Freeze Tag, Inc. - FORM 8-K/A - EX-99.3 - UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS - January 8, 2018

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EX-99.2 - UNAUDITED FINANCIAL STATEMENTS - Freeze Tag, Inc.frzt_ex992.htm
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8-K/A - FORM 8-K/A - Freeze Tag, Inc.frzt_8ka.htm

EXHIBIT 99.3

 

MUNZEE, INC.

 

INDEX TO PRO FORMA FINANCIAL INFORMATION

 

Unaudited Pro Forma Combined Financial Information

of Munzee, Inc. and Freeze Tag, Inc.

 

 

 

Page

 

 

 

 

 

Unaudited Pro Forma Condensed Financial Information

 

 

 2

 

Unaudited Pro Forma Condensed Combined Balance Sheets as of September 30, 2017

 

 

 3

 

Unaudited Pro Forma Condensed Combined Statements of Operations for the Year Ended December 31, 2016

 

 

 4

 

Unaudited Pro Forma Condensed Combined Statements of Operations for the Nine Months Ended September 30, 2017

 

 

 5

 

Notes to Unaudited Pro Forma Condensed Combined Financial Statements

 

 

 6

 

 

 
1
 
 

 

UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION

 

The unaudited pro forma condensed combined balance sheet presents the historical balance sheets of Munzee, Inc. (“Munzee”) and Freeze Tag, Inc. (“Freeze Tag”) as of September 30, 2017 and accounts for the merger of Munzee and Freeze Tag as a reverse merger transaction, with Munzee as the accounting acquirer giving effect to the transaction as if it had occurred as of September 30, 2017. On July 26, 2017, Munzee entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Freeze Tag, which closed on October 18, 2017. At closing, in accordance with the Merger Agreement, Munzee merged with and into Freeze Tag, with Freeze Tag being the surviving corporation.

 

The Munzee balance sheet information was derived from its unaudited balance sheet as of September 30, 2017. The Freeze Tag balance sheet information was derived from its unaudited balance sheet as of September 30, 2017 included in its quarterly report on Form 10-Q that was filed with the Securities and Exchange Commission (“SEC”) on November 14, 2017.

 

The unaudited pro forma condensed combined statements of operations are based on the historical statements of Munzee and Freeze Tag and combine the results of operations of Munzee and Freeze Tag for the year ended December 31, 2016 and the nine months ended September 30, 2017, giving effect to the transaction as if it occurred on January 1, 2016, and reflecting the pro forma adjustments expected to have a continuing impact on the combined results.

 

The historical results of operations of Munzee were derived from its unaudited statement of operations for the nine months ended September 30, 2017 and its audited statement of operations for the year ended December 31, 2016 that are included in this Form 8-K. The historical results of operations for Freeze Tag were derived from its unaudited statement of operations for the nine months ended September 30, 2017 included in its quarterly report on Form 10-Q that was filed with the SEC on November 14, 2017 and its audited statement of operations for the year ended December 31, 2016 included in its annual report on Form 10-K that was filed with the SEC on March 31, 2017.

 

The unaudited pro forma condensed combined financial statements are for informational purposes only. They do not purport to indicate the results that would have actually been obtained had the reverse acquisition been completed on the assumed dates or for the periods presented, or that may be realized in the future. Furthermore, while the pro forma financial information reflects transaction costs incurred with the merger of Munzee with and into Freeze Tag on October 18, 2017, the pro forma financial information does not reflect the impact of any reorganization or restructuring expenses or operating efficiencies resulting from the transaction. The unaudited pro forma condensed combined financial statements, including the notes thereto, are qualified in their entirety by reference to, and should be read in conjunction with, the historical financial statements referred to above.

 

 
2
 
Table of Contents

 

UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEETS

AS OF SEPTEMBER 30, 2017

 

 

 

Munzee

 

 

Freeze Tag

 

 

Pro Forma Adjustments

 

 

Pro Forma Combined

 

 

 

 

 

 

 

 

 

 

 

 

 

 

ASSETS

 

 

 

 

 

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

 

 

 

 

Cash

 

 $ 189,582

 

 

 $ 31,367

 

 

 $ -

 

 

 $ 220,949

 

Accounts receivable

 

 

 3,469

 

 

 

 7,693

 

 

 

 -

 

 

 

 11,162

 

Prepaid expenses and other current assets

 

 

 46,626

 

 

 

 4,402

 

 

 

 -

 

 

 

 51,028

 

Total current assets

 

 

 239,677

 

 

 

 43,462

 

 

 

 -

 

 

 

 283,139

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Property and equipment, net

 

 

 8,391

 

 

 

 -

 

 

 

 -

 

 

 

 8,391

 

Intangible assets, net

 

 

 -

 

 

 

 -

 

 

391,800

{b}

 

 

 391,800

 

Goodwill

 

 

 -

 

