal
payment of note payable
|
|
|
(250,000
|
)
|
|
-
|
|
|
Contributions
by member
|
|
|
214,174
|
|
|
259,718
|
|
|
Distributions
to member
|
|
|
(195,401
|
)
|
|
(37,605
|
)
|
|
Payments
of capital lease obligations
|
|
|
(1,176
|
)
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
NET
CASH PROVIDED BY FINANCING ACTIVITIES
|
|
|
957,597
|
|
|
222,113
|
|
|
|
|
|
|
|
|
|
|
|
NET
INCREASE IN CASH
|
|
|
297,220
|
|
|
3,008
|
|
|
|
|
|
|
|
|
|
|
|
CASH
-
BEGINNING OF YEAR/PERIOD
|
|
|
3,008
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
CASH
-
END OF YEAR
|
|
$
|
300,228
|
|
$
|
3,008
|
|
|
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL
DISCLOSURES OF CASH FLOW INFORMATION
|
|
|
|
|
|
|
|
|
Cash
paid for interest
|
|
$
|
100,294
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
NON-CASH
INVESTING AND FINANCING ACTIVITIES
|
|
|
|
|
|
|
|
|
Purchase
of equipment through capital lease obligation
|
|
$
|
11,760
|
|
$
|
-
|
|
|
The
accompanying notes are an integral part of these financial
statements.
|
MRO
INTEGRATED SOLUTIONS, LLC
NOTES
TO FINANCIAL STATEMENTS
AS
OF AND FOR THE YEAR ENDED DECEMBER 31,
2006
AND
FOR THE PERIOD FROM INCEPTION (APRIL 18,
2005) TO DECEMBER 31, 2005
|
1.
|
ORGANIZATION
AND NATURE OF BUSINESS
|
MRO
Integrated Solutions, LLC was incorporated as Logistics Supply Company, LLC
in
the State of Connecticut on April 18, 2005. On August 5, 2005, Logistics
Supply
Company, LLC legally changed its name to MRO Integrated Solutions, LLC. MRO
Integrated Solutions, LLC merged into MRO Integrated Solutions of Delaware,
LLC
on August 28, 2007 and continues to operate under the name MRO Integrated
Solutions, LLC (“MRO” or the “Company”). The purpose of this transaction was to
effectuate a change in location of incorporation to Delaware (see note
12).
MRO
is
headquartered in Shrewsbury, Massachusetts (“MA”) and purchases spare,
consumable maintenance and repair parts and resells them directly to
semiconductor fabrication facilities.
On
June
29, 2007, MRO became a wholly owned subsidiary of Conihasset Capital Partners,
Inc. (“CCP”) (see note 12).
|
2.
|
LIQUIDITY
AND FINANCIAL CONDITION
|
The
Company incurred net losses of $504,310 and $169,741 for the year ended December
31, 2006 and for the period from inception (April 18, 2005) to December 31,
2005, respectively. At December 31, 2006, the Company's members’ deficit
amounted to $433,165.
During
the year ended December 31, 2006, the Company obtained $1,000,000 in gross
proceeds from certain debt financing transactions with CCP (see note 7).
On May
18, 2007, the Company obtained an additional $500,000 in gross proceeds from
CCP, less $15,000 in financing costs (see note 12). On June 29, 2007, the
Company was acquired by CCP (see note 12).
Management
believes the funds the Company expects to generate from operations, and CCP’s
ability to raise additional capital, will sustain the business through December
31, 2007. In the event that the Company is required to obtain additional
capital
subsequent to 2007, the Company cannot provide any assurance that it will
secure
any commitments for new financing on acceptable terms, if at all.
|
3.
|
SUMMARY
OF SIGNIFICANT ACCOUNTING
POLICIES
|
Cash
The
Company places its cash with high quality financial institutions, which at
times
may exceed federal insured limits. The Company has not experienced any losses
on
these accounts and believes such risk is minimal.
Allowance
for Doubtful Accounts
The
Company sells its product throughout the United States of America. Credit
is
extended to customers only after an evaluation of the customer’s financial
condition and generally collateral is not required. Since its inception,
the
Company has not had any write-offs of its trade accounts receivable. Based
on
historical collection activity, management determined it is not necessary
to
establish an allowance for doubtful accounts as of December 31,
2006.
Inventory
Inventory
is stated at the lower of cost or market. Cost is determined using the first-in,
first-out method. Inventory consists of semiconductor spare and consumable
parts.
MRO
INTEGRATED SOLUTIONS, LLC
NOTES
TO FINANCIAL STATEMENTS
AS
OF AND FOR THE YEAR ENDED DECEMBER 31,
2006
AND
FOR THE PERIOD FROM INCEPTION (APRIL 18,
2005) TO DECEMBER 31, 2005
Deferred
Financing Costs
The
Company incurred $60,000 in financing costs in connection with its entering
into
various convertible promissory notes during the year ended December 31, 2006.
In
accordance with Statement of Financial Accounting Standards (“SFAS”) No. 91,
“Accounting for Nonrefundable Fees and Costs Associated with Originating or
Acquiring Loans and Initial Direct Costs of Leases”, the Company has determined
that even though the notes are due on demand, they will amortize these financing
costs over the maximum life of the loans based on there being no understanding
between the Company and the lender as to the length of time over which the
loan
would be outstanding. Any unamortized balance will be written-off in the event
that the loans are repaid or converted prior to maturity. For the year ended
December 31, 2006, the Company amortized $2,000 of deferred financing fees
and
had a remaining unamortized balance of $58,000.
Property
and Equipment
Property
and equipment are stated at cost less accumulated depreciation, and are
depreciated over the estimated useful life of the related asset. Depreciation
is
computed by the straight line method. Equipment acquired under capital leases
are depreciated over the estimated useful life of the asset. The estimated
useful lives used in computing depreciation are summarized as
follows:
|
|
Years
of
|
|
|
Useful
Life
|
|
|
|
|
Office
furniture
|
5
|
|
Computer
equipment
|
5
|
|
Equipment
acquired under capital lease
|
5
|
Maintenance
and repairs of property and equipment are charged to operations, and major
improvements are capitalized. Upon retirement, sale, or other disposition of
property and equipment, the costs and accumulated depreciation are eliminated
from the accounts, and any resulting gain or loss is included in results of
operations.
Fair
Value of Financial Instruments
The
fair
value of financial instruments is the amount for which the instrument could
be
exchanged in a current transaction between willing parties. At December 31,
2006, the carrying values of cash, accounts receivable, inventory, accounts
payable, accrued expenses, and convertible note payable approximated their
respective fair values because of the short duration of these instruments.
Additionally, it is management’s opinion that the Company is not exposed to
significant interest rate or credit risks arising from these
instruments.
Revenue
Recognition
The
Company generates revenue from sales of its products to semiconductor
fabrication facilities. The Company sells its products directly to third parties
and to other distributors. The Company also provides warehousing services for
other distributors. The Company applies the revenue recognition principles
set
forth in Securities and Exchange Commission Staff Accounting Bulletin (“SAB”)
104 “Revenue Recognition” with respect to all of its revenue. Accordingly, the
Company records revenue when: (i) persuasive evidence of an arrangement exists,
(ii) delivery has occurred, (iii) the sales price is fixed or determinable,
and
(iv) collectability of the sale is reasonably assured.
The
Company recognizes revenue at the time in which it receives a confirmation
that
the goods were either tendered at their destination when shipped “FOB
destination” or transferred to a shipping agent when shipped “FOB shipping
point”. Delivery to the customer is deemed to have occurred when the customer
takes title to the product. Generally, title passes to the customer upon
shipment, but could occur when the customer receives the product based on the
terms of the agreement with the customer.
Revenue
from warehousing services is recognized when products are shipped from its
warehouse at the request of its customer.
MRO
INTEGRATED SOLUTIONS, LLC
NOTES
TO FINANCIAL STATEMENTS
AS
OF AND FOR THE YEAR ENDED DECEMBER 31,
2006
AND
FOR THE PERIOD FROM INCEPTION (APRIL 18,
2005) TO DECEMBER 31, 2005
Revenue
Reporting
On
July
13, 2007, the Company entered into an agreement with a distributor whereby
the
Company agreed to provide warehousing services for inventory that the
distributor requests the Company to buy on its behalf. In exchange for such
services, the distributor has agreed to pay the Company its cost plus a fixed
percentage of such cost. Further, the distributor has agreed to purchase back
from the Company any inventory that it requests the Company to purchase on
its
behalf that the Company is unable to sell to the Company’s other customers
within 12 months from the date of purchase. The term of the agreement is
retroactive from January 1, 2007 to December 31, 2009. Prior to January 1,
2007,
there was no formal written agreement between the Company and this distributor;
however, these terms between the Company and the distributor were in effect
during 2006.
The
Company is recording the purchase of this inventory as its own inventory since
title transfers to the Company at the time of purchase, and the Company has
the
right to sell the inventory to its customer base with no
restrictions.
In
accordance with Emerging Issues Task Force (“EITF”) 99-19, “Reporting Revenue
Gross versus Net as an Agent”, the Company reports the sales to the distributor
at the net amount retained because it has earned a fee rather than generating
a
sale of goods. During the year ended December 31, 2006, the Company transferred
$102,455 of material at cost and recognized $6,491 in warehousing fees. The
Company did not incur any such activity for the period from inception (April
18,
2005) to December 31, 2005. As of December 31, 2006, the Company had $18,224
of
inventory on hand that the distributor had requested the Company to
purchase.
