Attached files
| file | filename |
|---|---|
| 8-K/A - FORM 8-K AMENDMENT NO 1 - Hangover Joe's Holding Corp | ami_8ka.htm |
| EX-99.1 - EXHIBIT 99.1 - Hangover Joe's Holding Corp | ex99x1.htm |
EXHIBIT 99.2
HEADNOTE TO PROFORMA FINANCIAL INFORMATION
On October 8, 2010, pursuant to the terms and conditions of the Agreement and Plan of Merger and Reorganization dated July 23, 2010, (the “Merger Agreement”), Accredited Members Holding Corporation (“AMHC”) acquired all of the issued and outstanding common stock of World Wide Premium Packers, Inc. (“WWPP”), a related-party affiliate. As a result, WWPP became a wholly-owned subsidiary of the Company on October 8, 2010.
As consideration for the acquisition, AMHC issued 398,477 shares of its Series A Convertible Preferred Stock (the Series A Preferred”), immediately convertible at the option of the holder into eight shares of AMHC’s common stock. At the date of the acquisition, the market value of AMHC’s common stock was $0.45 per share.
Each Series A Preferred shareholder may be entitled to contingent consideration consisting of an additional 20.8 shares of common stock upon conversion of each Series A Preferred share should WWPP achieve pre-tax operating income over a period of six consecutive months of at least $1 million by October 8, 2013, as defined. Accounting standards require that AMHC recognize the acquisition date fair value of this contingent consideration. Given the estimated disparity between this threshold and WWPP’s projected financials results. AMHC believes that the probability of achieving this threshold is not highly probably and therefore, adjusted the fair value of the contingent consideration by a probability factor accordingly. At October 13, 2013 should this threshold not be met, each share of remaining outstanding Series A Preferred shall automatically be converted into eight shares of AMHC common stock.
The acquisition was accounted for as a purchase. Management’s preliminary estimate of the purchase price, which is based primarily on the underlying fair value of the Company’s common stock is approximately $2.2 million. The preferred stock issued in the acquisition includes an embedded conversion feature, which has been bifurcated and presented as a liability based on factors indicating this conversion feature is not indexed to AMHC’s common stock. A preliminary allocation of the purchase price has been made to major categories of assets and liabilities in the accompanying pro forma condensed consolidated financial statements. The pro forma adjustments represent AMHC’s preliminary determination of acquisition accounting adjustments and are based upon available information and certain assumptions that AMHC believes to be reasonable. Consequently, the amounts reflected in the unaudited pro forma condensed consolidated financial statements are subject to change and such changes may be material.
The historical pro forma balance sheet and statement of operations information is based on AMHC’s unaudited September 30, 2010, interim financial statements, included in its quarterly report on Form 10-Q for the fiscal quarter ended September 30, 2010, filed on November 15, 2010, and the audited financial statements of WWPP as of September 30, 2010, and for the period from February 14, 2010 (inception), through September 30, 2010. Since WWPP had no operations prior to February 14, 2010, a pro forma statement of operations for the year ended December 31, 2009 is not presented.
The accompanying pro forma condensed consolidated balance sheet as of September 30, 2010, gives effect to the acquisition as if it had been consummated on that date. The accompanying pro forma condensed consolidated statement of operations for the nine months ended September 30, 2010, give effect to the acquisition as if it had been consummated at the beginning of the period presented.
The pro forma financial information should be read in conjunction with our historical consolidated financial statements used in the presentation of the pro forma financial information. THE PRO FORMA INFORMATION PRESENTED IS NOT NECESSARILY INDICATIVE OF THAT WHICH WOULD HAVE BEEN ATTAINED HAD THE TRANSACTION OCCURRED AT THE DATES INCLUDED IN THE PRO FORMA FINANCIAL INFORMATION.
