Attached files
| file | filename |
|---|---|
| EX-99.1 - Vegalab, Inc. | ex99-1.htm |
| 8-K/A - Vegalab, Inc. | 8ka.htm |
Exhibit 99.2
UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION
On October 17, 2017, Vegalab, Inc. (“Vegalab” or the “Company”) purchased substantially all the assets of a produce packaging business conducted under the name M&G Packing, Inc. (the “Business”) located in Tulare County, California. The acquisition consisted of purchasing the real property and building used in the Business from M & G Farms, Inc., a California corporation, and all of the equipment, inventory, customers, suppliers, contract rights, and intangible property from M&G Packing, Inc., a California corporation. We did not acquire the cash, accounts receivable or any payables.
The total purchase price for the Business plus closing costs is $854,452, which was paid $429,452 in cash and $425,000 in the form of a promissory note secured by the real property that bears interest at the rate of 6.0% per annum with interest only payable monthly and all principal and interest due 18 months from the close of escrow on October 24, 2017.
The following unaudited pro forma combined financial information is based on the historical financial statements of Vegalab, Inc. (“Vegalab” or the “Company”) after giving effect to our acquisition of M&G Packing, Inc. (“M&G”) and adjustments described in the accompanying notes to the unaudited pro forma combined financial information.
The unaudited pro forma combined balance sheet as of December 31, 2016, and the unaudited pro forma combined statement of operations for the year ended December 31, 2016 were derived from and should be read in conjunction with the Form 10-K of Vegalab, Inc. for the year ended December 31, 2016, filed on July 21, 2017.
The unaudited pro forma combined balance sheet as of September 30, 2017 and the unaudited pro forma combined statement of operations for the nine months ended September 30, 2017 were derived from and should be read in conjunction with the Form 10-Q of Vegalab, Inc. for the nine months ended September 30, 2017, filed on November 11, 2017.
The following unaudited pro forma combined financial statements reflect the acquisition of the Business using the acquisition method of accounting. The acquisition has been accounted for under accounting principles generally accepted in the United States of America. The pro forma adjustments are based upon available information and assumptions that we believe are reasonable. The pro forma adjustments are preliminary and have been prepared to illustrate the estimated effect of the acquisition. Differences between these preliminary estimates and the final acquisition accounting will occur and these differences could have a material impact on the accompanying unaudited pro forma combined financial statements and the combined companies’ future results of operations and financial position. The unaudited pro forma combined financial statements do not purport to be indicative of the operating results or financial position that would have been achieved had the acquisition taken place on the date indicated or the results that may be obtained in the future.
| 1 |
Vegalab, Inc.
Unaudited Pro Forma Combined Balance Sheets
As of September 30, 2017
| Vegalab, Inc. | M&G Packing, Inc. | Pro-Forma Adjustments | Pro-Forma Combined | |||||||||||||
| ASSETS | ||||||||||||||||
| Current assets: | ||||||||||||||||
| Cash | $ | 130,125 | $ | 177,110 | $ | (177,110 | )(a) | $ | 1,331,673 | |||||||
| (429,452 | )(b) | |||||||||||||||
| 1,631,000 | (f) | |||||||||||||||
| Accounts receivable | 714,828 | 436,988 | (436,988 | )(a) | 714,828 | |||||||||||
| Other receivable - related party | - | 235,221 | (235,221 | )(a) | - | |||||||||||
| Inventory | 1,471,668 | - | - | 1,471,668 | ||||||||||||
| Security deposits | 1,809 | - | - | 1,809 | ||||||||||||
