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8-K/A - PHOTOTRON HOLDINGS, INC. FORM 8-K/A - GROWLIFE, INC.form8ka120405.htm
EX-99.1 - EXHIBIT 99.1 - GROWLIFE, INC.exhibit99_1.htm

Exhibit 99.2

SG Technologies Corp

Summary of Unaudited Pro Forma Condensed Financial Statements

 

On March 21, 2012, SG Technologies Corp (the “Company”), entered into an Agreement and Plan of Merger with Phototron Holdings, Inc. (“Phototron”) and the closing of the merger occurred on April 5, 2012. At the closing, SGT Merger Corporation, a Nevada corporation and wholly-owned subsidiary of Phototron (“MergerCo”), was merged with and into the Company (the “Merger”). The Company’s outstanding shares of common stock were exchanged for 157,000,000 shares of Phototron’s common stock and 3,000,000 shares of Phototron’s Series A Preferred Stock. Each share of the Series A Preferred Stock will convert into 23 shares of Phototron’s common stock on the earlier of (a) the date agreed to by the holders of a majority of the shares of Series A Preferred Stock and Phototron’s representative and (b) the 18-month anniversary of the closing.

 

In connection with the closing, Phototron and the Company entered into an escrow agreement, pursuant to which, the shares of the Series A Preferred stock issued to the Company’s stockholders will be held in escrow pending the achievement by the surviving company of certain financial milestones as provided in the merger agreement. If the surviving corporation achieves such financial milestones, the Series A Preferred Stock will be released from escrow and delivered to the Company’s former stockholders. If the surviving corporation fails to achieve such financial milestones, the Series A Preferred Stock will be released from escrow, delivered to Phototron, Inc. and cancelled.

 

In connection with the Merger, Phototron issued $500,000 of notes payable to the former note holders of the Company in exchange for notes previously issued by the Company. The new notes (the “Notes”) were issued pursuant to the terms and conditions of that that certain Securities Purchase and Exchange Agreement, dated as of March 16, 2012. The Notes are unsecured and pay 6% interest per annum with a maturity date of April 15, 2015. Phototron’s obligations under the Notes would accelerate upon bankruptcy, any default by Phototron of its payment obligations under the Notes or the breach of any provision of any material agreement between Phototron and such note holders. Default interest will accrue after an event of default at an annual rate of 12%.The Notes are convertible at any time into common stock at a specified conversion price, which will initially be $0.035 per share. The conversion price will be subject to specified adjustments for certain changes in the number of outstanding shares of Phototron’s common stock. In the event a dilutive issuance occurs such conversion price would be subject to a “full ratchet” adjustment that generally reduces the conversion price to equal the price in the dilutive issuance.

 

As of the closing, Phototron had 309,343,383 shares of common stock issued and outstanding, of which 157,000,000 shares were owned by the Company’s former stockholders, representing approximately 51% of the outstanding shares of Phototron’s common stock immediately following the Merger, and 152,343,383 shares were owned by Phototron’s existing stockholders, representing approximately 49% of the outstanding shares of Phototron’s common stock. Since former holders of the Company’s common stock owned, after the Merger, approximately 51% of Phototron’s shares of common stock, and because of certain other factors, including the members of the merged executive management were members of the Company’s management, the transaction will be accounted for as a reverse merger with the Company deemed the acquiring company for accounting purposes, and Phototron deemed the legal acquirer. Due to the change in control, the consolidated financial statements going forward will reflect the historical results of the Company prior to the Merger and that of the combined company following the Merger, and will not include the historical financial results of Phototron prior to the completion of the Merger. Common stock and the corresponding capital amounts of the Company pre-Merger will be retroactively restated as capital stock shares reflecting the exchange ratio in the Merger

 
 

 

The Company has estimated that the fair value of the 157,000,000 common shares and the 3,000,000 shares of Phototron’s Series A Preferred Stock issued to the former stockholders of the Company to be $300,000; however, a formal valuation is underway and actual valuation may differ. The purchase price has been allocated to specific identifiable tangible and intangible assets in accordance with Accounting Standards Codification 805, “Business Combinations”, as follows:

 

 

 Tangible assets acquired (at Fair Value)  $ 248,494
 Intangibles assets 225,000
 Goodwill 617,716
 Total 1,091,210
 Less fair value of liabilities assumed 791,210
 Purchase price $ 300,000

 

The conversion feature of the Notes described above do not have fixed settlement provisions because their conversion may be lowered if Phototron issues securities at lower prices in the future. In accordance with the FASB authoritative guidance, the conversion feature of the Notes will be separated from the host contract (i.e., the Notes Payable) and recognized as a derivative instrument to be re-measured at the end of every reporting period with the change in value reported in the statement of operations.

 

The unaudited pro forma balance sheet as of March 31, 2012 and the unaudited consolidated statement of operations for the year ended December 31, 2011 and the three months ended March 31, 2012 presented herein gives effect to the acquisition as if the transaction had occurred at the beginning of such period and includes certain adjustments that are directly attributable to the transaction, which are expected to have a continuing impact on the Company, and are factually supportable, as summarized in the accompanying notes.  

 

The unaudited pro forma condensed consolidated financial information is provided for illustrative purposes only. The unaudited pro forma condensed consolidated financial information presented herein is based on management’s estimate of the effects of the acquisition, had such transaction occurred on the dates indicated herein, based on currently available information and certain assumptions and estimates that the Company believes are reasonable under the circumstances. The unaudited pro forma condensed consolidated financial information is not necessarily indicative of the results of operations or financial position that actually would have been achieved had the acquisition been consummated on the dates indicated, or that may be achieved in the future.