Use
of Estimates
The
preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and the disclosure of contingent assets and liabilities at the
date
of the financial statements and the reported amounts of income and expenses
during the reported period. The Company evaluates all of its estimates on an
on-going basis. Actual results could differ from these estimates.
Convertible
Instruments
The
Company evaluates and accounts for conversion options embedded in its
convertible instruments in accordance with SFAS No. 133, “Accounting for
Derivative Instruments and Hedging Activities” (“SFAS No. 133”) and EITF 00-19,
“Accounting for Derivative Financial Instruments Indexed to, and Potentially
Settled in, a Company’s Own Stock” (“EITF 00-19”).
SFAS
No.
133 generally provides three criteria that, if met, require companies to
bifurcate conversion options from their host instruments and account for them
as
free standing derivative financial instruments in accordance with EITF 00-19.
These three criteria include circumstances in which (a) the economic
characteristics and risks of the embedded derivative instrument are not clearly
and closely related to the economic characteristics and risks of the host
contract, (b) the hybrid instrument that embodies both the embedded derivative
instrument and the host contract is not remeasured at fair value under otherwise
applicable generally accepted accounting principles with changes in fair value
reported in earnings as they occur and (c) a separate instrument with the same
terms as the embedded derivative instrument would be considered a derivative
instrument subject to the requirements of SFAS No. 133. SFAS No. 133 and EITF
00-19 also provide an exception to this rule when the host instrument is deemed
to be conventional (as that term is described in the implementation guidance
to
SFAS No. 133 and further clarified in EITF 05-2, “The Meaning of “Conventional
Convertible Debt Instrument” in Issue No. 00-19).
MRO
INTEGRATED SOLUTIONS, LLC
NOTES
TO FINANCIAL STATEMENTS
AS
OF AND FOR THE YEAR ENDED DECEMBER 31,
2006
AND
FOR THE PERIOD FROM INCEPTION (APRIL 18,
2005) TO DECEMBER 31, 2005
The
Company accounts for convertible instruments (when it has determined that the
embedded conversion options should not be bifurcated from their host
instruments) in accordance with the provisions of EITF 98-5, “Accounting for
Convertible Securities with Beneficial Conversion Features,” (“EITF 98-5”) and
EITF 00-27, “Application of EITF 98-5 to Certain Convertible Instruments.”
Accordingly, the Company records when necessary discounts to convertible notes
for the intrinsic value of conversion options embedded in debt instruments
based
upon the differences between the fair value of the underlying common stock
at
the commitment date of the note transaction and the effective conversion price
embedded in the note. Debt discounts under these arrangements are amortized
over
the term of the related debt to their earliest date of redemption.
The
Company evaluated the conversion option embedded in its convertible instruments
during each of the reporting periods presented and has determined, in accordance
with the provisions of these statements, that it does not meet the criteria
requiring bifurcation of these instruments. Additionally, the Company’s
conversion options, if free standing, would not be considered derivatives
subject to accounting guidelines prescribed under SFAS No. 133.
The
Company has evaluated the provisions of EITF 00-19-2 "Accounting for
Registration Payment Arrangements", which specifies that the contingent
obligation to make future payments or otherwise transfer consideration under
a
registration payment arrangement should be separately recognized and measured
in
accordance with SFAS 5, "Accounting for Contingencies." Adoption of EITF 00-19-2
is required for fiscal years beginning after December 15, 2006. The Company
has
determined that the provisions of EITF 00-19-2 will not have an effect on its
financial statements.
Concentrations
of Credit Risk
The
Company believes it is not exposed to any significant credit risk with cash.
The
Company maintains its cash with a high credit quality financial institution.
Total deposits on account at the financial institution are secured by the
Federal Deposit Insurance Corporation up to $100,000.
Shipping
and Handling Fees and Costs
Shipping
and handling fees billed to customers are classified in net sales in the
statements of operations. Shipping and handling costs are classified in cost
of
goods sold in the statements of operations. These costs totaled $25,494 and
$793
for the year ended December 31, 2006 and for the period from inception (April
18, 2005) to December 31, 2005, respectively.
Income
Taxes
The
Company is not a tax paying entity for federal and state income tax purposes,
and thus no income tax expense/benefit has been recorded in the financial
statements. The income or loss of the Company is taxed to the members in their
respective returns.
MRO
INTEGRATED SOLUTIONS, LLC
NOTES
TO FINANCIAL STATEMENTS
AS
OF AND FOR THE YEAR ENDED DECEMBER 31,
2006
AND
FOR THE PERIOD FROM INCEPTION (APRIL 18,
2005) TO DECEMBER 31, 2005
|
4.
|
PROPERTY
AND EQUIPMENT
|
At
December 31, 2006, property and equipment is comprised of the
following:
|
Office
furniture
|
|
$
|
2,260
|
|
|
Computer
equipment
|
|
|
36,641
|
|
|
Leased
equipment
|
|
|
11,760
|
|
|
Total
property and equipment
|
|
|
50,661
|
|
|
Less:
accumulated depreciation
|
|
|
(13,947
|
)
|
|
Property
and equipment, net
|
|
$
|
36,714
|
|
Depreciation
expense on property and equipment amounted to $8,761 and $5,186 for the year
ended December 31, 2006 and for the period from inception (April 18, 2005)
to
December 31, 2005, respectively.
On
January 31, 2006, the Company entered into a $250,000 note payable bearing
interest at 60% per annum, payable on demand but in no event later than January
31, 2007. The note was personally guaranteed by the President of MRO. Interest
was payable on a monthly basis. The $250,000 note was paid in full by the
Company on September 30, 2006. Included in accrued expenses in the accompanying
balance sheet at December 31, 2006 is $38,500 of accrued and unpaid interest
on
this note. There are no late fees or penalties accruing on this liability.
Per
Accounting Principles Board Opinion No. 21, “Interest on Receivables and
Payables”, if the interest rate is deemed unreasonable, an imputed interest rate
must be used to determine the present value of the note, and any discount
or
premium must be recognized and amortized over the life of the note. Since
the
note was paid back within the year, no discount or premium was recognized
on
this note.
|
6.
|
CONVERTIBLE
NOTES PAYABLE-RELATED
PARTY
|
On
August
28, 2006, the Company entered into a 5% convertible promissory note with
CCP in
the amount of $150,000, payable on demand, but no later than August 28, 2011,
and was convertible in whole into membership units representing 5% of the
total
outstanding membership units of the Company. The Company received $150,000
in
gross proceeds, less $9,000 in financing costs.
On
October 2, 2006, the Company received an additional $75,000 in gross proceeds
from CCP, less $4,500 in financing costs. This 5% convertible promissory
note
was also due on demand but no later than October 2, 2011 and was convertible
in
whole into membership units representing 2.5% of the total outstanding
membership units of the Company.
On
November 15, 2006, the Company received an additional $775,000 in gross proceeds
from CCP, less $46,500 in financing costs. The prior two notes were rescinded
and consolidated into a new convertible note, including this borrowing, for
$1,000,000. As a condition of this convertible note, the Company entered
into a
registration rights agreement with CCP. The agreement does not provide a
liquidated damages clause.
This
new
convertible note payable to CCP in the amount of $1,000,000, bearing interest
at
5% per annum, was payable on demand but in no event later than November 15,
2011. The note was secured by substantially all of the assets of the Company
and
is convertible in whole into membership units representing 33.33% of the
total
outstanding membership units of the Company. CCP, at its option, could convert
the note at anytime on or before the maturity date. Interest is payable on
a
quarterly basis.
The
Company has accrued and unpaid interest as of December 31, 2006 of $6,326
related to this note included in accrued expenses in the accompanying balance
sheet. Interest expense related to this note was $6,326 for the year ended
December 31, 2006.
On
June
29, 2007, CCP converted this note, which at that time was $1,500,000 as a result
of the Company borrowing an additional $500,000 from CCP on May 18, 2007, in
conjunction with its acquisition of 100% of the membership units of the Company
(see note 12).
MRO
INTEGRATED SOLUTIONS, LLC
NOTES
TO FINANCIAL STATEMENTS
AS
OF AND FOR THE YEAR ENDED DECEMBER 31,
2006
AND
FOR THE PERIOD FROM INCEPTION (APRIL 18,
2005) TO DECEMBER 31, 2005
Ownership rights in the Company are reflected in Membership Units as recorded
by
the Company. The Membership Units all have the same preferences,
limitations and rights, including voting rights. Initially the Company had
two members holding 80% and 20% of the Membership Units outstanding.
Subsequently in a private transaction, a third member was added in August
2005.
As a result of this transaction, the Company had three members owning 60%,
20%
and 20%, respectively. As of December 31, 2006, there were three members
and 100
Membership Units outstanding.
|
8.
|
COMMITMENTS
AND CONTINGENCIES
|
Lease
Commitments
The
Company has an operating facility in Shrewsbury, MA, under a four-year
non-cancelable operating lease expiring on May 31, 2009. Base rent for the
premises does not include real estate taxes and other operating expenses for
which the Company is separately liable. Annual base rent on the premises is
$56,820, payable in monthly installments of $4,735 each.
Future
minimum operating lease payments at December 31, 2006 are as
follows:
|
Year
ending December 31,
|
|
|
|
|
|
2007
|
|
$
|
56,820
|
|
|
2008
|
|
|
56,820
|
|
|
2009
|
|
|
23,675
|
|
|
Total
|
|
$
|
137,315
|
|
Rent
expense and related costs amounted to $70,277 and $41,923 for the year ended
December 31, 2006 and for the period from inception (April 18, 2005) to December
31, 2005, respectively.