| Prepaid expenses | 13,949 | - | - | 13,949 | ||||||||||||
| Total current assets | 2,332,379 | 849,319 | 352,229 | 3,533,927 | ||||||||||||
| Land and building | - | - | 275,000 | (c) | 275,000 | |||||||||||
| Property, plant and equipment, net of accumulated depreciation | 21,138 | - | 400,000 | (c) | 421,138 | |||||||||||
| Security deposits | 14,500 | - | 14,500 | |||||||||||||
| 35,638 | - | 675,000 | 710,638 | |||||||||||||
| Total Assets | $ | 2,368,017 | $ | 849,319 | $ | 1,027,229 | $ | 4,244,565 | ||||||||
| LIABILITIES AND STOCKHOLDERS' DEFICIT | ||||||||||||||||
| Current liabilities: | ||||||||||||||||
| Accounts payable - trade | $ | 111,404 | $ | 436,804 | $ | (436,804 | )(a) | $ | 111,404 | |||||||
| Accounts payable - related party | 1,501,704 | - | - | 1,501,704 | ||||||||||||
| Accrued income taxes | - | 107,429 | (107,429 | )(a) | - | |||||||||||
| Accrued interest payable - related party | 4,395 | - | - | 4,395 | ||||||||||||
| Current portion of long term loans payable | 2,890 | - | - | 2,890 | ||||||||||||
| Notes payable - related party | 1,318 | - | - | 1,318 | ||||||||||||
| Total current liabilities | 1,621,711 | 544,233 | (544,233 | ) | 1,621,711 | |||||||||||
| Loan payable - Long-term | 4,689 | - | 425,000 | (d) | 429,689 | |||||||||||
| Total Liabilities | 1,626,400 | 544,233 | (119,233 | ) | 2,051,400 | |||||||||||
| Stockholders’ deficit: | ||||||||||||||||
| Common stock | 21,056 | 1,803 | (f) | 22,859 | ||||||||||||
| Additional paid-in capital | 2,201,183 | - | 1,629,197 | (f) | 3,830,380 | |||||||||||
| Accumulated deficit | (1,480,622 | ) | (179,452 | )(e) | (1,660,074 | ) | ||||||||||
| 305,086 | (305,086 | )(a) | ||||||||||||||
| Total stockholders’ deficit | 741,617 | 305,086 | 1,146,462 | 2,193,165 | ||||||||||||
| Total Liabilities and Stockholder's Deficit | $ | 2,368,017 | $ | 849,319 | $ | 1,027,229 | $ | 4,244,565 | ||||||||
| 2 |
Vegalab, Inc.
Unaudited Pro Forma Combined Statements of Operations
For the Nine Months Ended September 30, 2017
| Vegalab, Inc. | M&G Packing, Inc. (1) | Pro-Forma Adjustments | Pro-Forma Combined | |||||||||||||
| Revenue | ||||||||||||||||
| Revenue - Fertilizers | $ | 555,952 | $ | - | $ | 555,952 | ||||||||||
| Revenue - Citrus | - | 6,936,140 | - | 6,936,140 | ||||||||||||
| Total revenue | 555,952 | 6,936,140 | - | 7,492,092 | ||||||||||||
| Cost of revenue - Fertilizers | 477,752 | - | - | 477,752 | ||||||||||||
| Cost of revenue - Citrus | - | 6,179,017 | - | 6,179,017 | ||||||||||||
| Total cost of goods sold | 477,752 | 6,179,017 | - | 6,656,769 | ||||||||||||
| Gross Profit | 78,200 | 757,123 | - | 835,323 | ||||||||||||
| Operating expenses: | ||||||||||||||||
| General and administrative | 780,361 | 576,600 | - | 1,356,961 | ||||||||||||
| Total operating expenses | 780,361 | 576,600 | - | 1,356,961 | ||||||||||||
| (Loss) income from operations | (702,161 | ) | 180,523 | - | (521,638 | ) | ||||||||||
| Other expenses: | ||||||||||||||||
| Impairment of goodwill and intangible assets | - | - | (179,452 | )(e) | (179,452 | ) | ||||||||||
| Other Income | - | 386 | - | 386 | ||||||||||||
| Interest expense | (3,831 | ) | - | - | (3,831 | ) | ||||||||||
| Total other income (expenses) | (3,831 | ) | 386 | (179,452 | ) | (182,897 | ) | |||||||||
| (Loss) income before provision for income taxes | (705,992 | ) | 180,909 | (179,452 | ) | (704,535 | ) | |||||||||
| Provision for income taxes (Income) / expense | (17,036 | ) | 21,364 | - | 4,328 | |||||||||||
| Net loss | $ | (688,956 | ) | $ | 159,545 | $ | (179,452 | ) | $ | (708,863 | ) | |||||
| Weighted average number of shares outstanding | 20,573,211 | 20,573,211 | ||||||||||||||
| Net loss per share | $ | (0.03 | ) | $ | (0.03 | ) | ||||||||||
(1) Includes operations of M&G Packing Inc. from October 1, 2016 to June 30, 2017
| 3 |
Vegalab, Inc.
