Attached files
| file | filename |
|---|---|
| 8-K/A - AMENDMENT NO. 2 TO FORM 8-K - CHARLESTON BASICS INC | f8k021110_paneltech.htm |
| EX-4.1 - SPECIMEN COMMON STOCK CERTIFICATE OF REGISTRANT - CHARLESTON BASICS INC | f8k021110ex4i_paneltech.htm |
| EX-10.6 - FORM OF SECURITIES PURCHASE AGREEMENT ISSUED IN CONNECTION WITH THE OFFERING - CHARLESTON BASICS INC | f8k021110ex10vi_paneltech.htm |
Exhibit 99.3
PANELTECH
INTERNATIONAL LLC
CHARLESTON
BASICS, INC.
INTRODUCTION
TO PRO FORMA CONDENSED
COMBINED
FINANCIAL STATEMENTS
(Unaudited)
The
following unaudited pro forma condensed combined financial statements give
effect to the merger between Paneltech International LLC (“Paneltech”) and
Paneltech Products, Inc., a wholly owned subsidiary of Charleston Basics, Inc.
(“CHARLESTON”), contemplated in the Agreement and Plan of Merger
dated as of December 23, 2009. Effective on December 23, 2009,
Paneltech was merged with Paneltech Products, Inc., becoming a wholly-owned
subsidiary of CHARLESTON whereby 100% of the membership units of Paneltech were
exchanged for 61,759,852 shares of CHARLESTON, a public corporation. Upon
completion of the merger, CHARLESTON changed its name to Paneltech International
Holdings, Inc.
As a
result of the transaction, the former owners of Paneltech became the controlling
stockholders of CHARLESTON. Accordingly, the merger of Paneltech and CHARLESTON
is a reverse merger that has been accounted for as a recapitalization of
Paneltech, which is deemed to be the accounting acquirer. The unaudited pro
forma information is presented for illustration purposes only in accordance with
the assumptions set forth below and in the notes to the unaudited pro forma
combined condensed financial statements.
The
unaudited pro forma condensed combined balance sheet combines the balance sheets
of Paneltech and CHARLESTON as if the recapitalization has occurred on September
30, 2009. The unaudited pro forma condensed combined statement of operations for
the year ended December 31, 2008 (the fiscal year of Paneltech, the accounting
acquirer) combines the historical statements of operations of Paneltech and
CHARLESTON for the year ended December 31, 2008 and gives pro forma effect to
the recapitalization as if it were completed on January 1, 2008. The unaudited
pro forma condensed combined statements of operations for the nine months ended
September 30, 2009 combines the historical statements of operations of Paneltech
and CHARLESTON for the nine months ended September 30, 2009 and gives pro forma
effect to the recapitalization as if it were completed on January 1, 2009.
References are made to the notes to the pro forma statements and a detailed
explanation of these combinations.
The
unaudited pro forma balance sheet and statements of operations should be read in
conjunction with the separate historical consolidated financial statements of
Paneltech for the years ended December 31, 2008 and 2007 and the unaudited
historical consolidated financial statements of Paneltech for the nine months
ended September 30, 2009 and 2008 appearing elsewhere and included in the Form
8-K/A of CHARLESTON as filed with the US Securities and Exchange Commission
(“SEC”) on January 15, 2010, and the historical financial statements of
CHARLESTON, as filed with the Securities and Exchange Commission and issued in
its Form 10-K for the years ended March 31, 2009 and March 31, 2008 and its
unaudited financial statements, as filed and issued in its Forms 10-Q for the
quarters ended June 30, 2009, September 30, 2009 and December 31, 2009 and
2008.
These pro
forma condensed combined financial statements may not be indicative of what
would have occurred if the reverse acquisition had actually occurred on the
indicated dates and they should not be relied upon as an indication of future
results of operations.