Payroll
Liabilities
As
of
December 31, 2006, the Company has accrued $21,956 for payroll taxes, including
penalties and interest, that it may owe related to payments made to individuals
who provided services to the Company during the year ended December 31, 2006
and
for the period from inception (April 18, 2005) to December 31,
2005.
For
the
year ended December 31, 2006, the Company had two customers, which comprised
approximately 47% and 33% of net sales. Accounts receivable from these customers
amounted to $107,342 and $0, respectively at December 31, 2006. For the period
from inception (April 18, 2005) to December 31, 2005, the Company had three
customers, which comprised approximately 35%, 22% and 13% of net
sales.
MRO
INTEGRATED SOLUTIONS, LLC
NOTES
TO FINANCIAL STATEMENTS
AS
OF AND FOR THE YEAR ENDED DECEMBER 31,
2006
AND
FOR THE PERIOD FROM INCEPTION (APRIL 18,
2005) TO DECEMBER 31, 2005
|
10.
|
OBLIGATION
UNDER CAPITAL LEASE
|
The
Company entered into a capital lease for warehouse equipment on July 26, 2006.
The lease payments are $367 per month for a term of 36 months, with a bargain
purchase option of $1 at the maturity of the lease, July 31, 2009. The lease
carries an interest rate of 8% and is guaranteed by a member of the Company.
The
net carrying value of assets under this obligation was $10,584 at December
31,
2006.
As
of
December 31, 2006, the aggregate future minimum annual lease payments under
this
capital lease are as follows:
|
Years
ending December 31,
|
|
|
|
|
|
2007
|
|
$
|
4,408
|
|
|
2008
|
|
|
4,408
|
|
|
2009
|
|
|
2,939
|
|
|
Total
minimum lease payments
|
|
|
11,755
|
|
|
Less:
amount representing interest
|
|
|
(1,171
|
)
|
|
Present
value of minimum lease payments
|
|
|
10,584
|
|
|
Less:
current maturity
|
|
|
(3,715
|
)
|
|
Obligation
under capital lease, non-current maturity
|
|
$
|
6,869
|
|
|
11.
|
RELATED
PARTY TRANSACTIONS
|
A
relative of a member of the Company was paid $10,000 for warehouse services
provided for the year ended December 31, 2006. For the year ended December
31,
2006 and for the period from inception (April 18, 2005) to December 31, 2005,
$125,300 and $41,390, respectively was recorded as compensation to the members,
and is included in selling, general and administrative expenses.
On
May
18, 2007, MRO received an additional $500,000 in gross proceeds from CCP,
less
$15,000 in financing costs. This borrowing was combined with the previously
issued $1,000,000 convertible promissory note dated November 15, 2006. The
result of this borrowing was the issuance of a new promissory convertible
note
by MRO dated May 18, 2007, in the amount of $1,500,000, at rate of 5%, payable
on demand but in no event later than May 18, 2012. The Company incurred $15,000
in financing costs in connection with this additional borrowing and is
amortizing such costs over the life of the note. The note was secured by
substantially all of the assets of the Company and was convertible in whole
into
membership units representing 50% of the total outstanding membership units
of
the Company. CCP, at its option, could convert the note at anytime on or
before
the maturity date. Interest is payable on a quarterly basis.
On
June
1, 2007, the President of MRO, in a private transaction, acquired the remaining
outstanding member units from the other two membership owners, becoming the
sole
member of MRO.
On
June
13, 2007, the President and sole member of MRO (the “Seller”), and CCP entered
into a sale agreement (the “Sale Agreement”) for the sale of all of the
outstanding membership interests of MRO to CCP.
MRO
INTEGRATED SOLUTIONS, LLC
NOTES
TO FINANCIAL STATEMENTS
AS
OF AND FOR THE YEAR ENDED DECEMBER 31,
2006
AND
FOR THE PERIOD FROM INCEPTION (APRIL 18,
2005) TO DECEMBER 31, 2005
On
June
29, 2007 (the “Closing Date”), the Seller completed the sale of one hundred
percent (100%) of his outstanding membership interest of MRO. In consideration
for such sale, CCP agreed, pursuant to arm’s length negotiations, to pay and
deliver on the Closing Date a purchase price of $3 million in the form of the
issuance to the Seller of 300,000 shares of CCP’s common stock at a price of
$5.00 per share, and the conversion by MRO of a convertible promissory note
in
the amount of $1.5 million held by CCP. The $7,083 of accrued and unpaid
interest was forgiven by CCP and written off against interest expense by the
Company. Additionally, unamortized deferred financing fees of $67,000 were
written off by the Company. Upon completion of such transactions, the Company
became a wholly owned subsidiary of CCP. In addition, the Seller will remain
the
President of MRO.
On
July
13, 2007, the Company entered into an agreement with a distributor whereby
the
Company agreed to provide warehousing services for inventory that the
distributor requests the Company to buy on its behalf. In exchange for such
services, the distributor has agreed to pay the Company its cost plus a fixed
percentage of such cost. Further, the distributor has agreed to purchase back
from the Company any inventory that it requests the Company to purchase on
its
behalf that the Company is unable to sell to the Company’s other customers
within 12 months from the date of purchase. The term of the agreement is
retroactive from January 1, 2007 to December 31, 2009.
On
July
19, 2007, the Company, CCP and Metron Technology, Inc. (“Metron”), a Delaware
corporation that supports original equipment manufacturers, semiconductor
manufacturers and suppliers, entered into a purchase agreement (the “Purchase
Agreement”) whereby the Company would purchase certain assets of Metron’s North
American Cleanroom Consumable Products Division (“NACCPD”).
On
July
23, 2007 (the “Closing Date”), MRO completed the purchase from Metron of all of
the NACCPD assets. In consideration for such purchase, the Purchaser agreed,
pursuant to arm’s length negotiations, to pay and deliver on the Closing Date a
purchase price of $1.1 million in cash allocable to the NACCPD assets
acquired.
The
Company merged into MRO Integrated Solutions of Delaware, LLC on August 28,
2007. The purpose of this transaction was to effectuate a change in location
of
incorporation to Delaware. The Company will continue to operate under the name
MRO Integrated Solutions, LLC.
MRO
INTEGRATED SOLUTIONS, LLC
INDEX
OF FINANCIAL STATEMENTS
AS
OF AND FOR THE PERIOD ENDED JUNE 29, 2007 AND JUNE 30,
2006
|
|
Page
Number
|
|
|
|
|
|
|
|
|
Balance
Sheet
|
|
|
|
|
|
• As
of June 29, 2007 (Unaudited)
|
16
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
• For
the period ended June 29, 2007 and June 30, 2006
(Unaudited)
|
17
|
|
|
|
|
|
|
|
|
Statement
of Changes in Member's Deficit
|
|
|
|
|
|
• For
the period ended June 29, 2007 (Unaudited)
|
18
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
• For
the period ended June 29, 2007 and June 30, 2006
(Unaudited)
|
19
|
|
|
|
|
|
|
|
|
|
|
|
20
|
|
|
MRO
INTEGRATED SOLUTIONS, LLC
|
|
BALANCE
SHEET (UNAUDITED)
|
|
June
29, 2007
|
|
ASSETS
|
|
CURRENT
ASSETS
|
|
|
|
|
|
Cash
|
|
$
|
349,409
|
|
|
Accounts
receivable, net
|
|
|
210,711
|
|
|
Inventory
|
|
|
305,614
|
|
|
Prepaid
expenses
|
|
|
5,005
|
|
|
Total
current assets
|
|
|
870,739
|
|
|
|
|
|
|
|
|
Property
and equipment, net
|
|
|
31,648
|
|
|
Deferred
financing fees, net
|
|
|
67,000
|
|
|
Security
deposit
|
|
|
11,713
|
|
|
|
|
|
|
|
|
TOTAL
ASSETS
|
|
$
|
981,100
|
|
|
LIABILITIES
AND MEMBER'S DEFICIT
|
|
CURRENT
LIABILITIES
|
|
|
|
|
|
Convertible
note payable - related party
|
|
$
|
1,500,000
|
|
|
Accounts
payable
|
|
|
169,493
|
|
|
Accrued
expenses
|
|
|
69,049
|
|
|
Current
portion of capital lease obligation
|
|
|
3,551
|
|
|
|
|
|
|
|
|
Total
current liabilities
|
|
|
1,742,093