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ACCREDITED MEMBERS HOLDING CORPORATION AND SUBSIDIARIES
PROFORMA CONDENSED CONSOLIDATED BALANCE SHEET
(UNAUDITED)
|
Historical
September 30,
2010
|
Historical September 30,
2010
|
Proforma
Adjustments
|
Notes |
Proforma
September 30,
2010
|
|||||||||||||||
|
AMHC
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WWPP
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||||||||||||||||||
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Assets
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|||||||||||||||||||
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Current assets:
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|||||||||||||||||||
|
Cash and cash equivalents
|
$ | 687,593 | $ | 317,519 | $ | - | $ | 1,005,112 | |||||||||||
|
Accounts receivable, net
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438,500 | - | 438,500 | ||||||||||||||||
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Accounts receivable, related party
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38,702 | - | (38,702 | ) | 1 | - | |||||||||||||
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Prepaid expenses and other
|
38,455 | 84,456 | 122,911 | ||||||||||||||||
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Investment in marketable securities
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651,422 | - | 651,422 | ||||||||||||||||
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Total current assets
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1,854,672 | 401,975 | (38,702 | ) | 2,217,945 | ||||||||||||||
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Property and equipment, net
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213,862 | 48,500 | (9,700 | ) | 3 | 252,662 | |||||||||||||
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Intangible asset
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- | 12,500 | 1,873,00 | 2 | 1,885,500 | ||||||||||||||
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Cost investments
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230,000 | - | 230,000 | ||||||||||||||||
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Investment in debt securities
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39,140 | - | 39,140 | ||||||||||||||||
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Investment in derivative warrants
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24,624 | - | 24,624 | ||||||||||||||||
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Deposits and other assets
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6,294 | - | 6,294 | ||||||||||||||||
| 513,920 | 61,000 | 1,863,300 | 2,438,220 | ||||||||||||||||
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Total assets
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$ | 2,368,592 | $ | 462,975 | $ | 1,824,628 | $ | 4,656,165 | |||||||||||
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Liabilities and Shareholders' Equity
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Current liabilities:
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Accounts payable and accrued expenses
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$ | 277,461 | $ | 116,671 | $ | 394,132 | |||||||||||||
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Deferred revenue
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684,493 | 684,493 | |||||||||||||||||
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Related party payables
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- | 38,702 | (38,702 | ) | 1 | - | |||||||||||||
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Total current liabilities
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961,954 | 155,873 | (38,702 | ) | 1,078,625 | ||||||||||||||
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Convertible notes payable:
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|||||||||||||||||||
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Related parties
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100,000 | - | 100,000 | ||||||||||||||||
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Other
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100,000 | - | 100,000 | ||||||||||||||||
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Deferred rent liability
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12,075 | - | 12,075 | ||||||||||||||||
| Derivative liability | - | - | 1,543,000 | 2 | 1,543,000 | ||||||||||||||
| 212,075 | - | 1,543,000 | 1,755,075 | ||||||||||||||||
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Total liabilities
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1,174,029 | 155,373 | 1,504,298 | 2,833,700 | |||||||||||||||
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Shareholders' equity:
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Preferred stock; $0.10 par value;
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Authorized shares - 1,000,000 shares
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Issued and outstanding shares - 398,477 shares
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- | - | 637,602 | 2 | 637,602 | ||||||||||||||
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Common stock; $0.001 par value;
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Authorized shares - 50,000,000 shares
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Issued and outstanding shares - 30,959,859
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29,660 | 956 | (956 | ) | 2 | 29,660 | |||||||||||||
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Additional paid-in capital
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3,754,309 | 1,159,557 | (1,159,557 | ) | 2 | 3,754,309 | |||||||||||||
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Other comprehensive loss
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(37,861 | ) | - | - | (37,861 | ) | |||||||||||||
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Accumulated deficit
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(2,551,545 | ) | (852,911 | ) | 843,211 | (2,561,245 | ) | ||||||||||||
