EX-99.2 2 v124968_ex99-2.htm
EXHIBIT 99.2
Pro Forma Financial Information

On April 3, 2008, the Company purchased substantially all the assets of Intelligent Digital Systems, LLC. (“IDS”). The assets consist of the current TechEye software (“DVR Software”) and computer software in development relating to the TrueHybrid hybrid NVR/DVR technology (“Hybrid DVR Software”). The Company is currently investigating patent protection for a number of the processes included in the DVR software and Hybrid DVR Software. The assets purchased included three trademarks, which the Company does not currently plan to use and therefore assigned no value to them.

Under the terms of the agreement, the Company purchased accounts receivable of $3,185 and inventory of $20,123 as well as the DVR Software and Hybrid DVR Software.

The amount of $1,562,692 was assigned to intangible assets. The intangible assets consist of the DVR Software and Hybrid DVR Software and are being amortized over their estimated useful lives of 1 and 5 years respectively.

The following table summarizes the estimated fair values of the assets acquired at the date of acquisition:

Accounts Receivable
  
$
3,185
  
Inventory
    
20,123
 
DVR Software
    
28,555
  
Hybrid DVR Software
    
1,534,137
 
         
Total
  
$
1,586,000
  

The intangible software assets were valued using the income method, using the company's best estimates of future cash flows from the sales of the products including the software, a 40% tax rate and discount rates between 15 and 20%.

Amortization of $7,139 will be charged to cost of good sold during the quarter ending June 30, 2008 for the DVR Software. The balance of $21,416 will be amortized in equal amounts over the next three quarters.

Amortization associated with the Hybrid DVR Software is not expected to begin until the fourth quarter of 2008, when products containing the software are commercially available. As a result, future amortization is expected to be:

Quarter ending June 30, 2008
  
$
7,139
  
Quarter ending September 30, 2008
  
$
7,139
  
Quarter ending December 31, 2008
  
$
83,846
  
2009
  
$
313,966
  
2010
  
$
306,827
  
2011
  
$
306,827
  
2012
  
$
306,827
  
2013
  
$
230,121
  
Total
  
$
1,562,692
  

The following pro forma condensed consolidated balance sheets and statements of operations are presented to give effect to the acquisition by Visual Management Systems, Inc. of substantially all of the assets of IDS on April 3, 2008. The pro forma condensed consolidated balance sheet assumes that the acquisition occurred as of March 31, 2008. The pro forma condensed consolidated statements of operations assume that the acquisition occurred on January 1, 2007. Such information does not purport to be indicative of the results which would have actually been obtained if the acquisitions had been effected on the dates indicated nor is it indicative of actual or future operating results or financial position.
 

Visual Management Systems, Inc. and Subsidiaries
Pro Forma Combined Balance Sheet
At March 31, 2008   
Visual Management Systems, Inc.
and Subsidiaries
  
Intelligent Digital Systems,
LLC
  
Pro Forma Adjustments
 
Pro Forma Combined
 
                   
Assets
                          
                           
Current assets
                          
Cash
  
$
111,567
  
$
2,777
a 
$
(7,777
)
$
106,567
  
Accounts receivable
    
195,912
   
3,185
   
-
   
199,097
 
Inventory
    
587,606
   
20,123
   
-
   
607,729
 
Prepaid expenses
    
5,190
   
-
   
-
   
5,190
 
Total current assets
    
900,275
   
26,085
   
(7,777
)
  
918,583
 
Property and equipment - net
    
726,786
   
225
  b   
(225
)
  
726,786
 
Deposits and other assets
    
90,808
               
90,808
 
Investment in joint venture
          
   
 c   
5,000
   
5,000
 
Intangible assets - net
    
1,659,727
   
   
 d   
1,562,692
   
3,222,419
 
                           
Total Assets
  
$
3,377,596
  
$
26,310
  
$
1,559,690
  
$
4,963,596
  
                           
Liabilities and Stockholders' Deficit
                          
                           
Current liabilities
                          
Accounts payable
  
$
705,074
  
$
808
e 
$
(808
)
$
705,074
  
Accrued expenses and other current liabilities
    
973,096
               
973,096
 
Customer Deposits
    
236,041
               
236,041
 
Sales tax payable
    
78,236
               
78,236
 
Bank line of credit
    
49,981
               
49,981
 
Short term debt
    
-
   
-
f   
42,000
   
42,000
 
Current maturity of convertible notes payable
    
833,333
               
833,333
 
Current portion of long-term debt
    
346,278
               
346,278
 
Current portion of obligations under capital leases
    
53,811
               
53,811
 
Total current liabilities
    
3,275,850
   
808
   
41,192
   
3,317,850
 
                           
Convertible notes payable
   
2,268,334
   
 
g   
1,544,000
   
3,812,334
 
(net of current maturities and unamortized discount of $648,333)
                          
Long-term debt - net of current portion
    
306,696
   
15,000 h
   
(15,000
)
  