|
|
|
|
|
|
|
|
|
Long-term
portion of capital lease obligation
|
|
|
4,901
|
|
|
|
|
|
|
|
|
TOTAL
LIABILITIES
|
|
|
1,746,994
|
|
|
|
|
|
|
|
|
COMMITMENTS
AND CONTINGENCIES
|
|
|
|
|
|
|
|
|
|
|
|
MEMBER'S
DEFICIT
|
|
|
(765,894
|
)
|
|
|
|
|
|
|
|
TOTAL
LIABILITIES AND MEMBER'S DEFICIT
|
|
$
|
981,100
|
|
|
MRO
INTEGRATED SOLUTIONS, LLC
|
|
STATEMENTS
OF OPERATIONS (UNAUDITED)
|
|
|
|
|
For
the Period
|
|
|
For
the Period
|
|
|
|
|
|
Ended
|
|
|
Ended
|
|
|
|
|
|
June
29,
|
|
|
June
30,
|
|
|
|
|
|
2007
|
|
|
2006
|
|
|
|
|
|
|
|
|
|
|
|
Net
sales
|
|
$
|
606,237
|
|
$
|
54,544
|
|
|
|
|
|
|
|
|
|
|
|
Cost
of goods sold
|
|
|
511,243
|
|
|
51,876
|
|
|
|
|
|
|
|
|
|
|
|
GROSS
PROFIT
|
|
|
94,994
|
|
|
2,668
|
|
|
|
|
|
|
|
|
|
|
|
Selling,
general and administrative expenses
|
|
|
260,949
|
|
|
220,762
|
|
|
|
|
|
|
|
|
|
|
|
LOSS
FROM OPERATIONS
|
|
|
(165,955
|
)
|
|
(218,094
|
)
|
|
|
|
|
|
|
|
|
|
|
Interest
and financing expense
|
|
|
34,130
|
|
|
63,091
|
|
|
|
|
|
|
|
|
|
|
|
NET
LOSS
|
|
$
|
(200,085
|
)
|
$
|
(281,185
|
)
|
|
MRO
INTEGRATED SOLUTIONS, LLC
|
|
STATEMENT
OF CHANGES IN MEMBER'S DEFICIT (UNAUDITED)
|
|
FOR
THE PERIOD ENDED JUNE 29, 2007
|
|
|
|
|
Units
|
|
|
Amount
|
|
|
|
|
|
|
|
|
|
|
|
Balance
- December 31, 2006
|
|
|
100
|
|
$
|
(433,165
|
)
|
|
|
|
|
|
|
|
|
|
|
Contributions
|
|
|
-
|
|
|
1,356
|
|
|
|
|
|
|
|
|
|
|
|
Distributions
|
|
|
-
|
|
|
(134,000
|
)
|
|
|
|
|
|
|
|
|
|
|
Net
loss
|
|
|
-
|
|
|
(200,085
|
)
|
|
|
|
|
|
|
|
|
|
|
Balance
- June 29, 2007
|
|
|
100
|
|
$
|
(765,894
|
)
|
|
MRO
INTEGRATED SOLUTIONS, LLC
|
|
STATEMENTS
OF CASH FLOWS (UNAUDITED)
|
|
|
|
|
|
|
|
|
|
|
For
the Period
|
|
For
the Period
|
|
|
|
|
Ended
|
|
Ended
|
|
|
|
|
June
29,
|
|
June
30,
|
|
|
CASH
FLOWS FROM OPERATING ACTIVITIES
|
|
2007
|
|
2006
|
|
|
Net
loss
|
|
$
|
(200,085
|
)
|
$
|
(281,185
|
)
|
|
Adjustments
to reconcile net loss to net cash used in operating
activities:
|
|
|
|
|
|
|
|
|
Depreciation
|
|
|
5,066
|
|
|
-
|
|
|
Amortization
of deferred financing fees
|
|
|
6,000
|
|
|
-
|
|
|
Changes
in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
Accounts
receivable
|
|
|
(24,413
|
)
|
|
(50,915
|
)
|
|
Inventory
|
|
|
(176,275
|
)
|
|
(45,635
|
)
|
|
Prepaid
expenses
|
|
|
2,090
|
|
|
-
|
|
|
Accounts
payable
|
|
|
84,307
|
|
|
82,161
|
|
|
Accrued
expenses
|
|
|
2,267
|
|
|
5,113
|
|
|
|
|
|
|
|
|
|
|
|
NET
CASH USED IN OPERATING ACTIVITIES
|
|
|
(301,043
|
)
|
|
(290,461
|
)
|
|
|
|
|
|
|
|
|
|
|
CASH
FLOWS FROM FINANCING ACTIVITIES
|
|
|
|
|
|
|
|
|
Gross
proceeds from convertible notes payable - related party
|
|
|
500,000
|
|
|
-
|
|
|
Deferred
financing fee in connection with convertible notes payable
|
|
|
(15,000
|
)
|
|
-
|
|
|
Proceeds
from notes payable
|
|
|
-
|
|
|
250,000
|
|
|
Contributions
by member
|
|
|
1,356
|
|
|
122,612
|
|
|
Distributions
to member
|
|
|
(134,000
|
)
|
|
(68,955
|
)
|
|
Payments
of capital lease obligation
|
|
|
(2,132
|
)
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
NET
CASH PROVIDED BY FINANCING ACTIVITIES
|
|
|
350,224
|
|
|
303,657
|
|
|
|
|
|
|
|
|
|
|
|
NET
INCREASE IN CASH
|
|
|
49,181
|
|
|
13,196
|
|
|
|
|
|
|
|
|
|
|
|
CASH
-
BEGINNING OF PERIOD
|
|
|
300,228
|
|
|
3,008
|
|
|
|
|
|
|
|
|
|
|
|
CASH
-
END OF PERIOD
|
|
$
|
349,409
|
|
$
|
16,204
|
|
|
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL
DISCLOSURES OF CASH FLOW INFORMATION
|
|
|
|
|
|
|
|
|
Cash
paid for interest
|
|
$
|
25,864
|
|
$
|
62,500
|
|
MRO
INTEGRATED SOLUTIONS, LLC
NOTES
TO FINANCIAL STATEMENTS (UNAUDITED)
AS
OF AND FOR THE PERIOD ENDED JUNE 29, 2007 AND JUNE 30,
2006
|
1.
|
ORGANIZATION
AND NATURE OF BUSINESS
|
MRO
Integrated Solutions, LLC, was incorporated as Logistics Supply Company,
LLC in
the State of Connecticut on April 18, 2005. On August 5, 2005, Logistics
Supply
Company, LLC legally changed its name to MRO Integrated Solutions, LLC.
MRO
Integrated Solutions, LLC merged with MRO Integrated Solutions of Delaware,
LLC
(“MRO” or the “Company”) on August 28, 2007 and continues to operate under the
name MRO Integrated Solutions, LLC (“MRO” or the “Company”). The purpose of this
transaction was to effectuate a change in location of incorporation to
Delaware
(see note 13).
MRO
is
headquartered in Shrewsbury, Massachusetts (“MA”) and purchases spare,
consumable maintenance and repair parts and resells them directly to
semiconductor fabrication facilities.
On
June
29, 2007, MRO became a wholly owned subsidiary of Conihasset Capital Partners,
Inc (“CCP”) (see note 4). These financial statements do not reflect the
transactions relating to the acquisition of the Company by CCP which includes
the conversion of the convertible note payable of $1,500,000 to equity,
the
write-off to expense of deferred financing costs of $67,000 and the write-off
of
accrued and unpaid interest on the convertible note payable of $7,083,
which was
forgiven as part of the acquisition (see notes 5 and 8).
|
2.
|
LIQUIDITY
AND FINANCIAL CONDITION
|
The
Company incurred net losses of $200,085, $504,310, and $169,741 for the
period
ended June 29, 2007, for the year ended December 31, 2006, and for the
period
from inception (April 18, 2005) to December 31, 2005, respectively. At
June 29,
2007, the Company's members’ deficit amounted to $765,894, prior to the
acquisition.
On
June
29, 2007, the Company was acquired by CCP (see note 5).
Management
believes the funds the Company expects to generate from operations, and
CCP’s
ability to raise additional capital, will sustain the business through
June 30,
2008. In the event that the Company is required to obtain additional capital
subsequent to June 30, 2008, the Company cannot provide any assurance that
it
will secure any commitments for new financing on acceptable terms, if at
all.
|
3.
|
SUMMARY
OF SIGNIFICANT ACCOUNTING
POLICIES
|
Cash
The
Company places its cash with high quality financial institutions, which
at times
may exceed federal insured limits. The Company has not experienced any
losses on
these accounts and believes such risk is minimal.
Allowance
for Doubtful Accounts
The
Company sells its product throughout the United States of America. Credit
is
extended to customers only after an evaluation of the customer’s financial
condition and generally collateral is not required. Since its inception,
the
Company has not had any write-offs of its trade accounts receivable. Based
on
historical collection activity, management determined it is not necessary
to
establish an allowance for doubtful accounts as of June 29, 2007.
Inventory
Inventory
is stated at the lower of cost or market. Cost is determined using the
first-in,
first-out method. Inventory consists of semiconductor spare and consumable
parts.
MRO
INTEGRATED SOLUTIONS, LLC
NOTES
TO FINANCIAL STATEMENTS (UNAUDITED)
AS
OF AND FOR THE PERIOD ENDED JUNE 29, 2007 AND JUNE 30,
2006
Deferred
Financing
Costs
The
Company incurred $15,000 in financing costs in connection with its entering
into
a convertible promissory note for the period ended June 29, 2007. In accordance
with Statement of Financial Accounting Standards (“SFAS”) No. 91, “Accounting
for Nonrefundable Fees and Costs Associated with Originating or Acquiring
Loans
and Initial Direct Costs of Leases”, the Company is amortizing these financing
costs over the maximum life of the loans based on there being no understanding
between the Company and the lender as to the length of time over which the
loan
would be outstanding. Any unamortized balance will be written-off in the
event
that the loans are repaid or converted prior to maturity. For the period
ended
June 29, 2007, the Company amortized $6,000 of deferred financing fees and
had a
remaining unamortized balance of $67,000.
