EXHIBIT 99.2
Worlds Online Inc.
Introduction to Pro Forma Condensed Combined Financial Statements
The following unaudited pro forma condensed combined financial statements are presented to illustrate the estimated effects of the Membership Interest Purchase Agreement between MariMed Advisors Inc., a wholly owned subsidiary of Worlds Online Inc. and Sigal Consulting LLC, a Massachusetts limited liability company, on the historical financial position and results of operations of Worlds Online Inc.
The pro forma balance sheet as of June 30, 2014 is based on the unaudited consolidated balance sheet of Worlds Online Inc. and the unaudited balance sheet of Sigal Consulting LLC. The pro forma statement of operations for the six months ended June 30, 2014 is based on the unaudited consolidated statement of operations for Worlds Online Inc. and the unaudited statement of operations of Sigal consulting LLC for the six months ended June 30, 2014. The pro forma statement of operations for the year ended December 31, 2013 is based on the audited consolidated statement of operations for Worlds Online Inc. for the year ended December 31, 2013 and the audited statement of operations of Sigal Consulting LLC for the period from August 16, 2013 (inception) through to December 31, 2013.
The unaudited pro forma condensed combined statement of operations for the six months ended June 30, 2014 and for the year ended December 31, 2013 assumes that the transaction was consummated on January 1, 2013. The unaudited pro forma condensed combined balance sheet as of June 30, 2014 assumes the transaction was consummated on that date.
The information presented in the unaudited pro forma condensed combined financial statements does not purport to represent what the financial position or results of operations of Worlds Online Inc. would have been had the transaction occurred as of the dates indicated, nor is it indicative of the future financial position or results of operations for any period of Worlds Online Inc.
The pro forma adjustments are based upon available information and certain assumptions that the management of Worlds Online Inc. believes are reasonable under the circumstances.
These unaudited pro forma condensed combined financial statements should be read in conjunction with the accompanying notes and assumptions and the historical financial statements and related notes of Worlds Online Inc. and Sigal Consulting LLC.
| (1) |
| Worlds Online Inc. and Subsidiaries | ||||||||||||||||||
| Unaudited Pro Forma Condensed Combined Balance Sheet | ||||||||||||||||||
| As of June 30, 2014 | ||||||||||||||||||
| Pro Forma | ||||||||||||||||||
| Worlds | Sigal | Pro Forma | Combined | |||||||||||||||
| Online Inc. | Consulting LLC | Adjustment | Total | |||||||||||||||
| ASSETS | ||||||||||||||||||
| Current Assets | ||||||||||||||||||
| Cash | $ | 358,153 | $ | 284,307 | $ | 642,460 | ||||||||||||
| Accounts receivables | — | 55,500 | 55,500 | |||||||||||||||
| Advance to Client | — | 72,000 | 72,000 | |||||||||||||||
| Due from client | — | 100 | 100 | |||||||||||||||
| Trading securities | 7,373 | — | 7,373 | |||||||||||||||
| Total Current Assets | 365,526 | 411,907 | 777,433 | |||||||||||||||
| Other Assets | ||||||||||||||||||
| Licenses and domain names | — | 425,000 | 425,000 | |||||||||||||||
| Deposits | — | 32,500 | 32,500 | |||||||||||||||
| Total Other Assets | — | 457,500 | 457,500 | |||||||||||||||
| TOTAL ASSETS | $ | 365,526 | $ | 869,407 | $ | 1,234,933 | ||||||||||||
| Current Liabilities | ||||||||||||||||||
| Accounts Payables | $ | — | $ | 103,426 | $ | 103,426 | ||||||||||||
| Accrued expenses | 692,591 | 18,000 | 710,591 | |||||||||||||||
| Account payable - related party | 200,129 | — | 200,129 | |||||||||||||||
| Due to Affiliate | — | 20,000 | 20,000 | |||||||||||||||
| Note payable | 450,000 | 500,000 | 950,000 | |||||||||||||||
| License fee payable | — | 250,000 | 250,000 | |||||||||||||||
| Deferred revenue | 226,950 | — | 226,950 | |||||||||||||||
| Total Current Liabilities | 1,569,670 | 891,426 | 2,461,096 | |||||||||||||||
| Other Liabilities | ||||||||||||||||||
| Due to members | — | 75,072 | 75,072 | |||||||||||||||
| Total Other Liabilities | — | 75,072 | 75,072 | |||||||||||||||
| — | ||||||||||||||||||
| Total Liabilities | $ | 1,569,670 | $ | 966,498 | $ | 2,536,168 | ||||||||||||
| Stockholders' (Deficit) | ||||||||||||||||||
| Common Stock (Par value $0.001 authorized 100,000,000 shares, issued and outstanding 31,954,236 on June 30, 2014 | $ | 31,954 | $ | — | 31,954 | A | $ | 63,908 | ||||||||||
| Common stock subscribed but not yet issued | 400 | — | 400 | |||||||||||||||
| Common Stock Warrants | 1,165,563 | — | 1,165,563 | |||||||||||||||