Substance of the
Transaction
|
·
|
In
connection with the merger the registrant issued 61,759,852 shares of
Common Stock to the Paneltech shareholders at a par value of
$0.0001.
|
|
·
|
As
of the date of the merger Charleston Basics had Common Stock shares
outstanding of 6,543,720.
|
|
·
|
Immediately
following the merger, the registrant raised $1,500,000 in proceeds through
the issuance of Redeemable Convertible Preferred Stock of 2,726,550 shares
at a par value of $0.0001. These shares are convertible into 13,632,750
shares of Common Stock as of the date of the merger. As part of the sale
of the Preferred Stock, the registrant also issued warrants to purchase
4,544,250 shares of Common Stock at an exercise price of
$0.12. The Convertible Preferred Shares are redeemable at the
right of the holder in three years at a redemption value of 2x the
original issuance value. Each share of preferred stock provides
the holder with the right to receive dividends at a rate of
12%.
|
|
·
|
Immediately
following the merger, the registrant purchased back 13,772,550 shares of
Common Stock from a significant shareholder for $750,000 whereby $375,000
was paid in cash and a note was issued for $375,000 payable with interest
at Prime.
|
|
·
|
Immediately
following the merger, the registrant sold the assets of its tactical gear
business for a nominal value to one of the former Chief Executive Officers
of CHARLESTON who is also a shareholder of the
Company.
|
|
·
|
Subsequent
to December 23, 2009, the Company raised proceeds from the sale of
preferred stock of $150,000 and issued warrants to purchase approximately
3,200,000 shares of Common Stock, some of which were issued in connection
with the sale of preferred stock.
|
|
·
|
Recapitalization
of shares outstanding and pro forma presentation of stockholders’ equity
post reverse merger:
|
|
Shares
Outstanding
|
||||||||||||||||
|
Common
|
Treasury
|
Preferred
|
||||||||||||||
|
Stock
|
Stock*
|
Stock
|
Warrants
|
|||||||||||||
|
Paneltech
shareholders
|
61,759,852 | |||||||||||||||
|
Preferred
sale
|
2,726,550 | 4,544,250 | ||||||||||||||
|
Collins’
buyback
|
(13,772,550 | ) | ||||||||||||||
|
Assets
sold
|
(50,000 | ) | ||||||||||||||
|
Charleston
pre-merger shares
|
6,543,720 | |||||||||||||||
| 68,303,572 | 13,822,550 | 2,726,550 | 4,544,250 | |||||||||||||
Pro
forma Statement of Stockholders’ Equity – September 30, 2009
|
Retained
|
||||||||||||||||||||||||
|
Additional
|
Earnings/
|
|||||||||||||||||||||||
|
Common
Stock
|
Paid-In
|
Accumulated
|
Treasury
|
|||||||||||||||||||||
|
Shares
|
Amount
|
Capital
|
(Deficit)
|
Stock*
|
Total
|
|||||||||||||||||||
|
Balance-January
1, 2009
|
61,759,852 | $ | 6,176 | $ | 1,138,040 | $ | 747,145 | $ | 1,891,361 | |||||||||||||||
|
•
Buyback of Collins Shares
|
$ | (750,000 | ) | (750,000 | ) | |||||||||||||||||||
|
•
Assets sold to former Chief
|
||||||||||||||||||||||||
|
Executive
Officer
|
2,045 | (2,045 | ) | |||||||||||||||||||||
|
•
Derivative warrants
|
(90,000 | ) | (90,000 | ) | ||||||||||||||||||||
|
•
Distributions to shareholders
|
(450,960 | ) | (450,960 | ) | ||||||||||||||||||||
|
•
Acquisition of shares of
|
||||||||||||||||||||||||
|
CHARLESTON
|
6,543,720 | 654 | (654 | ) | ||||||||||||||||||||
|
•
Recapitalization of Paneltech
|
||||||||||||||||||||||||
|
LLC
since date of merger
|
(468,877 | ) | 468,877 | |||||||||||||||||||||
|
•
Net loss for nine months
|
(783,062 | ) | (783,062 | ) | ||||||||||||||||||||
|
Balance-September
30, 2009
|
68,303,572 | $ | 6,830 | $ | 580,554 | $ | (18,000 | ) | $ | (752,045 | ) | $ | (182,661 | ) | ||||||||||
*These
Treasury shares are to be cancelled in 2010.
|
Paneltech
International LLC and Charleston Basics, Inc.
|
||||||||||||||||||||||||
|
Pro
Forma Condensed Combined Balance Sheet
|
||||||||||||||||||||||||
|
For
the Nine Months Ended September 30, 2009
|
||||||||||||||||||||||||
|
(Unaudited)
|
||||||||||||||||||||||||
|
(a)
|
Pro
Forma Adjustments
|
|||||||||||||||||||||||
|
Consolidated
|
||||||||||||||||||||||||
|
(b)
|
Paneltech
|
|||||||||||||||||||||||
|
Note
|
Charleston
|
International
|
Pro
Forma
|
|||||||||||||||||||||
|
Ref.