Property
and Equipment
Property
and equipment are stated at cost less accumulated depreciation, and are
depreciated over the estimated useful life of the related asset. Depreciation
is
computed by the straight line method. Equipment acquired under capital leases
are depreciated over the estimated useful life of the asset. The estimated
useful lives used in computing depreciation are summarized as
follows:
|
|
Years
of
|
|
|
Useful
Life
|
|
|
|
|
Office
furniture
|
5
|
|
Computer
equipment
|
5
|
|
Equipment
acquired under capital lease
|
5
|
Maintenance
and repairs of property and equipment are charged to operations, and major
improvements are capitalized. Upon retirement, sale, or other disposition
of
property and equipment, the costs and accumulated depreciation are eliminated
from the accounts, and any resulting gain or loss is included in results
of
operations.
Fair
Value of Financial Instruments
The
fair
value of financial instruments is the amount for which the instrument could
be
exchanged in a current transaction between willing parties. As of June 29,
2007,
the carrying values of cash, accounts receivable, inventory, accounts payable,
accrued expenses and convertible note
payable
approximated their respective fair values because of the short duration of
these
instruments. Additionally, it is management’s opinion that the Company is not
exposed to significant interest rate or credit risks arising from these
instruments
Revenue
Recognition
The
Company generates revenue from sales of its products to semiconductor
fabrication facilities. The Company sells its products directly to third
parties
and to other distributors. The Company also provides warehousing services
for
other distributors. The Company applies the revenue recognition principles
set
forth in Securities and Exchange Commission Staff Accounting Bulletin (“SAB”)
104, “Revenue Recognition”, with respect to all of its revenue. Accordingly, the
Company records revenue when: (i) persuasive evidence of an arrangement exists,
(ii) delivery has occurred, (iii) the sales price is fixed or determinable,
and
(iv) collectability of the sale is reasonably assured.
The
Company recognizes revenue at the time in which it receives a confirmation
that
the goods were either tendered at their destination when shipped “FOB
destination” or transferred to a shipping agent when shipped “FOB shipping
point”. Delivery to the customer is deemed to have occurred when the customer
takes title to the product. Generally, title passes to the customer upon
shipment, but could occur when the customer receives the product based on the
terms of the agreement with the customer.
Revenue
from warehousing services is recognized when products are shipped from its
warehouse at the request of its customer.
MRO
INTEGRATED SOLUTIONS, LLC
NOTES
TO FINANCIAL STATEMENTS (UNAUDITED)
AS
OF AND FOR THE PERIOD ENDED JUNE 29, 2007 AND JUNE 30,
2006
Revenue
Reporting
On
July
13, 2007, the Company entered into an agreement with a distributor whereby
the
Company agreed to provide warehousing services for inventory that the
distributor requests the Company to buy on its behalf. In exchange for such
services, the distributor has agreed to pay the Company its cost plus a fixed
percentage of such cost. Further, the distributor has agreed to purchase back
from the Company any inventory that it requests the Company to purchase on
its
behalf that the Company is unable to sell to the Company’s other customers
within 12 months from the date of purchase. The term of the agreement is
retroactive from January 1, 2007 to December 31, 2009. Prior to January 1,
2007,
there was no formal written agreement between the Company and this distributor;
however, these terms between the Company and the distributor were in effect
during 2006.
The
Company is recording the purchase of this inventory as its own inventory since
title transfers to the Company at the time of purchase, and the Company has
the
right to sell the inventory to its customer base with no
restrictions.
In
accordance with Emerging Issues Task Force (“EITF”) 99-19, “Reporting Revenue
Gross versus Net as an Agent”, the Company reports the sales to the distributor
at the net amount retained because it has earned a fee rather than generating
a
sale of goods. During the period ended June 29, 2007, the Company transferred
$84,436 of material at cost and recognized $5,231 in warehousing fees. During
the six months ended June 30, 2006, the Company transferred $19,930 of material
at cost and recognized $1,002 in warehousing fees. As June 29, 2007, the Company
had $55,891 of inventory on hand that the distributor had requested the Company
to purchase.
Use
of Estimates
The
preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amount of assets and
liabilities and the disclosure of contingent assets and liabilities at the
date
of the financial statements and the reported amounts of income and expenses
during the reported period. The Company evaluates all of its estimates on an
on-going basis. Actual results could differ from these estimates.
Convertible
Instruments
The
Company evaluates and accounts for conversion options embedded in its
convertible instruments in accordance with SFAS No. 133, “Accounting for
Derivative Instruments and Hedging Activities” (“SFAS No. 133”) and EITF 00-19,
“Accounting for Derivative Financial Instruments Indexed to, and Potentially
Settled in, a Company’s Own Stock” (“EITF 00-19”).
SFAS
No.
133 generally provides three criteria that, if met, require companies to
bifurcate conversion options from their host instruments and account for them
as
free standing derivative financial instruments in accordance with EITF 00-19.
These three criteria include circumstances in which (a) the economic
characteristics and risks of the embedded derivative instrument are not clearly
and closely related to the economic characteristics and risks of the host
contract, (b) the hybrid instrument that embodies both the embedded derivative
instrument and the host contract is not remeasured at fair value under otherwise
applicable generally accepted accounting principles with changes in fair value
reported in earnings as they occur and (c) a separate instrument with the same
terms as the embedded derivative instrument would be considered a derivative
instrument subject to the requirements of SFAS No. 133. SFAS No. 133 and EITF
00-19 also provide an exception to this rule when the host instrument is deemed
to be conventional (as that term is described in the implementation guidance
to
SFAS No. 133 and further clarified in EITF 05-2, “The Meaning of “Conventional
Convertible Debt Instrument” in Issue No. 00-19).
The
Company accounts for convertible instruments (when it has determined that the
embedded conversion options should not be bifurcated from their host
instruments) in accordance with the provisions of EITF 98-5, “Accounting for
Convertible Securities with Beneficial Conversion Features,” (“EITF 98-5”) and
EITF 00-27, “Application of EITF 98-5 to Certain Convertible Instruments.”
Accordingly, the Company records when necessary discounts to convertible notes
for the intrinsic value of conversion options embedded in debt instruments
based
upon the differences between the fair value of the underlying common stock
at
the commitment date of the note transaction and the effective conversion price
embedded in the note. Debt discounts under these arrangements are amortized
over
the term of the related debt to their earliest date of redemption.
MRO
INTEGRATED SOLUTIONS, LLC
NOTES
TO FINANCIAL STATEMENTS (UNAUDITED)
AS
OF AND FOR THE PERIOD ENDED JUNE 29, 2007 AND JUNE 30,
2006
The
Company evaluated the conversion option embedded in its convertible instruments
during each of the reporting periods presented and has determined, in accordance
with the provisions of these statements, that it does not meet the criteria
requiring bifurcation of these instruments. Additionally, the Company’s
conversion options, if free standing, would not be considered derivatives
subject to accounting guidelines prescribed under SFAS No. 133.
The
Company has evaluated the provisions of EITF 00-19-2 "Accounting for
Registration Payment Arrangements", which specifies that the contingent
obligation to make future payments or otherwise transfer consideration under
a
registration payment arrangement should be separately recognized and measured
in
accordance with SFAS 5, "Accounting for Contingencies." Adoption of EITF 00-19-2
is required for fiscal years beginning after December 15, 2006. The
implementation of EITF 00-19-2 did not have an effect on the Company’s financial
statements.
Concentrations
of Credit Risk
The
Company believes it is not exposed to any significant credit risk with cash.
The
Company maintains its cash with a high credit quality financial institution.
Total deposits on account at the financial institution are secured by the
Federal Deposit Insurance Corporation up to $100,000.
Shipping
and Handling Fees and Costs
Shipping
and handling fees billed to customers are classified in net sales in the
statements of operations. Shipping and handling costs are classified in cost
of
goods sold in the statements of operations. These costs totaled $16,433 and
$6,163 for periods ended June 29, 2007 and June 30, 2006,
respectively.
Income
Taxes
The
Company is not a tax paying entity for federal and state income tax purposes,
and thus no income tax expense/benefit has been recorded in the financial
statements. The income or loss of the Company is taxed to the members in their
respective returns.
On
June
13, 2007, the President and sole owner of MRO (the “Seller”), and CCP entered
into a sale agreement (the “Sale Agreement”) for the sale of all of the
outstanding membership interests of MRO to CCP.
On
June
29, 2007 (the “Closing Date”), the Seller completed the sale of one hundred
percent (100%) of the outstanding membership interests of MRO. In consideration
for such sale, CCP agreed, pursuant to arm’s length negotiations, to pay and
deliver on the Closing Date a purchase price of $3 million in the form of the
issuance to the Seller of 300,000 shares of CCP’s common stock at a price of
$5.00 per share, the conversion by MRO of a convertible promissory note in
the
amount of $1.5 million held by CCP and the forgiving of $7,083 of accrued and
unpaid interest related to this note. Additionally, unamortized deferred
financing fees of $67,000 were written off to expense by the Company. Upon
completion of such transactions, the Company became a wholly owned subsidiary
of
CCP. In addition, the Seller will remain the President of MRO.
These
financial statements do not reflect the transactions relating to the acquisition
of the Company by CCP.