 

 

 -

 

 

7,082,607

{b}

 

 

 7,082,607

 

Other assets – deposits

 

 

 15,000

 

 

 

 38

 

 

 

 -

 

 

 

 15,038

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total assets

 

 $ 263,068

 

 

 $ 43,500

 

 

 $ 7,474,407

 

 

 $ 7,780,975

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)

Current liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accounts payable

 

 $ 2,987

 

 

 $ 126,499

 

 

 $ -

 

 

 $ 129,486

 

Accrued expenses

 

 

 43,025

 

 

 

 517,904

 

 

 

 -

 

 

 

 560,929

 

Accrued interest payable – related party

 

 

 -

 

 

 

 321,262

 

 

 

 -

 

 

 

 321,262

 

Accrued interest payable

 

 

 -

 

 

 

 534,737

 

 

 

 -

 

 

 

 534,737

 

Unearned royalties

 

 

 -

 

 

 

 127,187

 

 

 

 -

 

 

 

 127,187

 

Notes payable

 

 

 -

 

 

 

 58,096

 

 

 

 -

 

 

 

 58,096

 

Convertible notes payable – related party

 

 

 -

 

 

 

 1,447,041

 

 

 

 -

 

 

 

 1,447,041

 

Convertible notes payable, net of discount

 

 

 -

 

 

 

 2,359,014

 

 

 

 -

 

 

 

 2,359,014

 

Derivative liabilities

 

 

 -

 

 

 

 4,005,735

 

 

 

 -

 

 

 

 4,005,735

 

Total current liabilities

 

 

 46,012

 

 

 

 9,497,475

 

 

 

 -

 

 

 

 9,543,487

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total liabilities

 

 

 46,012

 

 

 

 9,497,475

 

 

 

 -

 

 

 

 9,543,487

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Series A preferred stock, $0.00001 par value

 

 

 -

 

 

 

 -

 

 

 

 -

 

 

 

 -

 

Series C preferred stock, $0.00001 par value

 

 

 -

 

 

 

 -

 

 

44

{b}

 

 

 44

 

Common stock; $0.00001 par value

 

 

 64

 

 

 

 125

 

 

(64

){a}

 

 

 125

 

Additional paid-in capital

 

 

 5,112

 

 

 

 4,568,430

 

 

(5,112

){a}

 

 

 12,264,849

 

 

 

 

 

 

 

 

 

 

 

222,056

{a}

 

 

 

 

 

 

 

 

 

 

 

 

 

 

7,474,363

{b}

 

 

 

 

Stock subscription receivable

 

 

 (5,000 )

 

 

 -

 

 

 

 

 

 

 

 (5,000 )

Common stock payable

 

 

 -

 

 

 

 16,800

 

 

 

 -

 

 

 

 16,800

 

Retained earnings (deficit)

 

 

 216,880

 

 

 

 (14,039,330 )

 

 

 (216,880 ){a}

 

 

 (14,039,330 )

Total stockholders’ equity (deficit)

 

 

 217,056

 

 

 

 (9,453,975 )

 

 

 7,474,407

 

 

 

 (1,762,512 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total liabilities and stockholders’ equity (deficit)

 

 $ 263,068

 

 

 $ 43,500

 

 

 $ 7,474,407

 

 

 $ 7,780,975

 

 

See notes to the unaudited pro forma condensed combined financial statements

 

 
3
 
Table of Contents

 

UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENTS OF OPERATIONS

FOR THE YEAR ENDED DECEMBER 31, 2016

 

 

 

Munzee

 

 

Freeze Tag

 

 

Pro Forma Adjustments

 

 

Pro Forma Combined

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenues

 

 $ 2,359,759

 

 

 $ 138,720

 

 

 $ -

 

 

 $ 2,498,479

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating costs and expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost of sales

 

 

 931,745

 

 

 

 235,153

 

 

 

 -

 

 

 

 1,166,898

 

Selling, general and administrative expenses

 

 

 1,401,238

 

 

 

 554,773

 

 

78,360

{c}

 

 

 2,034,371

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total operating costs and expenses

 

 

 2,332,983

 

 

 

 789,926

 

 

 

 78,360

 

 

 

 3,201,269

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income (loss) from operations

 

 

 26,776

 

 

 

 (651,206 )

 

 

 (78,360 )

 

 

 (702,790 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense, net

 

 

 (2,394 )

 

 

 (859,645 )

 

 

 -

 

 

 

 (862,039 )

Loss on change in derivative liabilities

 

 

 -

 

 

 

 (616,286 )

 

 

 -

 

 

 

 (616,286 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total other expenses

 

 

 (2,394 )

 

 

 (1,475,931 )

 

 

 -

 

 

 

 (1,478,325 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income (loss) before income taxes

 

 

 24,382

 

 

 

 (2,127,137 )

 

 

 (78,360 )