 

The unaudited pro forma condensed consolidated financial information presented herein should be read in conjunction with the financial statements of the Company contained elsewhere in this Current Report on Form 8-K, as filed with the Securities and Exchange Commission, Phototron’s Annual Report on Form 10-K for the fiscal year ended December 31, 2011, as filed with the Securities and Exchange Commission on April 12, 2012, and Phototron’s Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2012, as filed with the Securities and Exchange Commission on May 15, 2012.

 

 
 

 

Phototron Holdings, Inc. and SG Technologies Corp.        
Pro-Forma Balance Sheet            
March 31, 2012            
(Unaudited)            
             
     Phototron  SG        
     Holdings,  Technologies  Pro-forma    
ASSETS  Inc.  Corp.  Adjustments  Total  
               
Current Assets            
  Cash  $       9,825  $      6,251      $      16,076  
  Accounts receivable, net                -          14,635                 -              14,635  
  Inventories       183,234      134,605                 -            317,839  
  Prepaid expenses and other current assets         15,000               -                   -               15,000  
               
Total current assets       208,059      155,491                 -            363,550  
               
Property and equipment, net         27,900          1,753                 -              29,653  
               
Other assets         12,535          8,600                 -              21,135  
               
Intangibles                -                 -        225,000 (c)        225,000  
               
Goodwill                -                 -        617,716 (c)        617,716  
               
Total Assets  $   248,494  $  165,844 $  842,716    $ 1,257,054  
               
LIABILITIES AND EQUITY            
               
Current Liabilities            
  Accounts payable  $     40,606  $    43,638  $              -    $      84,244  
  Accrued liabilities         14,498             253                 -              14,751  
  Notes payable         60,947        25,000      (25,000) (a)          60,947  
  Related party advances                -        282,000    (282,000) (a)                 -    
  Notes payable, related party                -        193,000    (193,000) (a)                 -    
               
Total current liabilities       116,051      543,891    (500,000)          159,942  
               
6% Senior secured convertible notes, net of discount       343,696        254,080 (a)        597,776  
Derivative liability       331,463        245,920 (a)        577,383  
               
Total liabilities       791,210      543,891                 -         1,335,101  
               
Commitments and contingencies            
               
Equity            
               
  Members' deficiency                  -    (378,047)      378,047 (b)                 -    
               
  Stockholders' equity            
  Convertible Series A Preferred stock          15,700 (b)          15,700  
  Common stock       15,233               -          15,513 (b)          30,746  
  Additional paid-in capital  4,292,990               -   (4,292,990) (b)                 -    
             253,554 (b)        253,554  
  Retained earnings (4,850,939)               -     4,472,892 (b)     (378,047)  
Total equity    (542,716)               -        464,669         (78,047)  
               
Total Liabilities and equity  $  248,494  $  165,844  $  842,716    $ 1,257,054  
                            -    
               
(a) - To record new 6% Senior Secured Convertible Notes that replaced the existing note payable, note payable, related party and related party advances  
(b) - To recognize the exchange of SG Technologies equity for 157,000,000 shares of common stock and 3,000,000 shares of Phototron Holdings, Inc.'s Series A Preferred Stock.  
(c) - To reflect amortization of intangible assets, including trademarks, customer and distributor lists and trade secrets.   
                 

 

 
 

 

Phototron Holdings, Inc. and SG Technologies Corp.          
 Pro-Forma Statement of Operations (Unaudited)            
 For the Year Ended December 31, 2011            
               
   Phototron    SG        
   Holdings,    Technologies    Pro-forma    
   Inc.    Corp.    Adjustments    Total
               
 Revenue  $    498,736    $   948,406    $              -    $ 1,447,142
               
 Cost of goods sold        352,481         717,686                    -      1,070,167
               
 Gross profit        146,255         230,720                    -         376,975
               
 General and administrative expenses     4,024,226         601,943          75,000 (c)    4,701,169
               
 Loss from operations  (3,877,971)       (371,223)       (75,000)   (4,324,194)
               
 Other expenses              
 Reverse merger expenses        430,966                     -                    -         430,966
 Interest expense          58,217           25,412                    -           83,629
               
 Net loss $(4,367,154)    $ (396,635)    $ (75,000)   $(4,838,789)
               
 Loss per share - basic and diluted  $        (0.03)            $        (0.02)
               
 Weighted average shares            
outstanding basic and diluted 137,158,752           294,158,752

 

 
 

 

Phototron Holdings, Inc. and SG Technologies Corp.          
 Pro-Forma Statement of Operations (Unaudited)            
 For the Three Months Ended March 31, 2012            
               
   Phototron    SG        
   Holdings,    Technologies Pro-forma    Pro-forma
   Inc.    Corp.   Adjustments  Total
               
 Revenue  $   107,592    $  91,809    $         -    $    199,401
               
 Cost of goods sold          70,837        83,767               -          154,604
               
 Gross profit          36,755          8,042               -            44,797
               
 General and administrative expenses        305,703      125,144     18,750 (c)        449,597
               
 Loss from operations     (268,948)    (117,102)   (18,750)       (404,800)
               
 Other expenses              
 Reverse merger expenses                   -                   -               -                    -
 Interest expense        117,925          4,584               -          122,509
               
 Net loss  $ (386,873)   $(121,686)   $(18,750)    $ (527,309)
               
 Loss per share - basic and diluted  $       (0.00)            $       (0.00)
               
 Weighted average shares            
 outstanding basic and diluted 149,303,598           306,303,598