MRO
INTEGRATED SOLUTIONS, LLC
NOTES
TO FINANCIAL STATEMENTS (UNAUDITED)
AS
OF AND FOR THE PERIOD ENDED JUNE 29, 2007 AND JUNE 30,
2006
|
5.
|
PROPERTY
AND EQUIPMENT
|
At
June
29, 2007, property and equipment is comprised of the following:
|
|
|
|
|
|
|
Office
furniture
|
|
$
|
2,260
|
|
|
Computer
equipment
|
|
|
36,641
|
|
|
Leased
equipment
|
|
|
11,760
|
|
|
Total
property and equipment
|
|
|
50,661
|
|
|
Less:
accumulated depreciation
|
|
|
(19,013
|
)
|
|
Property
and equipment, net
|
|
$
|
31,648
|
|
Depreciation
expense on property and equipment amounted to $5,066 and $0 for the periods
ended June 29, 2007 and June 30, 2006, respectively.
On
January 31, 2006, the Company entered into a $250,000 note payable bearing
interest at 60% per annum, payable on demand but in no event later than January
31, 2007. The note was personally guaranteed by President of MRO. Interest
was
payable on a monthly basis. The $250,000 note was paid in full by the Company
on
September 30, 2006. Included in accrued expense in the accompanying balance
sheet at June 29, 2007 is an additional $38,500 of accrued and unpaid interest
on this note. There are no late fees or penalties accruing on this liability.
Per
Accounting Principles Board Opinion No. 21, “Interest on Receivables and
Payables”, if the interest rate is deemed unreasonable, an imputed interest rate
must be used to determine the present value of the note, and any discount or
premium must be recognized and amortized over the life of the note. Since the
note was paid back within the year, no discount or premium was recognized on
this note.
|
7.
|
CONVERTIBLE
NOTES PAYABLE-RELATED
PARTY
|
On
August
28, 2006, the Company entered into a 5% convertible promissory note with CCP
in
the amount of $150,000, payable on demand, but no later than August 28, 2011,
and was convertible in whole into membership units representing 5% of the total
outstanding membership units of the Company. The Company received $150,000
in
gross proceeds, less $9,000 in financing costs.
On
October 2, 2006, the Company received an additional $75,000 in gross proceeds
from CCP, less $4,500 in financing costs. This 5% convertible promissory note
was also due on demand but no later than October 2, 2011 and was convertible
in
whole into membership units representing 2.5% of the total outstanding
membership units of the Company.
On
November 15, 2006, the Company received an additional $775,000 in gross proceeds
from CCP, less $46,500 in financing costs. The prior two notes were rescinded
and consolidated into a new convertible note, including this borrowing, for
$1,000,000. As a condition of this convertible note, the Company entered into
a
registration rights agreement with CCP. The agreement does not provide a
liquidated damages clause.
On
May
18, 2007, the Company received an additional $500,000 from CCP. The prior
$1,000,000 note was rescinded and consolidated into a new Convertible Note
for
$1,500,000.
This
new
convertible note payable to CCP in the amount of $1,500,000, bearing interest
at
5% per annum, is payable on demand but in no event later than May 18, 2012.
The
note was secured by substantially all of the assets of the Company and was
convertible in whole into membership units representing 50% of the total
outstanding membership units of the Company. CCP, at its option, could convert
the note at anytime on or before the maturity date. Interest is payable on
a
quarterly basis.
MRO
INTEGRATED SOLUTIONS, LLC
NOTES
TO FINANCIAL STATEMENTS (UNAUDITED)
AS
OF AND FOR THE PERIOD ENDED JUNE 29, 2007 AND JUNE 30,
2006
The
Company has accrued and unpaid interest as of June 29, 2007 of $7,083 related
to
this note included in accrued expenses in the accompanying balance sheet.
Interest expense related to this note was $19,167 for the year ended December
31, 2006.
On
June
29, 2007, CCP elected to convert this $1,500,000 note into equity (see note
4),
in conjunction with its acquisition of 100% of the membership units of the
Company, making the Company a wholly owned subsidiary of CCP.
Ownership
rights in the Company are reflected in Membership Units as recorded by the
Company. The Membership Units all have the same preferences, limitations
and rights, including voting rights. On June 1, 2007, the President of
MRO, in a private transaction, acquired the remaining outstanding Membership
Units from the other two members, becoming the sole member of MRO. As of
June
29, 2007, both prior and subsequent to the acquisition of the Company by
CCP,
there were 100 Membership Units outstanding.
|
9.
|
COMMITMENTS
AND CONTINGENCIES
|
Lease
Commitments
The
Company has an operating facility in Shrewsbury, MA, under a four-year
non-cancelable operating lease expiring on May 31, 2009. Base rent for the
premises does not include real estate taxes and other operating expenses for
which the Company is separately liable. Annual base rent on the premises is
$56,820, payable in monthly installments of $4,735 each.
Future
minimum operating lease payments at June 29, 2007 are as follows:
|
Year
ending December 31,
|
|
|
|
|
|
2007
|
|
$
|
28,410
|
|
|
2008
|
|
|
56,820
|
|
|
2009
|
|
|
23,675
|
|
|
Total
|
|
$
|
108,905
|
|
Rent
expense and related costs amounted to $35,138 and $35,138 for the period ended
June 29, 2007 and June 30, 2006, respectively.
Payroll
Liabilities
As
of
June 29, 2007, the Company has accrued $23,466 for payroll taxes, including
penalties and interest, that it may owe related to payments made to individuals
who provided services to the Company during the year ended December 31, 2006
and
for the period from inception (April 18, 2005) to December 31,
2005.
|
10.
|
SIGNIFICANT
CUSTOMERS
|
For
the
period ended June 29, 2007, the Company had two customers, which comprised
approximately 73% and 13% of net sales. As of June 29, 2007, accounts receivable
from these customers amounted to $193,148 and $3,588, respectively. For the
period ended June 30, 2006, the Company had two customers, which comprised
approximately 50% and 22% of net sales.
|
11.
|
OBLIGATION
UNDER CAPITAL LEASE
|
The
Company entered into a capital lease for warehouse equipment on July 26,
2006.
The lease payments are $367 per month for a term of 36 months, with a bargain
purchase option of $1 at the maturity of the lease, July 31, 2009. The lease
carries an interest rate of 8% and is guaranteed by a member of the Company.
The
net carrying value of assets under this obligation was $8,452 at June 29,
2007
.
MRO
INTEGRATED SOLUTIONS, LLC
NOTES
TO FINANCIAL STATEMENTS (UNAUDITED)
AS
OF AND FOR THE PERIOD ENDED JUNE 29, 2007 AND JUNE 30,
2006
As
of
June 29, 2007, the aggregate future minimum annual lease payments under this
capital lease are as follows:
|
Years
ending December 31,
|
|
|
|
|
|
2007
|
|
$
|
1,837
|
|
|
2008
|
|
|
4,408
|
|
|
2009
|
|
|
2,939
|
|
|
Total
minimum lease payments
|
|
|
9,184
|
|
|
Less:
amount representing interest
|
|
|
(732
|
)
|
|
Present
value of minimum lease payments
|
|
|
8,452
|
|
|
Less:
current maturity
|
|
|
(4,901
|
)
|
|
Obligations
under capital lease, non-current maturity
|
|
$
|
3,551
|
|
|
12.
|
RELATED
PARTY TRANSACTIONS
|
Two
relatives of a member of the Company were paid $3,938 and $10,000 for warehouse
services provided for the period ended June 29, 2007 and June 30, 2006,
respectively. For the period ended June 29, 2007 and June 30, 2006, $34,622
and
$60,400, respectively, was recorded as compensation to the members, and is
included in selling, general, and administrative expenses.
On
July
13, 2007, the Company entered into an agreement with a distributor whereby
the
Company agreed to provide warehousing services for inventory that the
distributor requests the Company to buy on its behalf. In exchange for such
services, the distributor has agreed to pay the Company its cost plus a fixed
percentage of such cost. Further, the distributor has agreed to purchase
back
from the Company any inventory that it requests the Company to purchase on
its
behalf that the Company is unable to sell to the Company’s other customers
within 12 months from the date of purchase. The term of the agreement is
retroactive from January 1, 2007 to December 31, 2009.
On
July
19, 2007, the Company, CCP and Metron Technology, Inc. (“Metron”), a Delaware
corporation that supports original equipment manufacturers, semiconductor
manufacturers and suppliers, entered into a purchase agreement (the “Purchase
Agreement”) whereby the Company would purchase certain assets of Metron’s North
American Cleanroom Consumable Products Division (“NACCPD”).
On
July
23, 2007 (the “Closing Date”), MRO completed the purchase from Metron of all of
the NACCPD assets. In consideration for such purchase, the Purchaser agreed,
pursuant to arm’s length negotiations, to pay and deliver on the Closing Date a
purchase price of $1.1 million in cash allocable to the NACCPD assets
acquired.
The
Company merged into MRO Integrated Solutions of Delaware, LLC on August 28,
2007. The purpose of this transaction was to effectuate a change in location
of
incorporation to Delaware. The Company will continue to operate under the name
MRO Integrated Solutions, LLC.
(b)
Pro Forma Financial Information.
The
Company has included below the following Conihasset Capital Partners,
Inc. and Subsidiary Unaudited Pro Forma Condensed Combined Financial
Statements required as a result of the Purchase Agreement:
|
|
·
|
Balance
Sheet as of June 30, 2007;
|
|
|
·
|
Statement
of Operations for the six months ended June 30, 2007;
and
|
|
|
·
|
Statement
of Operations for the year ended December 31,
2006
|
CONIHASSET
CAPITAL PARTNERS, INC. AND SUBSIDIARY
Unaudited
Pro Forma Condensed Combined Financial Statements
Introduction
to the Unaudited Pro Forma Condensed Combined Financial
Statements
On
June
13, 2007, Conihasset Capital Partners, Inc. (“CCP” or the “Company”) and Thomas
Melina (the “Seller”), President and sole member of MRO Integrated Solutions,
LLC (“MROIS” or the “Subsidiary”), a Delaware limited liability company
(formerly a Connecticut limited liability company) that specializes in spares
and consumable products, entered into a purchase agreement (the “Purchase
Agreement”) for the purchase of all of the outstanding membership interests of
the Subsidiary.