Unaudited Pro Forma Combined Balance Sheet
As of December 31, 2016
| Vegelabs, Inc. | M&G Packing, Inc. | Pro-Forma Adjustments | Pro-Forma Combined Balance | |||||||||||||
| ASSETS | ||||||||||||||||
| Current assets: | ||||||||||||||||
| Cash | $ | 151 | $ | - | $ | - | $ | 1,201,699 | ||||||||
| (429,452 | )(b) | |||||||||||||||
| 1,631,000 | (f) | |||||||||||||||
| Accounts receivable | 671,279 | 623,556 | (623,556 | )(a) | 671,279 | |||||||||||
| Other receivable - related party | - | 245,676 | (245,676 | )(a) | - | |||||||||||
| Inventory | 1,889,423 | - | - | 1,889,423 | ||||||||||||
| Prepaid expenses | 20,540 | - | - | 20,540 | ||||||||||||
| Total current assets | 2,581,393 | 869,232 | 332,316 | 3,782,941 | ||||||||||||
| Land and building | - | - | 275,000 | (c) | 275,000 | |||||||||||
| Property, plant and equipment, net of accumulated depreciation | - | - | 400,000 | (c) | 400,000 | |||||||||||
| Security deposits | 14,500 | - | 14,500 | |||||||||||||
| Total Assets | $ | 2,595,893 | $ | 869,232 | $ | 1,007,316 | $ | 4,472,441 | ||||||||
| LIABILITIES AND STOCKHOLDERS' DEFICIT | ||||||||||||||||
| Current liabilities: | ||||||||||||||||
| Accounts payable - trade | $ | 67,563 | $ | 637,626 | $ | (637,626 | )(a) | $ | 67,563 | |||||||
| Accounts payable - related party | 1,727,857 | - | - | 1,727,857 | ||||||||||||
| Accrued income taxes | 17,036 | 86,065 | (86,065 | )(a) | 17,036 | |||||||||||
| Accrued interest payable - related party | 2,474 | - | - | 2,474 | ||||||||||||
| Notes payable - related party | 175,000 | - | - | 175,000 | ||||||||||||
| Total current liabilities | 1,989,930 | 723,691 | (723,691 | ) | 1,989,930 | |||||||||||
| Loan payable - Long-term | - | 425,000 | (d) | 425,000 | ||||||||||||
| Total Liabilities | 1,989,930 | 723,691 | (298,691 | ) | 2,414,930 | |||||||||||
| Stockholders’ deficit: | ||||||||||||||||
| Common stock | 20,140 | - | 1,803 | (f) | 21,943 | |||||||||||
| Additional paid-in capital | 1,377,499 | - | 1,629,197 | (f) | 3,006,696 | |||||||||||
| Accumulated deficit | (791,676 | ) | - | (179,452 | )(e) | (971,128 | ) | |||||||||
| 145,541 | (145,541 | )(a) | ||||||||||||||
| Total stockholders’ deficiency | 605,963 | 145,541 | 1,306,007 | 2,057,511 | ||||||||||||
| Total Liabilities and Stockholder's Deficit | $ | 2,595,893 | $ | 869,232 | $ | 1,007,316 | $ | 4,472,441 | ||||||||
| 4 |
Vegalab, Inc.
