Exhibit 99.3
GrowLife, Inc. and EZ-Clone Enterprises, Inc.
Summary of Unaudited Pro Forma Consolidated Financial Statements
On October 15, 2018, GrowLife, Inc. (the “Company”), closed the Purchase and Sale Agreement (the “Agreement”) with EZ Clone Enterprises, Inc., a California corporation (“EZ Clone”). EZ Clone is the manufacturer of multiple award-winning products specifically designed for the commercial cloning and propagation stage of indoor plant cultivation including cannabis, food, and other hydroponic farming. The Company acquired 51% of EZ Clone for $2,040,000, payable as follows: (i) a cash payment of $645,000; and (ii) the issuance of 107,307,692 restricted shares of the Company’s common stock at a price of $0.013 per share or $1,395,000.
The company has the obligation to acquire the remaining 49% of EZ Clone within one year for $1,960,000, payable as follows: (i) a cash payment of $855,000; and (ii) the issuance of 85,000,000 shares of the Company’s common stock at a price of $0.013 per share or $1,105,000.
The unaudited pro forma balance sheet as of December 31, 2017 and September 30, 2018 and the unaudited consolidated statement of operations for the year ended December 31, 2017 and the nine months ended September 30, 2018 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 consolidated financial information is provided for illustrative purposes only. The unaudited pro forma 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 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 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, GrowLife’s Annual Report on Form 10-K/A for the fiscal year ended December 31, 2017, as filed with the Securities and Exchange Commission on July 9, 2018, and GrowLife’s Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2018, as filed with the Securities and Exchange Commission on November 14, 2018.
1
PRO FORMA CONSOLIDATED BALANCE SHEETS
EZ-Clone | |||||
GrowLife, Inc. | Enterprises, Inc. | Pro Forma | Total | ||
December 31, 2017 | December 31, 2017 | Adjustments | December 31, 2017 | ||
ASSETS | (Audited) | (Audited) | |||
CURRENT ASSETS: | |||||
Cash and cash equivalents | $69,191 | $18,829 | $130,000 | a | $218,020 |
Accounts receivable | - | 99,959 | - | 99,959 | |
Inventory, net | 465,678 | 549,629 | - | 1,015,307 | |
Prepaid costs | - | 16,611 | - | 16,611 | |
Deposits | 24,308 | 6,100 | - | 30,408 | |
Total current assets | 559,177 | 691,128 | 130,000 | 1,380,305 | |
EQUIPMENT, NET | 302,689 | 351,864 | (105,306) | b | 549,247 |
INTANGIBLE ASSETS | - | - | 3,036,300 | c | 3,036,300 |
TOTAL ASSETS | $861,866 | $1,042,992 | $3,060,994 | $4,965,852 | |
LIABILITIES AND STOCKHOLDERS' (DEFICIT) | |||||
CURRENT LIABILITIES: | |||||
Accounts payable - trade | $821,398 | $147,661 | $- | $969,059 | |
Accrued expenses | 133,988 | 37,109 | - | 171,097 | |
Accrued expenses - related parties | 37,776 | - | - | 37,776 | |
Derivative liability | 2,660,167 | - | - | 2,660,167 | |
Current portion of convertible notes payable | 3,015,021 | - | 775,000 | d | 3,790,021 |
Current portion of notes payable | - | 148,269 | (148,269) | e | - |
Current portion of notes payable- related parties | - | 89,131 | - | 89,131 | |
Current portion of capital lease | - | 6,141 | - | 6,141 | |
Deferred revenue | 10,000 | - | - | 10,000 | |
Total current liabilities | 6,678,350 | 428,311 | 626,731 | 7,733,392 | |
LONG TERM LIABILITIES: | |||||
Long term portion of notes payable | - | 439,602 | (439,602) | f | - |
Capital leases | - | 10,704 | - | 10,704 | |
Total long term liabilites | - | 450,306 | (439,602) | 10,704 | |
COMMITMENTS AND CONTINGENCIES | - | - | - | - | |
STOCKHOLDERS' DEFICIT | |||||
Preferred stock | - | - | - | - | |
Common stock | 236,752 | 10,000 | 731 | g | 247,483 |
Additional paid in capital | 123,678,069 | 60,000 | 1,324,269 | h | 125,062,338 |
Accumulated deficit | (129,731,305) | 94,375 | (491,136) | i | (130,128,066) |
Total stockholders' deficit | (5,816,484) | 164,375 | 833,864 | (4,818,245) | |
NON CONROLLING INTEREST IN EZ CLONE ENTERPRISES, INC. | - | - | 2,040,001 | j | 2,040,001 |
TOTAL LIABILITIES, STOCKHOLDERS' DEFICIT AND NON CONTROLLING INTEREST | $861,866 | $1,042,992 | $3,060,994 | $4,965,852 |
See accompanying notes to these condensed consolidated financial statements.
