INNOVATIVE FOOD HOLDINGS INC - FORM 8-K/A - EX-99.2 - July 31, 2012

Attached files

file filename
8-K/A - INNOVATIVE FOOD HOLDINGS INCinnovativefood8ka071212.htm
EX-99.1 - INNOVATIVE FOOD HOLDINGS INCex99-1.htm
 
Exhibit 99.2

 
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
   
The unaudited pro forma condensed combined balance sheet at March 31, 2012 and the unaudited pro forma condensed combined statements of operations for the three months ended March 31, 2012, and for the year ended December 31, 2011 presented herein are based on the historical financial statements of Innovative Food Holdings, Inc.  (“Innovative”) and Artisan Specialty Foods, Inc. (“Artisan”)  after giving effect to Innovative’s acquisition of Artisan and the assumptions and adjustments described in the accompanying notes to these unaudited pro forma condensed combined financial statements.

The unaudited condensed combined pro forma balance sheet data assume that the acquisition took place on March 31, 2012 and combine Innovative’s consolidated balance sheet as of March 31, 2012 with Artisan’s balance sheet as of March 31, 2012.
 
The unaudited pro forma condensed combined statement of operations data for the three months ended March 31, 2012 combine the historical unaudited consolidated statement of operations of Innovative for the three months ended March 31, 2012 with the unaudited statement of operations of Artisan for the three months ended March 31, 2012. The unaudited pro forma condensed combined statement of operations data for the three months ended March 31, 2012 give effect to the merger as if it occurred on January 1, 2012.
 
The unaudited pro forma condensed combined statement of operations data for the year ended December 31, 2011 combine the historical consolidated statement of operations of Innovative for the year ended December 31, 2011 with the unaudited consolidated statement of operations of Artisan for the twelve months ended December 31, 2011. The unaudited pro forma condensed combined statement of operations data for the fiscal year ended December 31, 2011 give effect to the merger as if it occurred on January 1, 2011.

The unaudited pro forma condensed combined financial statements include adjustments, which are based upon preliminary estimates, to reflect the allocation of the purchase price to the acquired assets and assumed liabilities of Artisan. The final allocation of the purchase price will be determined after the completion of the acquisition and will be based upon actual net tangible and intangible assets acquired as well as liabilities assumed. The preliminary purchase price allocation for Artisan is subject to revision as more detailed analysis is completed and additional information on the fair values of Artisan’s assets and liabilities becomes available. Any change in the fair value of the net assets of Artisan will change the amount of the purchase price allocable to goodwill. Additionally, changes in Artisan’s working capital, including the results of operations from March 31, 2012 through the date the transaction is completed, will change the amount of goodwill recorded. Final purchase accounting adjustments may differ materially from the pro forma adjustments presented here.
 
The unaudited pro forma condensed combined financial statements do not give effect to the potential impact of current financial conditions, regulatory matters or any anticipated synergies, operating efficiencies or cost savings that may be associated with the acquisition. The unaudited pro forma condensed combined financial data also do not include any integration costs, cost overlap or estimated future transaction costs, except for fixed contractual transaction costs that the companies expect to incur as a result of the acquisition. In addition, as explained in more detail in the notes to the unaudited pro forma condensed combined financial statements, the acquisition date fair values of the identifiable assets acquired and liabilities assumed reflected in the unaudited pro forma condensed combined financial statements are subject to adjustment to reflect, among other things, the actual closing date, and may vary significantly from the actual amounts that will be recorded upon completion of the acquisition method accounting.
 
The historical financial information has been adjusted to give effect to events that are directly attributable to the Acquisition, factually supportable and, with respect to the statements of operations, expected to have a continuing impact on the results of the combined company. These unaudited pro forma combined financial statements should be read in conjunction with the historical financial statements and accompanying notes of Artisan (contained elsewhere in this Form 8-K), and Innovative’s historical financial statements and accompanying notes appearing in its periodic SEC filings including the Company’s Annual Report on Form 10-K for the year ended December 31, 2011, and its Quarterly Report on Form 10-Q for the three months ended March 31, 2012. The adjustments that are included in the following unaudited pro forma combined financial statements are described in Note 2 below, which includes the numbered notes that are marked in those financial statements.