306,696
 
Obligations under capital leases - net of current portion
    
100,554
               
100,554
 
                           
Stockholders' equity (deficit)
                          
Members Capital
          
10,502
 i   
(10,502
)
  
-
 
Preferred stock
    
1
               
1
 
Common stock, $.001 par value; 50,000,000 shares authorized
    
8,002
               
8,002
 
Additional paid-in-capital
    
12,744,785
               
12,744,785
 
Accumulated deficit
    
(15,176,626
)
              
(15,176,626
)
Treasury stock
    
(150,000
)
                    
(150,000
)
Total stockholders' equity (deficit)
    
(2,573,838
)
  
10,502
   
(10,502
)
  
(2,573,838
)
                           
Total liabilities and stockholder's equity (deficit)
  
$
3,377,596
  
$
26,310
  
$
1,559,690
  
$
4,963,596
  
 
a
To record the $5,000 invested in the joint venture by VMS and to record the fair value of the cash received.
b
Adjustment to record the fair value of assets received
c
Adjustment to record the VMS investment in the joint venture
d
Adjustment to record the fair value of the intangible assets
e
Adjustment to record the fair value of the liabilities assumed
f
Adjustment to record the portion of the purchase price to be paid in seven equal monthly installments
g
Adjustment to record the convertible note
h
Adjustment to record the fair value of the liabilities assumed
i
Adjustment to eliminate share capital of IDS
 

Visual Management Systems, Inc. and Subsidiaries
Pro Forma Combined Statement of Operations
 
Three months ended March 31, 2008   
Visual Management Systems, Inc.
and Subsidiaries
  
Intelligent Digital Systems,
LLC
  
Pro Forma Adjustments
 
Pro Forma Combined
 
                   
Revenues - net
  
$
1,577,309
  
$
9,918
        
$
1,587,227
  
                           
Cost of revenues
    
843,113
   
63,849
             
906,962
 
                           
Gross margin
    
734,196
   
(53,931
)
        
680,265
 
                           
                           
Operating expenses
    
2,729,362
   
17,303
aa   
83,846
   
2,830,511
 
                           
Loss from operations
    
(1,995,166
)
  
(71,234
)
  
(83,846
)
  
(2,150,246
)
                           
Other (income) expenses
                          
Debt conversion expense
    
-
               
-
 
Interest income
    
-
   
-
         
-
 
Interest expense
    
140,003
               
140,003
 
Miscellaneous income
    
305
                     
305
 
     
140,308
   
-
   
-
   
140,308
 
                           
Net Income (Loss)
  
$
(2,135,474
)
$
(71,234
)
$
(83,846
)
$
(2,290,554
)
                           
Weighted average shares outstanding
    
7,442,367
               
7,442,367
 
                           
Per share data (basic and diluted)
  
$
(0.29
)
            
$
(0.31
)
 
aa
Adjustment for the amortization of the intangible assets over the estimated useful lives

Visual Management Systems, Inc. and Subsidiaries
Pro Forma Combined Statement of Operations
 
Year ended December 31, 2007   
Visual Management Systems, Inc. and Subsidiaries
  
Intelligent Digital Systems,
LLC
  
Pro Forma Adjustments
 
Pro Forma Combined
 
                   
Revenues - net
  
$
6,315,622
  
$
131,260
        
$
6,446,882
  
                           
Cost of revenues
    
3,392,995
   
130,716
         
3,523,711
 
                           
Gross margin
    
2,922,627
   
544
         
2,923,171
 
                           
                           
Operating expenses
    
8,490,554
   
337,585
  aa   
335,382
   
9,163,521
 
                           
Loss from operations
    
(5,567,927
)
  
(337,041
)
  
(335,382
)
  
(6,240,350
)
                           
Other (income) expenses
                          
Debt conversion expense
    
796,084
               
796,084
 
Interest income
    
-
   
(12
)
        
(12
)
Interest expense
    
3,420,634
               
3,420,634
 
Miscellaneous income
    
-
                      
-
 
     
4,216,718
   
(12
)
  
-
   
4,216,706
 
                           
Loss before provision for income taxes
    
(9,784,645
)
                  
                           
Provision for income taxes
                          
                           
Net loss
    
(9,784,645
)
  
(337,029
)
  
(335,382
)
  
(10,457,056
)
                           
Provision for income taxes
    
-
                   
                           
Net loss
  
$
(9,784,645
)
$
(337,029
)
$
(335,382
)
$
(10,457,056
)
                           
Deemed dividend on convertible preferred stock
    
635,582
   
-
   
-
   
635,582
 
                           
Net income available to common
  
$
(10,420,227
)
$
(337,029
)
  
(335,382
)
$
(11,092,638
)
                           
Weighted average shares outstanding
    
6,646,751
               
6,646,751
 
                           
Per share data (basic and diluted)
  
$
(1.57
)
            
$
(1.67
)

aa
Adjustment for the amortization of the intangible assets over the estimated useful lives