 

 

 (2,181,115 )

Provision for income taxes

 

 

 (7,314 )

 

 

 (2,282 )

 

7,314

{d}

 

 

 (2,282 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss)

 

 $ 17,068

 

 

 $ (2,129,419 )

 

 $ (71,046 )

 

 $ (2,183,397 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average number of common shares outstanding – basic and diluted

 

 

 6,720,000

 

 

 

 3,811,940

 

 

 

 (6,720,000 ){e}

 

 

 3,811,940

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income (loss) per common share – basic and diluted

 

 $ 0.00

 

 

 $ (0.56 )

 

 $ -

 

 

 $ (0.57 )

 

See notes to the unaudited pro forma condensed combined financial statements

 

 
4
 
Table of Contents

 

UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENTS OF OPERATIONS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2017

 

 

 

Munzee

 

 

Freeze Tag

 

 

Pro Forma Adjustments

 

 

Pro Forma Combined

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenues

 

 $ 1,740,782

 

 

 $ 14,125

 

 

 $ -

 

 

 $ 1,754,907

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating costs and expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost of sales

 

 

 405,959

 

 

 

 85,751

 

 

 

 -

 

 

 

 491,710

 

Selling, general and administrative expenses

 

 

 1,258,249

 

 

 

 451,466

 

 

58,770

{c}

 

 

 1,768,485

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total operating costs and expenses

 

 

 1,664,208

 

 

 

 537,217

 

 

 

 58,770

 

 

 

 2,260,195

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income (loss) from operations

 

 

 76,574

 

 

 

 (523,092 )

 

 

 (58,770 )

 

 

 (505,288 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense, net

 

 

 (4,870 )

 

 

 (643,149 )

 

 

 -

 

 

 

 (648,019 )

Loss on disposition of property and equipment

 

 

 (46,230 )

 

 

 -

 

 

 

 -

 

 

 

 (46,230 )

Loss on change in derivative liabilities

 

 

 -

 

 

 

 (1,757,960 )

 

 

 -

 

 

 

 (1,757,960 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total other expenses

 

 

 (51,100 )

 

 

 (2,401,109 )

 

 

 -

 

 

 

 (2,452,209 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income (loss) before income taxes

 

 

 25,474

 

 

 

 (2,924,201 )

 

 

 (58,770 )

 

 

 (2,957,497 )

Provision for income taxes

 

 

 (8,641 )

 

 

 (1,200 )

 

8,641

{d}

 

 

 (1,200 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss)

 

 $ 16,833

 

 

 $ (2,925,401 )

 

 $ (50,129 )

 

 $ (2,958,697 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average number of common shares outstanding – basic and diluted

 

 

 6,076,044

 

 

 

 9,284,279

 

 

(6,076,044

){e}

 

 

 9,284,279

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income (loss) per common share – basic and diluted

 

 $ 0.00

 

 

 $ (0.32 )

 

 $ -

 

 

 $ (0.32 )

 

See notes to the unaudited pro forma condensed combined financial statements

 

 
5
 
Table of Contents

 

NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS

 

On July 26, 2017, Munzee entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Freeze Tag, wherein Freeze Tag acquired 100% of Munzee’s common stock through the issuance of 4,355,000 shares of Freeze Tag’s Series C Convertible Preferred Stock. The Merger Agreement closed on October 18, 2017 and will be accounted for as a reverse merger transaction, with Munzee as the accounting acquirer.

 

Pro forma adjustments to the attached condensed combined financial statements include the following:

 

 

a)

 To eliminate the equity accounts of Munzee.

 

 

 

 

b)

 To record the issuance of 4,355,000 shares of Freeze Tag $0.00001 par value Series C Preferred Stock to the shareholders of Munzee, valued at $7,696,463 and allocated to the following assets based on the report of an independent valuation firm:

 

Asset

 

Value

 

 

 

 

 

Net assets recorded by Munzee at September 30, 2017

 

 $ 222,056

 

Identifiable intangible assets:

 

 

 

 

IP/Technology/Patents

 

 

 258,900

 

Customer base

 

 

 109,000

 

Non-compete agreements

 

 

 23,900

 

Total identifiable intangible assets

 

 

 391,800

 

 

 

 

 

 

Goodwill

 

 

 7,082,607

 

 

 

 

 

 

Total

 

 $ 7,696,463

 

 

 

 

The identifiable intangible assets are amortized using the straight-line method over an estimated life of 5 years. The goodwill is not amortized, but evaluated periodically for impairment.

 

 

 

 

c)

 To record amortization of identifiable intangible assets.

 

 

 

 

d)

 To eliminate Munzee income tax provision due to offset of taxable loss of Freeze Tag.

 

 

 

 

e)

 To eliminate Munzee weighted average shares outstanding.

 

 

6

 

Freeze Tag, Inc. Reports