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Total shareholders' equity
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1,194,563 | 307,602 | 320,300 | 1,822,465 | |||||||||||||||
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Total liabilities and shareholders' equity
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$ | 2,368,592 | $ | 462,975 | $ | 1,824,628 | $ | 4,656,165 | |||||||||||
2
ACCREDITED MEMBERS HOLDING CORPORATION and SUBSIDIARIES
PROFORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(UNAUDITED)
|
Historical
for the nine months ended
September 30,
2010
|
Historical for the period from February 14, 2010 (inception)
September 30,
2010
|
Proforma
Adjustments |
Notes
|
Proforma
nine months ended
September 30,
2010
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AMHC
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WWPP
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Net revenue
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$ | 1,745,341 | $ | - | $ | - | $ | 1,745,341 | |||||||||||
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Cost of revenue
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679,570 | - | - | 679,570 | |||||||||||||||
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Gross profit
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1,065,771 | - | - | 1,065,771 | |||||||||||||||
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Operating expenses:
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General and administrative
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1,711,631 | 391,296 | 9,700 | 3 | 2,112,627 | ||||||||||||||
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Selling and marketing
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457,614 | 121,615 | - | 579,229 | |||||||||||||||
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Related party management fees
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- | 337,500 | (337,500 | ) | 1 | - | |||||||||||||
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Total operating expenses
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2,169,245 | 850,411 | 327,800 | 2,691,856 | |||||||||||||||
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Operating loss
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(1,103,474 | ) | (850,411 | ) | 327,800 | (1,626,085 | ) | ||||||||||||
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Other income (expense):
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Interest expense:
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|||||||||||||||||||
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Related parties
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(7,500 | ) | - | - | (7,500 | ) | |||||||||||||
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Other
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(8,241 | ) | - | - | (8,241 | ) | |||||||||||||
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Loss on value of derivative warrants
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(1,700 | ) | - | - | (1,700 | ) | |||||||||||||
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Impairment of marketable securities
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(187,000 | ) | - | - | (187,000 | ) | |||||||||||||
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Related party management fees
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337,500 | - | (337,500 | ) | 1 | - | |||||||||||||
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Other income
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7,926 | - | - | 7,926 | |||||||||||||||
| 140,985 | - | (337,500 | ) | (196,515 | ) | ||||||||||||||
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Net loss
|
(962,489 | ) | (850,411 | ) | (9,700 | ) | (1,822,600 | ) | |||||||||||
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Other comprehensive loss:
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|||||||||||||||||||
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Unrealized loss from available for sale securities
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(37,861 | ) | - | - | (37,861 | ) | |||||||||||||
|
Comprehensive loss
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$ | (1,000,350 | ) | $ | (850,411 | ) | $ | - | $ | (1,860,461 | ) | ||||||||
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Net loss income per share - basic and diluted
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$ | (0.03 | ) | $ | (0.06 | ) | |||||||||||||
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Weighted average number of common shares outstanding
|
30,361,398 | 4 | 30,361,398 | ||||||||||||||||
3
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
BALANCE SHEET AND STATEMENT OF OPERATIONS
BALANCE SHEET AS OF SEPTEMBER 30, 2010, AND THE STATEMENT OF
OPERATIONS FOR THE NINE MONTHS
ENDED SEPTEMBER 30, 2010
Note 1: This entry is recorded to reflect the elimination of the related party receivables and payables between AMHC and WWPP, and the related party income and expense that were recorded in connection with the related party management services agreement.
Note 2: This entry is recorded to reflect AMHC's acquisition of WWPP and the allocation of the purchase price, as discussed in the headnote to Proforma Financial Information. The excess of the purchase price paid over the net carrying value of the assets acquired and liabilities assumed was allocated to the estimated fair value of the assets and liabilities. The Trademark License is determined to have an indefinite life, and therefore, no amortization is recorded in the pro forma statement of operations.
Note 3: This entry is recorded to reflect depreciation and amortization expense on WWPP property and equipment during the nine months ended September 30, 2010.
Note 4: The common shares underlying the convertible preferred stock in not included in the weighted average share calculation, as the effect would be antidilutive for the nine-month period ended September 30, 2010.
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