2
GROWLIFE, INC. AND EZ-CLONE ENTERPRISES, INC.
PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
Year Ended, | ||||
EZ-Clone | ||||
GrowLife, Inc. | Enterprises, Inc. | Total | ||
December 31, 2017 | December 31, 2017 | Pro Forma Adjustments | December 31, 2017 | |
(Audited) | (Audited) | |||
NET REVENUE | $2,452,104 | $2,648,873 | $- | $5,100,977 |
COST OF GOODS SOLD | 2,180,603 | 1,310,455 | - | 3,491,058 |
GROSS PROFIT | 271,501 | 1,338,418 | - | 1,609,919 |
GENERAL AND ADMINISTRATIVE EXPENSES | 2,320,455 | 1,396,471 | - | 3,716,926 |
AMORTIZATION OF INTANGIBLE ASSETS- EZ-CLONE ENTERPRISES, INC. | - | - | 607,405k | 607,405 |
OPERATING LOSS | (2,048,954) | (58,053) | (607,405) | (2,714,412) |
OTHER INCOME (EXPENSE): | ||||
Change in fair value of derivative | 496,305 | - | - | 496,305 |
Interest expense, net | (1,281,083) | (39,581) | - | (1,320,664) |
Other (expense) income | 15,577 | - | - | 15,577 |
Loss on debt conversions | (2,502,819) | - | - | (2,502,819) |
Loss on sale of fixed assets | - | (30,128) | - | (30,128) |
Total other (expense) income | (3,272,020) | (69,709) | - | (3,341,729) |
(LOSS) BEFORE INCOME TAXES | (5,320,974) | (127,762) | (607,405) | (6,056,141) |
Income taxes - current benefit | - | (800) | - | (800) |
NET (LOSS) | $(5,320,974) | $(126,962) | $(607,405) | $(6,055,341) |
Basic and diluted (loss) per share | $(0.00) | $- | $(0.00) | |
Weighted average shares of common stock outstanding- basic and diluted | 2,044,521,389 | - | 107,307,692 | 2,151,829,081 |
See accompanying notes to these condensed consolidated financial statements.
3
GROWLIFE, INC. AND EZ-CLONE ENTERPRISES, INC.
PRO FORMA CONSOLIDATED BALANCE SHEETS
EZ-Clone | |||||
GrowLife, Inc. | Enterprises, Inc. | Pro Forma | Total | ||
September 30, 2018 | September 30, 2018 | Adjustments | September 30, 2018 | ||
ASSETS | (Unaudited) | (Audited) | |||
CURRENT ASSETS: | |||||
Cash and cash equivalents | $197,180 | $28,450 | $130,000 | a | $355,630 |
Accounts receivable | - | 37,950 | - | 37,950 | |
Inventory, net | 486,661 | 494,145 | - | 980,806 | |
Prepaid costs | - | 2,438 | - | 2,438 | |
Deposits | 32,921 | 6,100 | - | 39,021 | |
Total current assets | 716,762 | 569,083 | 130,000 | 1,415,845 | |
EQUIPMENT, NET | 502,397 | 317,734 | (90,891) | b | 729,240 |
INTANGIBLE ASSETS | - | - | 3,037,027 | c | 3,037,027 |
TOTAL ASSETS | $1,219,159 | $886,817 | $3,076,136 | $5,182,112 | |
LIABILITIES AND STOCKHOLDERS' (DEFICIT) | |||||
CURRENT LIABILITIES: | |||||
Accounts payable - trade | $954,218 | $191,529 | $- | $1,145,747 | |
Accrued expenses | 244,910 | 78,215 | - | 323,125 | |
Accrued expenses - related parties | 47,726 | - | - | 47,726 | |
Derivative liability | 1,118,107 | - | - | 1,118,107 | |
Current portion of convertible notes payable | 2,319,687 | - | 775,000 | d | 3,094,687 |
Current portion of notes payable | - | 139,125 | (139,125) | e | - |
Current portion of notes payable- related parties | - | 101,636 | - | 101,636 | |
Current portion of capital lease | - | 10,704 | - | 10,704 | |
Deferred revenue | 10,000 | - | - | 10,000 | |
Total current liabilities | 4,694,648 | 521,209 | 635,875 | 5,851,732 | |
LONG TERM LIABILITIES: | |||||
Long term portion of notes payable | - | 397,993 | (397,993) | f | - |
Total long term liabilites | - | 397,993 | (397,993) | - | |
COMMITMENTS AND CONTINGENCIES | - | - | - | - | |
STOCKHOLDERS' DEFICIT | |||||
Common stock | 305,411 | 10,000 | 731 | g | 316,142 |
Additional paid in capital | 134,527,801 | 60,000 | 1,324,269 | h | 135,912,070 |
Accumulated deficit | (138,308,701) | (102,385) | (446,746) | i | (138,857,832) |
Total stockholders' deficit | (3,475,489) | (32,385) | 878,254 | (2,629,620) | |
NON CONROLLING INTEREST IN EZ CLONE ENTERPRISES, INC. | - | - | 1,960,000 | j | 1,960,000 |
TOTAL LIABILITIES, STOCKHOLDERS' DEFICIT AND NON CONTROLLING INTEREST | $1,219,159 | $886,817 | $3,076,136 | $5,182,112 |
See accompanying notes to these condensed consolidated financial statements.
