KEYON COMMUNICATIONS INC. AND RELATED ENTITIES

PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEETS

AS OF JUNE 30, 2007 (UNAUDITED)

 

ASSETS				6/30/2007			Adjustments						6/30/2007 pro forma
CURRENT ASSETS:
Cash			$	519,223			9,668			b,c,d,e,f		$	528,891
Accounts receivable, less allowance for doubtful accounts				109,588									109,588
Prepaid expenses and other current assets				72,500									72,500
Total current assets				701,311									710,979
PROPERTY AND EQUIPMENT - Net				4,603,249									4,603,249
OTHER ASSETS
Goodwill				1,630,609									1,630,609
Subscriber base -net				914,405									914,405
Trademarks				16,667									16,667
Refundable deposits				74,827									74,827
Debt issuance costs - net				70,374									70,374
Total other assets				2,706,882									2,706,882
TOTAL ASSETS			$	8,011,442								$	8,021,110
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Cash overdraft			$	196,425								$	196,425
Revolving line of credit				100,000									100,000
Loan payable to shareholder				-									-
Term loan payable				3,000,000									3,000,000
Current portion of notes payable				44,356									44,356
Current portion of notes payable to shareholders				25,000									25,000
Current portion of deferred rent liability				44,673									44,673
Current portion of capital lease obligations				681,867									681,867
Accounts payable and accrued expenses				1,093,287									1,093,287
Deferred revenue				486,620									486,620
Total current liabilities				5,672,228									5,672,228
LONG-TERM LIABILITIES
Deferred rent liability, less current maturities				228,824									228,824
Notes payable, less current maturities				211,357									211,357
Notes payable to shareholders, less current maturities				-									-
Capital lease obligations, less current maturities				589,386									589,386
Total long term liabilities				1,029,567									1,029,567
COMMITMENTS AND CONTINGENCIES				-
STOCKHOLDERS' EQUITY:
Series A preferred stock, $0.01 par value ; 80,000 shares
authorized; 67,224 shares issued and outstanding at March 31, 2007 ; 43,096 shares issued and outstanding at December 31, 2006				672			(672	)		a
Common stock, $.01 par value pre-merger; $.001 par value post merger							672			a
							30			b
							34			c
							30			d
							75			e
							30			f
							0			g
							17			h
							298			i
							197			j
							15.0			k
				1,100						l			15,100
Additional paid-in capital				9,343,592			9,668			b,c,d,e,f			9,353,260
Accumulated deficit				(8,035,718	)								(8,049,046	)
Total stockholders' equity				1,309,647									1,319,315
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY			$	8,011,442								$	8,021,110

a.	Conversion of all series A preferred stock to common stock
b.	3025 - 2003 convertible note warrants exercised
c.	3358 - 2003 Snyder bridge loan warrants exercised
d.	3046 - 2004 Tavano investment warrants exercised
e.	7458 - $3M term loan guaranty warrants exercised
f.	3019 - 2006 series A dividend declared
g.	27 - Employee option exercised
h.	1655 - 2007 professional services rendered
i.	29,780 - Grants's 2007 merger shares
j.	19,695 - Resticted stock shares issued
k.	1,498 - Snyder, Handell, and Lazar warrants exercised
l.	Conversion rate of 1 to 60.44288

a.

To record par value as of June 30, 2007, the conversion of all series A preferred stock (67,224 shares) to common stock.

b.

To record as of June 30, 2007, the exercise of 3,025 warrants that were granted with the 2003 convertible notes at $1.52 per share.

c.

To record as of June 30, 2007, the exercise of 3,358 warrants that were granted with the 2003 Snyder bridge loan at $1.52 per share.

d.

To record as of June 30, 2007, the exercise of 3,046 warrants that were granted with the 2004 Tavano investment at $.02 per share.

e.

To record as of June 30, 2007, the exercise of 7,458 warrants that that were granted with the $3M term loan guaranty at $.01 per share.

f.

To record par value as of June 30, 2007, 3,019 shares of common stock as payment for the 2006 series A dividend declared.

g.

To record par value as of June 30, 2007, the exercise 27 employee options into common stock.

h.

Issuance of 1,655 shares in exchange for 2007 professional services rendered directly related to the merger.

i.

Assignment of 29,780 shares to Grant in relation to the merger.

j.

Issuance of 19,695 shares of restricted stock to employees.

k.

To record as of June 30, 2007, the exercise of 1,498 warrants by Snyder, Lazar and Handell.

l.

Calculation to convert shares rate of 1 to 60.44288.