Innovative Foods, Inc. effected a 1-for-50 reverse split of its common stock effective June 13, 2012.  The pro forma statements of operations for the three months ended March 31, 2012, the twelve months ended December 31, 2011, and the balance sheet as of March 31, 2012 have been restated for the effects of this reverse stock split.
 
 
1
 
 
Innovative Food Holdings, Inc.
Unaudited Pro Forma Condensed Combined Balance Sheet
 
As of March 31, 2012
 
   
Innovative Food Holdings, Inc.
and Subsidiaries
    
Artisan Foods, Inc.
  
Pro Forma Adjustments
  
Note
  
Pro Forma Combined
  
ASSETS
                        
Current Assets
                        
   Cash and cash equivalents
  
$
818,164
    
$
75,705
  
$
(120,000
)
 (1)
  
$
773,869
  
   Accounts receivable, net
    
506,545
      
355,943
    
-
        
862,488
  
   Inventory
    
25,342
      
419,759
    
-
        
445,101
  
   Other current assets
    
5,420
      
-
              
5,420
  
      Total current assets
    
1,355,471
      
851,407
    
(120,000
)
      
2,086,878
  
                                 
Goodwill and other intangibles
       -         -    
1,218,828
  
 (2)
    
1,218,828
  
Property and equipment, net
    
15,345
      
74,899
    
-
        
90,244
  
                                 
      Total assets
  
$
1,370,816
    
$
926,306
  
$
1,098,828
      
$
3,395,950
  
                                 
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
                                
 Current liabilities
                                
   Line of Credit
  
$
-
    
$
711,121
    
(711,121
)
(16) 
    
-
  
   Accounts payable and accrued liabilities
    
898,763
      
609,299
              
1,508,062
  
   Accrued liabilities - related parties
    
87,780
         -              
87,780
  
   Accrued interest, net
    
677,555
         -              
677,555
  
   Accrued interest, related parties, net
    
31,999
         -              
31,999
  
   Notes payable, current portion - net of discount
    
962,982
         -    
243,559
  
 (3)
    
1,206,541
  
   Notes payable - related parties, net of discount
    
130,500
         -              
130,500
  
   Capital lease payable - current
    
-
      
2,821
              
2,821
  
   Contingent purchase price  – current
    
-
         -    
150,000
  
 (4)
    
150,000
  
   Warrant liability
    
694,835
         -    
609,004
  
 (5)
    
1,303,839
  
   Options liability
    
216,770
         -              
216,770
  
   Conversion option liability
    
1,604,150
         -    
227,437
  
 (6)
    
1,831,587
  
      Total current liabilities
    
5,305,334
      
1,323,241
    
518,879
        
7,147,454
  
                                 
Contingent purchase price – long term
                  
150,000
  
(4)
    
150,000
  
Capital lease payable - long term
    
-
      
33,014
              
33,014
  
                                 
Total liabilities
    
5,305,334
      
1,356,255
    
668,879
        
7,330,468
  
                                 
Stockholders' deficiency
                                
   Preferred stock, $0.0001 par value, 10,000,000 shares
                                
      authorized, no shares issued or outstanding as of
                                
      March 31, 2012
    
-
         -              
-
  
Common stock
    
587
      
1,000
    
(1,000
)
 (7)
    
587
  
   Additional paid-in capital
    
3,816,197
         -              
3,816,197
  
   Common stock subscribed
    
61,034
         -              
61,034
  
   Treasure stock, 304 shares as of March 31, 2012
    
(99
)
       -              
(99
)
   Accumulated deficit
    
(7,812,237
)
    
(430,949
)
  
430,949
  
(8)
    
(7,812,237
)
      Total stockholders' deficiency
    
(3,934,518
)
    
(429,949
)
  
429,949
 
      
(3,934,518
)
                                 
Total liabilities and stockholders' deficiency
  
$
1,370,816
    
$
926,306
  
$
1,098,828
      
$
3,395,950
  
 
See accompanying notes to the pro forma condensed combined financial statements.
 
 
2
 
 
Innovative Food Holdings, Inc
Unaudited Pro Forma Condensed Combined Statement of Operations
 
For the Three Months Ended March 31, 2012
 
 
 
   
Innovative Food Holdings, Inc.
and Subsidiaries
    
Artisan Foods, Inc.
  