Unaudited Pro Forma Combined Statements of Operations
For the Year Ended December 31, 2016
| Vegalab, Inc. | M&G Packing, Inc. (1) | Pro-Forma Adjustments | Pro-Forma Combined | |||||||||||||
| Revenue | ||||||||||||||||
| Products Sales - Fertilizers | $ | 2,115,421 | $ | - | $ | 2,115,421 | ||||||||||
| Products Sales - Packaging | 5,424,424 | - | 5,424,424 | |||||||||||||
| Total revenue | 2,115,421 | 5,424,424 | - | 7,539,845 | ||||||||||||
| Cost of products sold - Fertilizers | 1,617,366 | - | - | 1,617,366 | ||||||||||||
| Cost of products sold - Packaging | - | 4,771,343 | - | 4,771,343 | ||||||||||||
| Total cost of goods sold | 1,617,366 | 4,771,343 | - | 6,388,709 | ||||||||||||
| Gross Profit | 498,055 | 653,081 | - | 1,151,136 | ||||||||||||
| Operating expenses: | ||||||||||||||||
| General and administrative | 593,334 | 423,595 | - | 1,016,929 | ||||||||||||
| Total operating expenses | 593,334 | 423,595 | - | 1,016,929 | ||||||||||||
| (Loss) income from operations | (95,279 | ) | 229,486 | - | 134,207 | |||||||||||
| Other income (expenses): | ||||||||||||||||
| Impairment of goodwill and intangible assets | - | - | 179,452 | (e) | 179,452 | |||||||||||
| Other income | - | 2,120 | - | 2,120 | ||||||||||||
| Interest expense | (4,046 | ) | - | - | (4,046 | ) | ||||||||||
| Total other expenses | (4,046 | ) | 2,120 | 179,452 | 177,526 | |||||||||||
| (Loss) income before provision for income taxes | (99,325 | ) | 231,606 | 179,452 | 311,733 | |||||||||||
| Provision for income taxes | 17,036 | 86,065 | - | 103,101 | ||||||||||||
| Net loss | $ | (116,361 | ) | $ | 145,541 | $ | 179,452 | $ | 208,632 | |||||||
| Weighted average number of shares outstanding | 17,669,571 | 17,669,571 | ||||||||||||||
| Net loss per share | $ | (0.01 | ) | $ | 0.01 | |||||||||||
(1) Includes operations of M&G Packing Inc. from October 7, 2015 (Inception) to September 30, 2016
| 5 |
Vegalab, Inc.
Notes to Unaudited Pro Forma Combined Financial Information
Note 1 – Background and Basis of Presentation
On October 17, 2017, Vegalab, Inc. (“Vegalab” or the “Company”) purchased substantially all the assets of a produce packaging business conducted under the name M&G Packing, Inc. (“M&G” or the “Business”) located in Tulare County, California. The acquisition consisted of purchasing the real property and building used in the Business from M & G Farms, Inc., a California corporation, and all of the equipment, inventory, customers, suppliers, contract rights, and intangible property from M&G Packing, Inc., a California corporation. We did not acquire the cash, accounts receivable or any payables.
The unaudited pro forma combined financial information was prepared based on the historical financial statements of both Vegalab and M&G.
We account for business combinations pursuant to Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (ASC) 805, Business Combinations. In accordance with ASC 805, assets acquired and liabilities assumed in an acquisition are recognized at their fair values as of the acquisition date and requires that fair value be measured based on the principles in ASC 820-10. ASC 820-10 clarifies that fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. ASC 820-10 also requires that a fair value measurement reflect the assumptions market participants would use in pricing an asset or liability based on the best information available.
Note 2 – Acquisition of M&G
The acquisition was accounted for as a business combination as defined by FASB Topic 805 – Business Combinations. The allocation of the purchase price to the assets acquired and liabilities assumed was based on our internal assessment of the valuation of assets. As of the date of this filing, a purchase price allocation based upon a valuation has been finalized. The total purchase price for the Business plus closing costs is $854,452, which was paid $429,452 in cash and $425,000 in the form of a promissory note secured by the real property that bears interest at the rate of 6.0% per annum with interest only payable monthly and all principal and interest due 18 months from the close of escrow on October 24, 2017.
| Cash paid | $ | 429,452 | ||
| Note payable to seller | 425,000 | |||
| Total Consideration | $ | 854,452 | ||
| Purchased: | ||||
| Land and building | $ | 275,000 | ||
| Machinery and equipment | 400,000 | |||
| Goodwill and intangible assets - impaired | 179,452 | (1) | ||
| Total acquired in acquisition | $ | 854,452 |
| (1) | The Company forgo the valuation of intangible assets acquired and, therefore, impaired the goodwill and intangible assets acquired, which consisted primarily of customer lists, vendor relationships and name brand. |
| 6 |
Vegalab, Inc.
Notes to Unaudited Pro Forma Combined Financial Information
Note 3 – Pro Forma Adjustments
The following adjustments have been reflected in the unaudited pro forma combined financial information:
| (a) | Reflects the removal of M&G assets and payables account not acquired. |
| (b) | Reflects the cash paid by Vegalab at closing of acquisition. |
| (c) | Reflects the fair value of the land, building and equipment acquired. |
| (d) | Reflects the note payable issued to M&G. |
| (e) | Reflects the write-off of the excess purchase price. |
| (f) | Reflects the sale by Vegalab of 1,801,113 shares of common stock for proceeds of $1,631,000 ($0.90 per share), a portion of which was used to acquire M&G |
| 7 |