|
Basics
Inc.
|
LLC
|
Debit
|
Credit
|
Combined
|
|||||||||||||||||||
|
CURRENT ASSETS
|
||||||||||||||||||||||||
|
Cash
|
d,e,g | $ | 261,503 | $ | 2,330 | $ | 1,500,000 | $ | 636,503 | $ | 1,127,320 | |||||||||||||
|
Accounts
receivable, less allowance for doubtful accounts
|
d | 28,114 | 1,118,494 | 28,114 | 1,118,494 | |||||||||||||||||||
|
Inventories
|
1,963,652 | 1,963,652 | ||||||||||||||||||||||
|
Prepaid
expenses and other current assets
|
32,426 | 32,426 | ||||||||||||||||||||||
|
Property
and equipment net
|
2,048,349 | 2,048,349 | ||||||||||||||||||||||
|
Other
assets
|
f | 85,983 | 85,000 | 983 | ||||||||||||||||||||
|
Deferred
loan costs, net of accumulated amortization
|
28,952 | 28,952 | ||||||||||||||||||||||
|
Intangible
assets, net of accumulated amortization
|
220,500 | 220,500 | ||||||||||||||||||||||
|
TOTAL
ASSETS
|
289,617 | 5,500,686 | 1,500,000 | 749,617 | 6,540,686 | |||||||||||||||||||
|
CURRENT LIABILITIES
|
||||||||||||||||||||||||
|
Line
of credit
|
1,442,372 | 1,442,372 | ||||||||||||||||||||||
|
Accounts
payable
|
d | 62,056 | 532,725 | 62,056 | 532,725 | |||||||||||||||||||
|
Accrued
expenses and other current liabilities
|
d | 17,779 | 225,259 | 17,779 | 225,259 | |||||||||||||||||||
|
Loans
and notes
|
d,g,h | 211,827 | 211,827 | 825,960 | 825,960 | |||||||||||||||||||
|
Current
maturities of long-term debt
|
305,067 | 305,067 | ||||||||||||||||||||||
|
Capital
lease obligations
|
16,427 | 16,427 | ||||||||||||||||||||||
|
Long
term debt, less current maturities
|
1,841,623 | 1,841,623 | ||||||||||||||||||||||
|
Derivative
obligation – warrants
|
i | 90,000 | 90,000 | |||||||||||||||||||||
|
Capital
lease obligations, less current portion
|
28,914 | 28,914 | ||||||||||||||||||||||
|
TOTAL
LIABILITIES
|
291,662 | 4,392,387 | 291,662 | 915,960 | 5,308,347 | |||||||||||||||||||
|
REDEEMABLE CONVERTIBLE PREFERRED
STOCK
|
e | 85,000 | 1,500,000 | 1,415,000 | ||||||||||||||||||||
|
EQUITY
|
||||||||||||||||||||||||
|
Members
equity
|
c | 1,108,299 | 1,891,361 | 783,062 | ||||||||||||||||||||
|
Common
stock par value
|
c,d | 654 | 654 | 6,830 | 6,830 | |||||||||||||||||||
|
Additional
paid in capital
|
c,d | 270,806 | 830,337 | 1,140,085 | 580,554 | |||||||||||||||||||
|
Accumulated
deficit
|
c,d | (273,505 | ) | 1,234,022 | 1,489,527 | (18,000 | ) | |||||||||||||||||
|
Treasury
stock
|
g | 752,045 | (752,045 | ) | ||||||||||||||||||||
|
TOTAL
EQUITY
|
(2,045 | ) | 1,108,299 | 4,708,419 | 3,419,504 | (182,661 | ) | |||||||||||||||||
|
TOTAL
LIABILITIES AND EQUITY
|
$ | 289,617 | $ | 5,500,686 | 5,085,081 | 5,835,464 | $ | 6,540,686 | ||||||||||||||||
NOTES
TO UNAUDITED CONDENSED COMBINED PRO FORMA BALANCE SHEET
|
(a)
|
|
Derived
from the unaudited balance sheet of Paneltech as of September 30, 2009
included in a Form 8-K/A of CHARLESTON as filed with the SEC on
January 15, 2010.