Pro Forma Adjustments
  
Note
  
Pro Forma Combined
  
                         
Revenue
  
$
3,285,307
    
$
1,599,396
  
$
(548,983
)
(9)
  
$
4,335,720
  
                                 
Cost of goods sold
    
2,611,982
      
1,002,493
    
(548,983
)
(9)
    
3,065,492
  
Gross Profit    
673,325
      
596,903
    
-
        
1,270,228
  
                                 
Selling, General and administrative expenses
    
659,637
      
289,887
    
41,027
  
(10)
    
990,551
  
      Total operating expenses
    
659,637
      
289,887
    
41,027
        
990,551
  
                                 
Operating profit (loss)
    
13,688
      
307,016
    
(41,027
)
      
279,677
  
                                 
Other (income) expense:
                                
    Interest expense
    
46,069
      
7,685
    
12,026
  
(11)
    
65,780
  
    Loss from change in fair value of warrant liability
    
193,821
      
-
    
135,404
  
(12)
    
329,225
  
    Loss from change in fair value of conversion option liability
    
378,435
      
-
    
109,854
  
(13)
    
488,289
  
      Total other expense
    
618,325
      
7,685
    
(257,284
)
      
883,294
  
                                 
 Income (Loss) before income taxes
    
(604,637
)
    
299,331
    
(298,311
 )      
(603,617
)
                                 
  Income tax expense
    
-
      
2,500
    
-
        
2,500
  
                                 
Net income (loss)
  
$
(604,637
)
  
$
296,831
  
$
(298,311
 )    
$
(606,117
)
                                 
Net income (loss) per share - basic
  
$
(0.11
)
  
$
296.83
            
$
(0.11
)
                                 
Net income (loss) per share - diluted
  
$
(0.11
)
  
$
296.83
            
$
(0.11
)
                                 
Weighted average shares outstanding - basic
    
5,673,844
      
1,000
    
(1,000
)
(14)
    
5,673,844
  
                                 
Weighted average shares outstanding - diluted
    
5,673,844
      
1,000
    
(1,000
)
(14)
    
5,673,844
  
 
See accompanying notes to the pro forma condensed combined financial statements.
 
 
3
 
 

Innovative Food Holdings, Inc
Unaudited Pro Forma Condensed Combined Statement of Operations
 
For the Twelve Months Ended December 31, 2011
 
   
Innovative Food Holdings, Inc.
and Subsidiaries
    
Artisan Foods, Inc.
    
Pro Forma Adjustments
  
Note
  
Pro Forma Combined
  
                           
Revenue
  
$
11,552,813
    
$
5,678,211
    
$
(2,011,817
)
(9)
  
$
15,219,207
  
                                   
Cost of goods sold
    
8,874,000
      
3,918,259
      
(2,011,817
)
(9)
    
10,780,442
  
Gross Profit    
2,678,813
      
1,759,952
      
-
        
4,438,765
  
                                   
Selling, General and administrative expenses
    
2,007,367
      
1,492,359
      
164,106
  
(10)
    
3,663,832
  
      Total operating expenses
    
2,007,367
      
1,492,359
      
164,106
        
3,663,832
  
                                   
Operating profit (loss)
    
671,446
      
267,593
      
(164,106
)
      
774,933
  
                                   
Other (income) expense:
                                  
    Interest expense
    
561,972
      
24,592
      
63,309
  
(11)
    
649,873
  
   (Gain) on extinguishment of debt
    
(165,326
)
    
-
                
(165,326
)
   Loss on settlement
    
63,000
      
-
                
63,000
  
  (Gain) from change in fair value of warrant liability
    
(682,350
)
    
-
      
(150,624
)
(12)
    
(832,974
)
  (Gain) from change in fair value of conversion option liability
    
(595,967
)
    
-
      
(132,266
)
(13)
    
(728,233
)
      Total other (income) expense
    
(818,671
)
    
24,592
      
(219,581
)
      
(1,013,660
)
                                   
 Income before income taxes
    
1,490,117
      
243,001
      
55,475
        
1,788,593
  
                                   
  Income tax expense
    
-
      
2,000
                
2,000
  
                                   
Net income
 
$
1,490,117
    
$
241,001
    
$
55,475
      
$
1,786,593
  
                                   
Net income per share - basic
  
$
0.34
    
$
241.00
              
$
0.41
  
                                   
Net income per share - diluted
  
$
0.10
    
$
241.00
              
$
0.12
  
                                   
Weighted average shares outstanding - basic
    
4,382,459
      
1,000
      
(1,000
)
(14)
    
4,382,459
  
                                   
Weighted average shares outstanding - diluted
    
14,602,154
      
1,000
      
446,857
  
(15)
    
15,050,011
  
 
See accompanying notes to the pro forma condensed combined financial statements.
 
