KEYW HOLDING CORP - FORM 8-K - EX-99.4 - December 2, 2010

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8-K - KEYW HOLDING CORPv204341_8k.htm
EX-99.1 - KEYW HOLDING CORPv204341_ex99-1.htm
EX-99.5 - KEYW HOLDING CORPv204341_ex99-5.htm
EX-2.1 - KEYW HOLDING CORPv204341_ex2-1.htm
EX-23.1 - KEYW HOLDING CORPv204341_ex23-1.htm
EX-99.2 - KEYW HOLDING CORPv204341_ex99-2.htm
EX-99.3 - KEYW HOLDING CORPv204341_ex99-3.htm

Exhibit 99.4
 
The KEYW Holding Corporation
 
Introduction to Pro Forma Condensed Financial Statements
 
Effective November 29, 2010, The KEYW Holding Corporation  (the “Company”) acquired all of the outstanding capital stock of Sycamore.US, Inc, (“Sycamore”) a corporation organized under the laws of Maryland, pursuant to a Stock Purchase Agreement (the “Purchase Agreement”) dated as of the same date (the “Acquisition”). The purchase price for the capital stock of Sycamore was $27,000,000 in cash and 87,500 shares of KEYW common stock. The total purchase price is $28,050,000 before acquisition costs.

The accompanying unaudited pro forma condensed balance sheet as of December 31, 2009 gives effect to the Acquisition as if the Acquisition occurred on that date. The accompanying unaudited pro forma condensed statement of operations for the year ended December 31, 2009, gives effect to the Acquisition as if it occurred on the first day of the period presented. The pro forma statements were prepared using US generally accepted accounting principles.

The unaudited pro forma condensed financial information is provided for informational purposes only and is not necessarily indicative of the results that would have occurred if the Acquisition had occurred on the first day of each period presented. The unaudited pro forma financial statements should not be construed as being representative of future operating results or the financial position of the Company and should be read in conjunction with:

 
•
The accompanying notes to the unaudited pro forma condensed financial statements;
     
 
•
KEYW’s historical consolidated financial statements and notes included in KEYW’s prospectus dated September 30, 2010 and filed with the Securities and Exchange Commission on October 1, 2010 pursuant to Rule 424(b)(4); and
     
 
•
Sycamore’s audited financial statements and notes for nine months ended September 24, 2010 and the years ended December 31, 2009 and December 31, 2008.

 
 
 

Consolidated Pro Forma Balance Sheet
 
December 31, 2009
 
   
KEYW
(audited)
    
Pre IPO Acquisitions
Acquisitions
(audited) (1)
    
S-1 Pro Forma
Adjustments
(unaudited)
    
S-1 Pro Forma
Combined
(unaudited)
    
Sycamore
(audited)
    
Sycamore
Adjustments
(unaudited)
    
Pro Forma
Combined
(unaudited)
  
  
  
(in thousands)
  
Cash
   $ 7,333       6,753       (8,000 )(2)     6,086       34       -     $ 6,120  
Accounts receivable
     9,409       7,875       (7,967 )(3)     9,317       3,222       (278 )(3)     12,261  
Inventory
     4,334       -       -       4,334       -       -       4,334  
Prepaids
     1,240       171       -       1,411       178       -       1,589  
Deferred tax
     223       -       -       223       -       -       223  
Current assets
     22,539       14,799       (15,967 )     21,371       3,434       (278 )     24,527  
                                                         
Property, plant, & equipment
     1,430       79       -       1,509       143       -       1,652  
Goodwill
     34,927       -       54,047 (4)     88,974       -       20,641 (4)     109,615  
Intangibles
     6,314       -       12,354 (5)     18,668       -       5,200 (6)     23,868  
Deferred tax
     1,892       -       0       1,892       -       -       1,892  
Other assets
     28       8       0       36       16       -       52  
                                                         
Total assets
   $ 67,130       14,886       50,434       132,450       3,593       25,563     $ 161,606  
                                                         
Accounts payable
     442       2,096       -       2,538       507       -       3,045  
Debt
     -       -       34,000 (7)     34,000       154       26,846 (7)     61,000  
Accrued expense
     435       362       -       797       -       -       797  
Accrued compensation
     2,214       646       -       2,860       649       -       3,509  
Other current liabilities
     83       452       -       535       -       -       535  
Current liabilities
     3,174       3,556       34,000       40,730       1,310       26,846       68,886  
                                                         
Other non-current liabilities
     53       14       -       67       14       (14 )     67  
Non-current deferred tax
     1,564       -       -       1,564       -       -       1,564  
Accrued earnout
     -       -       27,750       27,750       -       -       27,750  
Total liabilities
     4,791       3,570       61,750       70,111       1,324       26,832       98,267  
                                                         