|
|
(b)
|
Derived
from the unaudited balance sheet of CHARLESTON as of September 30, 2009
included in its Form 10-Q filed with the SEC.
|
|
|
(c)
|
Reflects
the recapitalization of Paneltech pursuant to the merger. It is based upon
the exchange of all of the common shares of Paneltech being exchanged for
61,759,852 shares of common stock of CHARLESTON.
|
|
|
(d)
|
Reflects
the elimination of CHARLESTON assets and liabilities which were acquired
in the merger transaction and then immediately sold.
|
|
|
(e)
|
Issuance
of Series A Convertible Preferred Stock, par value $.0001 for the issuance
of 2,726,500 shares for $1.5 million.
|
|
|
(f)
|
Estimated
transaction related costs for preferred stock issued and cash received
from the Offering.
|
|
|
(g)
|
Buy
back of Collins’ interest of 13,772,500 shares for $375,000 in cash and a
note of $375,000.
|
|
|
(h)
|
Issuance
of notes for $450,960 to former Members of Paneltech for tax
distributions.
|
|
|
(i)
|
|
Derivative
obligations for warrants based on a preliminary valuation from an outside
independent appraisal.
|
|
Paneltech
International LLC and Charleston Basics, Inc.
|
||||||||||||||||||||||||
|
Pro
Forma Condensed Combined Statement of Operations
|
||||||||||||||||||||||||
|
For
the Nine Months Ended September 30, 2009
|
||||||||||||||||||||||||
|
(Unaudited)
|
||||||||||||||||||||||||
|
(a)
|
Pro
Forma Adjustments
|
|||||||||||||||||||||||
|
Consolidated
|
||||||||||||||||||||||||
|
(b)
|
Paneltech
|
|||||||||||||||||||||||
|
Note
|
Charleston
|
International
|
Pro
Forma
|
|||||||||||||||||||||
|
Ref.
|
Basics
Inc.
|
LLC
|
Debit
|
Credit
|
Combined
|
|||||||||||||||||||
|
Net
Sales
|
c | $ | 56,221 | $ | 6,979,912 | $ | 56,221 | $ | - | $ | 6,979,912 | |||||||||||||
|
Cost
of Sales
|
c | 37,597 | 5,416,963 | - | 37,597 | 5,416,963 | ||||||||||||||||||
|
Gross
Profit
|
18,624 | 1,562,949 | 56,221 | (37,597 | ) | 1,562,949 | ||||||||||||||||||
|
Operating
Expenses
|
c | 71,433 | 2,203,584 | - | 71,433 | 2,203,584 | ||||||||||||||||||
|
Operating
Income
|
(52,809 | ) | (640,635 | ) | 56,221 | (109,030 | ) | (640,635 | ) | |||||||||||||||
|
Interest
Expense
|
g | - | (142,427 | ) | (41,000 | ) | - | (183,427 | ) | |||||||||||||||
|
Net
Loss before Income Taxes
|
(52,809 | ) | (783,062 | ) | 15,221 | (109,030 | ) | (824,062 | ) | |||||||||||||||
|
Provision
for Income Taxes
|
c | 671 | - | - | 671 | - | ||||||||||||||||||
|
Net
Loss
|
c | (53,480 | ) | (783,062 | ) | 15,221 | (109,701 | ) | (824,062 | ) | ||||||||||||||
|
Accretion
of Convertible Preferred Stock to redemption value
|
f | - | - | (396,000 | ) | - | (396,000 | ) | ||||||||||||||||
|
Preferred
stock dividends
|
e | - | - | (135,000 | ) | - | (135,000 | ) | ||||||||||||||||
|
Net
loss attributable to common stockholders
|
$ | (53,480 | ) | $ | (783,062 | ) | $ | (515,779 | ) | $ | (109,701 | ) | $ | (1,355,062 | ) | |||||||||
|
Pro
Forma weighted average common shares outstanding:
|
||||||||||||||||||||||||
|
Basic
and diluted
|
6,543,720 | 54,481,022 | ||||||||||||||||||||||
|
Pro
Forma (loss) per common share:
|
||||||||||||||||||||||||
|
Basic
and diluted
|
$ | (0.01 | ) | $ | (0.03 | ) | ||||||||||||||||||
|
Paneltech
International LLC and Charleston Basics, Inc.