 
4
 
 

NOTES TO UNAUDITED PROFORMA CONDENSED COMBINED FINANCIAL STATEMENTS

 
1. Purchase Price
 
 
The pro forma condensed combined balance sheet as of March 31, 2012 reflects the following allocation of the total purchase price to Artisan’s net tangible, with the residual allocated to intangible assets:

 
Closing cash payment
   $ 1,200,000  
Contingent purchase price
     300,000  
Total purchase price
   $ 1,500,000  
         
Tangible assets acquired
   $ 926,306  
Liabilities assumed
     645,134 (*)
Net tangible assets
     281,172  
Trade name
     60,900  
Non-compete agreement
     50,000  
Customer relationships
     914,100  
Goodwill
     193,828  
Total purchase price
   $ 1,500,000  
         
(*) excluding the Line of Credit paid off with closing cash payment
 
 
5
 
 
2. Pro Forma Adjustments
 
 
The pro forma condensed combined financial statements are based upon the historical consolidated financial statements of Innovative and Artisan’s and certain adjustments which Innovative believes are reasonable to give effect to the Artisan acquisition. These adjustments are based upon currently available information and certain assumptions, and therefore the actual adjustments will likely differ from the pro forma adjustments. The pro forma condensed combined financial statements were prepared using the acquisition method of accounting for the business combination. As discussed above, the purchase price allocation is considered preliminary at this time. However, Innovative  believes that the preliminary purchase price allocation and other related assumptions utilized in preparing the pro forma condensed combined financial statements provide a reasonable basis for presenting the pro forma effects of the Artisan acquisition.
 
Innovative believes there are no adjustments, in any material respects, that need to be made to present the Artisan financial information in accordance with U.S. GAAP, or to align Artisan’s historical accounting policies with Innovative’s accounting policies.
 
The following pro forma adjustments are included in the unaudited pro forma condensed combined balance sheet and statements of operations:
 
 
(1)
To record the net decrease in cash of $120,000 related to the acquisition including (a) $1,080,000 received from the Notes Payable, (b) $781,121 used to pay off the Line of Credit and (c) $488,879 distributed to the prior Shareholder of Artisan (“Seller”).
 
(2)
To record the fair value of the intangible assets acquired in the acquisition.
 
(3)
To record the acquisition note payable in the total principal amount of $1,200,000, less original issue discount of $120,000 and discount attributable to the beneficial conversion feature of the note in the amount of $836,441.
 
(4)
To record a contingent liability due to the seller of Artisan.
 
(5)
To record the fair value of warrants issued with the acquisition note payable.
 
(6)
To record the fair value of the conversion option liability of the acquisition note payable.
 
(7)
To eliminate the value of Artisan common stock outstanding.
 
(8)
To eliminate Artisan’s retained earnings at the time of the acquisition.
 
(9)
To eliminate intercompany sales.
 
(10)
To record amortization of intangible assets acquired.
 
(11)
To record interest on acquisition note payable, amortization of original issue discount on acquisition note payable, amortization of discounts on acquisition note payable due to conversion options and warrants and eliminate interest on letter of credit (principal paid pursuant to the Acquisition)
 
(12)
To record (gain) loss on the change in fair value of the warrants issued with the acquisition note payable.
 
(13)
To record (gain) loss on the change in fair value of the conversion option on the acquisition note payable.
 
(14)
To eliminate Artisan shares outstanding.
 
(15)
To record the dilutive effect of the warrants issued with the acquisition note payable.
 
(16)
To eliminate the Line of Credit which was not an assumed liability and was paid off from the Closing Cash Payment.
 
 
 
6
 

INNOVATIVE FOOD HOLDINGS INC Reports

Also read