On
June
29, 2007 (the “Closing Date”), the Company completed the purchase from the
Seller of one hundred percent (100%) of the outstanding membership interests
of
the Subsidiary. In consideration for such purchase, the Company agreed, pursuant
to arm’s length negotiations, to pay and deliver on the Closing Date a purchase
price of $3 million in the form of the issuance to the Seller of 300,000 shares
of the Company’s common stock at a price of $5.00 per share, and the conversion
by the Subsidiary of a convertible subordinated promissory note in the amount
of
$1.5 million held by the Company. In addition, the Seller will remain the
President of the Subsidiary. The results of the Subsidiary’s operations have
been included in the consolidated financial statements of CCP since that
date.
The
purchase method was used to account for the acquisition at June 29, 2007, and
the purchase price was initially allocated as follows:
|
Cash
|
|
$
|
349,409
|
|
|
Accounts
receivable
|
|
|
210,711
|
|
|
Inventory
|
|
|
305,614
|
|
|
Other
current assets
|
|
|
12,861
|
|
|
Property
and equipment
|
|
|
31,648
|
|
|
Goodwill
|
|
|
2,224,749
|
|
|
Total
assets acquired
|
|
|
3,134,992
|
|
|
Accounts
payable
|
|
|
191,606
|
|
|
Other
current liabilities
|
|
|
10,386
|
|
|
Net
assets acquired
|
|
$
|
2,933,000
|
|
The
net
assets acquired consist of the $3,000,000 purchase price less unamortized
deferred finance fees of $67,000.
Subsequently,
the Company determined that $400,000 of the amount previously allocated to
goodwill should be allocated to the Subsidiary’s customer list.
Additionally,
there was $67,000 of unamortized deferred finance fees on the books of CCP
which
were originally offset against equity with the resulting affect on goodwill.
The
Company subsequently determined that these unamortized deferred finance fees
should have been recorded as income on the books of CCP on the closing date
and
eliminated in consolidation with MROIS. An adjustment for this change has been
included in the unaudited pro forma condensed combined balance sheet as of
June
30, 2007 and the unaudited pro forma condensed combined statement of operations
for the six months ended June 30, 2007. The effect of this adjustment is an
increase of $67,000 to goodwill and stockholders' equity in the pro forma
condensed combined balance sheet as of June 30, 2007 and an increase of $67,000
in interest from controlled investments in the pro forma condensed combined
statement of operations for the six months ended June 30, 2007.
CONIHASSET
CAPITAL PARTNERS, INC. AND SUBSIDIARY
Unaudited
Pro Forma Condensed Combined Financial Statements
Introduction
to the Unaudited Pro Forma Condensed Combined Financial
Statements
The
following unaudited pro forma condensed combined balance sheet as of June 30,
2007 reflects the re-allocation of the purchase price, the adjustment for the
change in accounting for the unamortized deferred finance fees and subsequent
adjustments made to the MROIS balance sheet as of June 29, 2007 which was
included in the condensed consolidated balance sheet of CCP as of June 30,
2007
that was filed as part of the Company's 10-Q as of that date and for the six
months then ended.
The
following unaudited pro forma condensed combined statement of operations
for
the six months ended June 30, 2007 combines the results of operations
of CCP and MROIS for the period from January 1, 2007 through June 30,
2007, as though the acquisition had occurred as of March 1,
2006.
The
following unaudited pro forma condensed combined statement of operations for
the
year ended December 31, 2006 combines the results of operations of CCP and
MROIS
for the period from the date of inception of CCP (March 1, 2006) through
December 31, 2006, as though the acquisition had occurred as of March 1,
2006.
The
unaudited pro forma condensed combined balance sheet and statements of
operations reflect management’s best estimate of the purchase price allocation
related to CCP’s acquisition of MROIS. However, the final allocations may differ
from the pro forma amounts.
These
unaudited pro forma condensed combined balance sheet and statements of
operations should be read in conjunction with the separate historical audited
financial statements as of December 31, 2006 and for the year ended December
31,
2006 and the unaudited financial statements as of June 29, 2007 and for the
six
months ended June 29, 2007 for MROIS included elsewhere in this form 8-K/A
and
the historical audited financial statements as of December 31, 2006 and for
the period from the date of inception (March 1, 2006) to December 31,
2006 and the unaudited financial statements as of June 30, 2007 and for the
six
months ended June 30, 2007 for CCP.
CONIHASSET
CAPITAL PARTNERS, INC. AND SUBSIDIARY
UNAUDITED
PRO FORMA CONDENSED COMBINED BALANCE SHEET
AS
OF JUNE 30, 2007
|
|
|
|
CCP
|
|
Pro
Forma Adjustments
|
|
Pro
Forma Combined
|
|
|
|
|
|
(a)
|
|
|
|
|
|
|
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
and cash equivalents
|
|
$
|
1,848,309
|
|
$
|
-
|
|
|
|
|
$
|
1,848,309
|
|
|
Accounts
receivable
|
|
|
210,711
|
|
|
-
|
|
|
|
|
|
210,711
|
|
|
Inventory
|
|
|
305,614
|
|
|
-
|
|
|
|
|
|
305,614
|
|
|
Deposits
|
|
|
16,263
|
|
|
-
|
|
|
|
|
|
16,263
|
|
|
Prepaid
expense
|
|
|
12,284
|
|
|
3,857
|
|
|
(b
|
)
|
|
16,141
|
|
|
Total
Current Assets
|
|
|
2,393,181
|
|
|
3,857
|
|
|
|
|
|
2,397,038
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property
and equipment, net
|
|
|
37,511
|
|
|
9,604
|
|
|
(c
|
)
|
|
47,115
|
|
|
Leased
equipment, net
|
|
|
9,604
|
|
|
(9,604
|
)
|
|
(c
|
)
|
|
-
|
|
|
Intangible
assets, net
|
|
|
-
|
|
|
400,000
|
|
|
(d
|
)
|
|
400,000
|
|
|
Goodwill
|
|
|
2,224,749
|
|
|
(291,855
|
)
|
|
(d,e,g,h
|
)
|
|
1,932,894
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
Assets
|
|
$
|
4,665,045
|
|
$
|
112,002
|
|
|
|
|
$
|
4,777,047
|
|
|
LIABILITES
AND STOCKHOLDERS’ EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts
payable and accrued expenses
|
|
$
|
394,865
|
|
$
|
21,536
|
|
|
(e
|
)
|
$
|
416,401
|
|
|
Accrued
officer payroll and related payroll taxes
|
|
|
82,734
|
|
|
23,466
|
|
|
(e
|
)
|
|
106,200
|
|
|
Current
maturity of capital lease
|
|
|
3,886
|
|
|
(335
|
)
|
|
(f
|
)
|
|
3,551
|
|
|
Total
Current Liabilities
|
|
|
481,485
|
|
|
44,667
|
|
|
|
|
|
526,152
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Obligation
under capital lease
|
|
|
4,566
|
|
|
335
|
|
|
(f
|
)
|
|
4,901
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
Liabilities:
|
|
|
486,051
|
|
|
45,002
|
|
|
|
|
|
531,053
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders’
Equity:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
stock
|
|
|
1,084
|
|
|
-
|
|
|
|
|
|
1,084
|
|
|
Additional
paid-in capital
|
|
|
5,433,413
|
|
|
-
|
|
|
|
|
|
5,433,413
|
|
|
Accumulated
deficit
|
|
|
(1,255,503
|
)
|
|
67,000
|
|
|
(g
|
)
|
|
(1,188,503
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
Stockholders’ Equity
|
|
|
4,178,994
|
|
|
67,000
|
|
|
|
|
|
4,245,994
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
Liabilities and Stockholders’ Equity
|
|
$
|
4,665,045
|
|
$
|
112,002
|
|
|
|
|
$
|
4,777,047
|
|
See
notes to unaudited pro forma condensed
combined financial statements.