Common stock
     14       -       -       14       -       -       14  
Members equity
     0       11,316       (11,316 )(8)     0       2,269       (2,269 )(8)     0  
Additional paid-in capital
     66,504       -       -       66,504       -       1,000 (9)     67,504  
Accumulated deficit
     (4,179 )     -       -       (4,179 )     -       -       (4,179 )
Total equity
     62,339       11,316       (11,316 )     62,339       2,269       (1,269 )     63,339  
                                                         
Total liabilities and equity
   $ 67,130       14,886       50,434       132,450       3,593       25,563     $ 161,606  

 
 
 
 
Notes to Condensed Pro Forma Balance Sheet
 
(1)
The Pre-IPO acquisitions consist of TAG and IIT that were acquired in 2010 and disclosed on page 42 of our S-1 dated September 30, 2010.
(2)
This pro forma adjustment represents the cash paid for the IIT acquisition.
(3)
These pro forma adjustments represent the working capital adjustments pursuant to the working capital requirement in the purchase agreements.
(4)
These amounts represent the estimated goodwill that would have been recorded if the acquisitions had been completed on December 31, 2009.
(5)
This amount represents the actual amount of intangibles that were recorded in the IIT and TAG acquisitions in 2010.
(6)
This adjustment is an estimate of the intangibles acquired in the Sycamore acquisition.
(7)
These amounts represent the debt that would have been incurred if the acquisitions had been completed on December 31, 2009.
(8)
These adjustments remove the equity accounts of the acquired companies at acquisition.
(9)
This amount represents the equity issued in conjunction with the acquisition of Sycamore.

 
 
 

Consolidated Pro Forma Income Statement
 
For the Year Ended December 31, 2009
 
         
2009
    
2010 Pre - IPO
    
S-1 Pro Forma
          
Sycamore
    
Pro Forma
  
   
Successor
    
Acquisitions
    
Acquisitions (1)
    
Combined (2)
    
Sycamore
    
Adjustments
    
Combined
  
         
unaudited
    
unaudited
    
unaudited
          
unaudited
    
unaudited
  
(in thousands, except per share data)
  
Revenue
                                          
Services
   $ 32,743     $ 24,229     $ 52,952     $ 109,924     $ 19,394     $ -     $ 129,318  
Products
     6,294       -       -       6,294       -       -       6,294  
Total
     39,037       24,229       52,952       116,218       19,394       -       135,612  
                                                         
Cost of Revenues (6)
                                                        
Services
     23,475       17,806       43,508       84,789       13,982       -       98,771  
Products
     4,443       -       -       4,443       -       -       4,443  
Total
     27,918       17,806       43,508       89,232       13,982       -       103,214  
                                                         
Gross profit
                                                        
Services
     9,268       6,423       9,444       25,135       5,412       -       30,547  
Products
     1,851       -       -       1,851       -       -       1,851  
Total
     11,119       6,423       9,444       26,986       5,412       -       32,398  
                                                         
Operating expenses
     11,373       3,822       4,523       19,718       5,385       -       25,103  
Intangible amortization
     2,055       -       -       6,670       -       1,300 (3)     7,970  
Operating income
     (2,309 )     2,601       4,921       598       27       (1,300 )     (675 )
Non-operating expense(income)
     783       27       (275 )     3,035       25       2,160 (4)     5,220  
Income before taxes
     (3,092 )     2,574       5,196       (2,437 )     2       (3,460 )     (5,895 )
Tax expense
     (979 )     -       -       (979 )     -               (979 )
Net income
   $ (2,113 )   $ 2,574     $ 5,196     $ (1,458 )   $ 2     $ (3,460 )   $ (4,916 )
                                                         
Weighted average common shares outstanding:
                                                        
Basic
     12,062,930       -       -       12,312,930       -       -       12,400,430 (5)
Fully Diluted
     12,062,930       -       -       12,312,930       -       -       12,400,430 (5)
                                                         
Basic and diluted earnings per share
                                                        
Basic
   $ (0.18 )     n/a       n/a     $ (0.12 )     n/a       n/a     $ (0.40 )
Fully Diluted
   $ (0.18 )     n/a       n/a     $ (0.12 )     n/a       n/a     $ (0.40 )

 
 
 

Notes to Consolidated Pro Forma Income Statement
 
(1)
The 2010 pre-IPO acquisitions include the TAG and IIT acquisitions as disclosed on Page 10 of the S-1 filed on September 30, 2010.
 
(2)
The S-1 Pro Forma combined numbers include the adjustments made to the acquisitions as disclosed in our S-1 filed on September 30, 2010.

(3)
The pro forma adjustments consist of the intangible amortization that would have been recorded if the Sycamore acquisition had been completed on January 1, 2009.

(4)
This amount represents the interest expense related to the Sycamore acquisition if it had been completed on January 1, 2009.

(5)
This amount includes the 87,500 shares issued in the Sycamore acquisition.

(6)
Cost of revenues excludes intangible amortization expense as shown separately.

 
 
 

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