|
||||||||||||||||||||||||
|
Pro
Forma Condensed Combined Statement of Operations
|
||||||||||||||||||||||||
|
For
the Year Ended December 31, 2008
|
||||||||||||||||||||||||
|
(Unaudited)
|
||||||||||||||||||||||||
|
(a)
|
Pro
Forma Adjustments
|
|||||||||||||||||||||||
|
Consolidated
|
||||||||||||||||||||||||
|
(b)
|
Paneltech
|
|||||||||||||||||||||||
|
Note
|
Charleston
|
International
|
Pro
Forma
|
|||||||||||||||||||||
|
Ref.
|
Basics
Inc.
|
LLC
|
Debit
|
Credit
|
Combined
|
|||||||||||||||||||
|
Net
Sales
|
c | $ | 442,222 | $ | 17,405,486 | $ | 442,222 | $ | - | $ | 17,405,486 | |||||||||||||
|
Cost
of Sales
|
c | 360,105 | 13,412,884 | - | 360,105 | 13,412,884 | ||||||||||||||||||
|
Gross
Profit
|
82,117 | 3,992,602 | 442,222 | (360,105 | ) | 3,992,602 | ||||||||||||||||||
|
Operating
Expenses
|
c | 176,305 | 2,049,992 | - | 176,305 | 2,049,992 | ||||||||||||||||||
|
Operating
Income
|
(94,188 | ) | 1,942,610 | 442,222 | (536,410 | ) | 1,942,610 | |||||||||||||||||
|
Interest
Expense
|
g | - | (254,380 | ) | (54,000 | ) | - | (308,380 | ) | |||||||||||||||
|
Net
(Loss) Income before Income Taxes
|
(94,188 | ) | 1,688,230 | 388,222 | (536,410 | ) | 1,634,230 | |||||||||||||||||
|
Income
Taxes
|
c,d | 929 | - | 650,000 | 929 | 650,000 | ||||||||||||||||||
|
Net
(Loss) Income
|
c | (95,117 | ) | 1,688,230 | (261,778 | ) | (537,339 | ) | 984,230 | |||||||||||||||
|
Accretion
of Convertible Preferred Stock to redemption value
|
f | - | - | (180,000 | ) | - | (180,000 | ) | ||||||||||||||||
|
Preferred
stock dividends
|
g | - | - | (528,000 | ) | - | (528,000 | ) | ||||||||||||||||
|
Net
(loss) income attributable to common stockholders
|
$ | (95,117 | ) | $ | 1,688,230 | $ | (969,778 | ) | $ | (537,339 | ) | $ | 276,230 | |||||||||||
|
Pro
Forma weighted average common shares outstanding:
|
||||||||||||||||||||||||
|
Basic
and diluted
|
6,543,720 | 54,481,022 | ||||||||||||||||||||||
|
Pro
Forma (loss) income per common share:
|
||||||||||||||||||||||||
|
Basic
and diluted
|
$ | (0.02 | ) | $ | 0 .01 | |||||||||||||||||||
NOTES
TO UNAUDITED CONDENSED COMBINED PRO FORMA STATEMENTS OF OPERATIONS
|
(a)
|
|
Derived
from the audited income statements of Paneltech for the year
ended December 31, 2008 and the unaudited consolidated statement of
operations of Paneltech for the nine months ended September 30,
2009.
|
|
(b)
|
Derived
from the audited income statements of CHARLESTON for the year ended March
31, 2009 and 2008 and included in its Form 10-K filed with the SEC and the
unaudited quarterly financial statements for 2009 and 2008 included in its
Forms 10-Q’s filed with the SEC. The results of operations of CHARLESTON
for the year ended December 31, 2008 were derived by adding the nine
months ended December 31, 2008 to and deducting the nine months ended
December 31, 2007 from the results of operations for the year ended March
31, 2008. The results of operations of CHARLESTON for the nine months
ended September 30, 2009 were derived by adding the six months ended
September 30, 2009 to and deducting the nine months ended December 31,
2008 from the results of operations for the year ended March 31,
2009.
|
|
|
(c)
|
Reflects
elimination of operations of CHARLESTON. These operations were sold
immediately following the merger.
|
|
|
(d)
|
Pro
forma income taxes of Paneltech.
|
|
|
(e)
|
Dividends
on preferred stock.
|
|
|
(f)
|
Accretion
of Convertible Preferred Stock to redemption value.
|
|
|
(g)
|
Interest
on Paneltech and Collins’ notes.
|
|