CONIHASSET
CAPITAL PARTNERS, INC. AND SUBSIDIARY
UNAUDITED
PRO FORMA CONDENSED STATEMENT OF OPERATIONS
FOR
THE SIX MONTHS ENDED JUNE 30, 2007
|
|
|
|
CCP
|
|
|
MRO
Integrated Solutions, LLC
|
|
|
Pro
Forma Adjustments
|
|
|
|
|
|
Pro
Forma Combined
|
|
|
|
|
|
(1)
|
|
|
(2)
|
|
|
|
|
|
|
|
|
|
|
|
Net
sales
|
|
$
|
-
|
|
$
|
606,237
|
|
$
|
-
|
|
|
|
|
$
|
606,237
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost
of goods sold
|
|
|
-
|
|
|
511,243
|
|
|
-
|
|
|
|
|
|
511,243
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GROSS
PROFIT
|
|
|
-
|
|
|
94,994
|
|
|
-
|
|
|
|
|
|
94,994
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling,
general and administrative expenses
|
|
|
875,092
|
|
|
260,949
|
|
|
20,000
|
|
|
(6
|
)
|
|
1,156,041
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LOSS
FROM OPERATIONS
|
|
|
(875,092
|
)
|
|
(165,955
|
)
|
|
(20,000
|
)
|
|
|
|
|
(1,061,047
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OTHER
INCOME (EXPENSE):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
income from controlled investments
|
|
|
25,167
|
|
|
-
|
|
|
(25,167
|
)
|
|
(3,5
|
)
|
|
-
|
|
|
Interest
income
|
|
|
6,785
|
|
|
-
|
|
|
-
|
|
|
|
|
|
6,785
|
|
|
Interest
expense
|
|
|
-
|
|
|
(34,130
|
)
|
|
32,250
|
|
|
(4,5
|
)
|
|
(1,880
|
)
|
|
TOTAL
OTHER INCOME (EXPENSE), NET
|
|
|
31,952
|
|
|
|
)
|
|
7,083
|
|
|
|
|
|
4,905
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET
INCOME (LOSS)
|
|
$
|
(843,140
|
)
|
$
|
(200,085
|
)
|
$
|
(12,917
|
)
|
|
|
|
$
|
(1,056,142
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss per common share, basic and diluted
|
|
$
|
(1.78
|
)
|
|
|
|
|
|
|
|
|
|
$
|
(1.37
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
average shares of common shares outstanding, basic and
diluted
|
|
|
474,382
|
|
|
|
|
|
296,685
|
|
|
(7
|
)
|
|
771,067
|
|
See
notes to unaudited pro forma condensed
combined financial statements.
CONIHASSET
CAPITAL PARTNERS, INC. AND SUBSIDIARY
UNAUDITED
PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
FOR
THE PERIOD FROM INCEPTION (MARCH 1, 2006) THROUGH DECEMBER 31,
2006
|
|
|
|
CCP
|
|
|
MRO
Integrated Solutions, LLC
|
|
|
Pro
Forma Adjustments
|
|
|
|
|
|
Pro
Forma Combined
|
|
|
|
|
|
(8)
|
|
|
(9)
|
|
|
|
|
|
|
|
|
|
|
|
Net
sales
|
|
$
|
-
|
|
$
|
376,689
|
|
$
|
-
|
|
|
|
|
$
|
376,689
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost
of goods sold
|
|
|
-
|
|
|
314,373
|
|
|
-
|
|
|
|
|
|
314,373
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GROSS
PROFIT
|
|
|
-
|
|
|
62,316
|
|
|
-
|
|
|
|
|
|
62,316
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling,
general and administrative expenses
|
|
|
427,440
|
|
|
333,582
|
|
|
33,333
|
|
|
(11
|
)
|
|
794,355
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LOSS
FROM OPERATIONS
|
|
|
(427,440
|
)
|
|
(271,266
|
)
|
|
(33,333
|
)
|
|
|
|
|
(732,039
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OTHER
INCOME (EXPENSE):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
income from controlled investments
|
|
|
13,023
|
|
|
-
|
|
|
(13,023
|
)
|
|
(10
|
)
|
|
-
|
|
|
Interest
income
|
|
|
2,054
|
|
|
-
|
|
|
-
|
|
|
|
|
|
2,054
|
|
|
Interest
expense
|
|
|
-
|
|
|
(139,649
|
)
|
|
13,023
|
|
|
(10
|
)
|
|
(126,626
|
)
|
|
TOTAL
OTHER INCOME (EXPENSE), NET
|
|
|
15,077
|
|
|
(139,649
|
)
|
|
-
|
|
|
|
|
|
(124,572
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET
LOSS
|
|
$
|
(412,363
|
)
|
$
|
(410,915
|
)
|
$
|
(33,333
|
)
|
|
|
|
$
|
(856,611
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss per common share, basic and diluted
|
|
$
|
(4.76
|
)
|
|
|
|
|
|
|
|
|
|
$
|
(2.22
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
average shares of common shares outstanding, basic and
diluted
|
|
|
86,642
|
|
|
|
|
|
300,000
|
|
|
(12
|
)
|
|
386,642
|
|
See
notes to unaudited pro forma condensed
combined financial statements.
CONIHASSET
CAPITAL PARTNERS, INC. AND SUBSIDIARY
Notes
to the Unaudited Pro Forma Condensed Combined Financial
Statements
|
1.
|
Pro
Forma adjustments - Unaudited Condensed Combined Balance Sheet as
of June
30, 2007
|
|
(a)
|
Derived
from the unaudited condensed consolidated balance sheet of CCP and
Subsidiary, as reported in the June 30, 2007 in its form 10-Q filed
on
August 14, 2007.
|
|
(b)
|
Recording
subsequent increase to prepaid insurance as of June 29,
2007.
|
|
(c)
|
Recording
leased equipment with property and
equipment.
|
|
(d)
|
Subsequent
re-allocation of purchase price to the MROIS customer list of
$400,000, resulting in a reduction to goodwill of $400,000. This
customer
list is being amortized over an estimated useful life of ten
years.
|
|
(e)
|
Recording
subsequent increase to accrued expenses and accrued officer
payroll as of June 29, 2007.
|
|
(f)
|
To
adjust current and long-term maturity of capital
lease.
|
|
(g)
|
Correction
of error to reverse write-off of $67,000 of unamortized deferred
finance
fees previously recorded by CCP, resulting in an increase to goodwill
of
$67,000.
|
|
(h)
|
Recording
subsequent adjustments made to the balance sheet of MROIS as of June
29,
2007 resulting in an increase (decrease) to goodwill as
follows:
|
|
|
|
|
|
|
Prepaid
expense
|
|
$
|
(3,857
|
)
|
|
Accounts
payable and accrued expenses
|
|
|
21,536
|
|
|
Accrued
officer payroll and related payroll taxes
|
|
|
23,466
|
|
|
|
|
|
|
|
|
Net
increase to goodwill from these adjustments
|
|
$
|
41,145
|
|
|
2.
|
Pro
Forma adjustments - Unaudited Pro Forma Condensed Combined Statement
of
Operations for the six months ended June 30,
2007
|
|
(1)
|
Derived
from the unaudited condensed consolidated statement of operations
of CCP
for the six months ended June 30, 2007, as reported in its form 10-Q
filed
on August 14, 2007.
|
|
(2)
|
Derived
from the unaudited condensed statement of operations of MROIS for
the
period from January 1, 2007 to June 29,
2007.
|
|
(3)
|
Interest
income from controlled investment for CCP for the six months ended
June
30, 2007 as reported in its form 10-Q has been increased by $67,000
for
the correction in accounting related to the write-off of unamortized
deferred finance fees. These fees are eliminated in the consolidating
pro
forma adjustment with MROIS.
|
|
(4)
|
The
unaudited condensed statements of operations of MROIS does
not include the
affects of the Purchase Agreement at the Closing Date. At the
Closing
Date, MROIS recorded the following transactions to expense
the unamortized
portion of deferred finance fees in the amount of $67,000 and
to record
the forgiveness of interest due to CCP in the amount of $7,083.
These
amounts are eliminated in Note 5
below.
|
|
Write-off
of unamortized deferred finance fee
|
|
$
|
(67,000
|
)
|
|
Forgiveness
of interest due to CCP
|
|
|
7,083
|
|
|
Net
increase to interest expense
|
|
$
|
(59,917
|
)
|
|
(5)
|
The
elimination of inter-company activity including
-
|
|
Write-off
of unamortized deferred finance fee
|
|
$
|
67,000
|
|
|
Amortization
of deferred finance fee
|
|
|
6,000
|
|
|
Interest
charged by CCP to MROIS
|
|
|
26,250
|
|
|
Reversal of
interest due to CCP by MROIS forgiven as part
|
|
|
|
|
|
of
the acquisition
|
|
|
(7,083
|
)
|
|
|
|
|
|
|
|
Net
elimination entry
|
|
$
|
92,167
|
|
|
(6)
|
Amortization
of the customer list recognized as part of the
acquisition.
|
|
(7)
|
To
record issuance of 300,000 shares issued in connection with CCP’s
acquisition of 100% of the outstanding membership interests of
MROIS.
|
CONIHASSET
CAPITAL PARTNERS, INC. AND SUBSIDIARY
Notes
to the Unaudited Pro Forma Condensed Combined Financial
Statements
|
3.
|
Pro
Forma adjustments - Unaudited Pro Forma Condensed Combined Statement
of
Operations for the period from inception (March 1, 2006) to December
31,
2006.
|
|
(8)
|
Derived
from the audited statement of operations for the period from inception
(March 1, 2006) to December 31, 2006, as reported in the CCP
10-K.
|
|
(9)
|
Derived
from the unaudited condensed statement of operations of MROIS for
the
period from March 1, 2006 to December 31,
2006.
|
|
(10)
Elimination
of interest charged by CCP to MROIS
|
$11,023
|
|
|
|
|
|
Elimination
of amortization of deferred finance
fees
|
2,000
|
|
|
|
|
|
Total
amount of elimination adjustment
|
$
13,023
|
|
|
|
|
|
(11)
|
Amortization
of the intangible asset recognized as part of the
acquisition
|
|
(12)
|
To
record issuance of 300,000 shares issued in connection with CCP's
acquisition of 100% of the outstanding membership interests of
MROIS.
|
(c)
Shell company transaction.
Not
applicable.
(d)
Exhibits.
|
|
2.1
|
Stock
Purchase Agreement dated as of June 13, 2007 by and between Conihasset
Capital Partners, Inc. and Thomas J.
Melina.*
|