4
GROWLIFE, INC. AND EZ-CLONE ENTERPRISES, INC.
PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
Nine Months Ended, | |||||
EZ-Clone | |||||
GrowLife, Inc. | Enterprises, Inc. | Total | |||
September 30, 2018 | September 30, 2018 | Pro Forma Adjustments | September 30, 2018 | ||
(Unaudited) | (Audited) | ||||
NET REVENUE | $953,949 | $1,513,699 | $ | $2,467,648 | |
COST OF GOODS SOLD | 898,962 | 674,848 | - | 1,573,810 | |
GROSS PROFIT | 54,987 | 838,851 | - | 893,838 | |
GENERAL AND ADMINISTRATIVE EXPENSES | 1,116,724 | 918,635 | - | 2,035,359 | |
AMORTIZATION OF INTANGIBLE ASSETS- EZ-CLONE ENTERPRISES, INC. | - | - | 455,554 | k | 455,554 |
OPERATING LOSS | (1,061,737) | (79,784) | (455,554) | (1,597,075) | |
OTHER INCOME (EXPENSE): | |||||
Change in fair value of derivative | (120,286) | - | - | (120,286) | |
Interest expense, net | (365,859) | (28,876) | - | (394,735) | |
Impairment of acquired assets- Go Green | (60,000) | - | - | (60,000) | |
Loss on debt conversions | (645,483) | - | - | (645,483) | |
Total other (expense) income | (1,191,628) | (28,876) | - | (1,220,504) | |
(LOSS) BEFORE INCOME TAXES | (2,253,365) | (108,660) | (455,554) | (2,817,579) | |
Income taxes - current benefit | - | (1,100) | - | (1,100) | |
NET (LOSS) | $(2,253,365) | $(107,560) | $(455,554) | $(2,816,479) | |
Basic and diluted (loss) per share | $(0.00) | $- | $(0.00) | ||
Weighted average shares of common stock outstanding- basic and diluted | 2,996,701,771 | - | 107,307,692 | 3,104,009,463 |
See accompanying notes to these condensed consolidated financial statements.
5
(a)
Reflects cash received of $775,000 from the issuance of a convertible debenture, less $640,000 paid to EZ-Clone at closing.
(b)
Reflects the retirement of fixed assets at closing.
(c)
Reflects intangible assets booked related to the 51% acquisition of EZ-Clone, less the amortization of one year.
(d)
Reflects cash received of $775,000 from the issuance of a convertible debenture.
(e)
Reflects the retirement of current portion of debt at closing.
(f)
Reflects the retirement of long-term debt at closing.
(g)
Reflects the issuance of 107,307,692 restricted shares of the Company’s common stock for the 51% interest in EZ-Clone, offset by the elimination of the EZ-Clone common stock.
(h)
Reflects the issuance of 107,307,692 restricted shares of the Company’s common stock at a price of $0.013 per share or $1,395,000 for the 51% interest in EZ-Clone, offset by the elimination of the EZ-Clone additional paid in capital.
(i)
Reflects the amortization of the intangible asset for one year of an estimated five year life and the reversal of shareholder distributions.
(j)
Reflects the 49% non-controlling interest in EZ-Clone.
(k)
Reflects the amortization of the intangible asset for one year of an estimated five year life.
6