| Additional Paid in Capital | (392,521 | ) | 6,609,033 | A B C | 6,216,512 | |||||||||||||
| Members capital | — | (97,091 | ) | 97,091 | C | — | ||||||||||||
| Accumulated Deficit | (2,009,540 | ) | — | (6,741,095 | ) | A B C D | (8,750,635 | ) | ||||||||||
| Non-controlling interest | 3,017 | D | 3,017 | |||||||||||||||
| Total stockholders deficit | $ | (1,204,144 | ) | $ | (97,091 | ) | $ | (1,301,235 | ) | |||||||||
| TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT | $ | 365,526 | $ | 869,407 | $ | 1,234,933 | ||||||||||||
| See accompanying notes to (unaudited) pro forma financial statements. | ||||||||||||||||||
| (2) |
| Worlds Online Inc. and Subsidiaries | |||||||||||||||||||
| Unaudited Pro Forma Condensed Combined Statement of Operations | |||||||||||||||||||
| For the Six Months Ended June 30, 2014 | |||||||||||||||||||
| Worlds | Sigal | ||||||||||||||||||
| Online Inc. | Consulting LLC | Pro Forma | Pro Forma Combined | ||||||||||||||||
| Adjustment | Total | ||||||||||||||||||
| Revenues | |||||||||||||||||||
| Revenue | $ | 444 | $ | 149,250 | $149,694 | ||||||||||||||
| Total | 444 | 149,250 | 149,694 | ||||||||||||||||
| Cost and Expenses | |||||||||||||||||||
| Cost of Revenue | 4,900 | 47,526 | 52,426 | ||||||||||||||||
| Gross (Loss) | (4,456 | ) | 101,724 | 97,268 | |||||||||||||||
| Option Expense | 35,999 | — | 35,999 | ||||||||||||||||
| Selling, General & Admin. | 99,302 | 75,660 | 174,962 | ||||||||||||||||
| Payroll and related taxes | 96,250 | 10,391 | 106,641 | ||||||||||||||||
| Total expenses | 231,551 | 86,051 | 317,602 | ||||||||||||||||
| Operating (loss) | (236,007 | ) | 15,673 | (220,334) | |||||||||||||||
| Other Income (Expense): | |||||||||||||||||||
| Gain on trading securities | 5,404 | — | 5,404 | ||||||||||||||||
| Unrealized loss on trading securities | (6,208 | ) | — | (6,208) | |||||||||||||||
| Interest expense | (1,299 | ) | (9,516 | ) | (10,815) | ||||||||||||||
| Loss on extinguishment of debt | (19,078 | ) | — | (19,078) | |||||||||||||||
| Impairment loss on goodwill | C | — | |||||||||||||||||
| Net (Loss) | $ | (257,189 | ) | $ | 6,157 | $(251,032) | |||||||||||||
| Less: Net income attributable to noncontrolling interests | 3,017 | D | 3,017 | ||||||||||||||||
| Net (loss) attributable to WORX common shareholders | $(254,048) | ||||||||||||||||||
| Pro forma (loss) per share | $(0.01) | ||||||||||||||||||
| Number of Shares Affected by the Transaction | 31,954,236 | E | |||||||||||||||||
| See accompanying notes to (unaudited) pro forma financial statements. |
| (3) |
| Worlds Online Inc. and Subsidiaries | |||||||||||||||||
| Unaudited Pro Forma Condensed Combined Statement of Operations | |||||||||||||||||
| For the Year Ended December 31, 2013 | |||||||||||||||||
| Worlds | Sigal Consulting LLC | ||||||||||||||||
| Online Inc. | For the period from | Pro Forma | |||||||||||||||
| Year ended | August 16, 2013 (inception) | Pro Forma | Combined | ||||||||||||||
| December 31, 2013 | through December, 31, 2013 | Adjustment | Total | ||||||||||||||
| Revenues | |||||||||||||||||
| Revenue | $ | 904 | $ | 109,000 | $109,904 | ||||||||||||
| Total | 904 | 109,000 | 109,904 | ||||||||||||||
| Cost and Expenses | |||||||||||||||||
| Cost of Revenue | 26,285 | 98,630 | 124,915 | ||||||||||||||
| Gross (Loss) | (25,381 | ) | 10,370 | (15,011) | |||||||||||||
| Option Expense | 3,198 | — | 3,198 | ||||||||||||||
| Common stock issued for services rendered | 94,000 | — | 94,000 | ||||||||||||||
| Selling, General & Admin. | 182,055 | 108,062 | 290,117 | ||||||||||||||
| Payroll and related taxes | 253,510 | — | 253,510 | ||||||||||||||
| Total expenses | 532,763 | 108,062 | 640,825 | ||||||||||||||
| Operating (loss) | (558,145 | ) | (97,692 | ) | (655,837) | ||||||||||||
| Other Income (Expense): | |||||||||||||||||
| Gain on trading securities | 6,684 | — | 6,684 | ||||||||||||||
| Unrealized loss on trading securities | (2,696 | ) | — | (2,696) | |||||||||||||
| Unrealized gain on trading securities | 18,550 | — | 18,550 | ||||||||||||||
| Interest expense | — | (5,556 | ) | (5,556) | |||||||||||||
| Impairment loss on goodwill | C | ||||||||||||||||
| Net (Loss) | $ | (535,607 | ) | $ | (103,248 | ) | $(638,855) | ||||||||||
| Less: Net (loss) attributable to noncontrolling interests | (50,592 | ) | D | (50,592) | |||||||||||||
| Net (loss) attributable to WORX common shareholders | $(588,263) | ||||||||||||||||
| Pro forma (loss) per share | $(0.02) | ||||||||||||||||
| Number of Shares Affected by the Transaction | 31,954,236 | E | |||||||||||||||
See accompanying notes to (unaudited) pro forma financial statements.
| (4) |
Worlds Online Inc.
Notes to Pro Forma Condensed Combined Financial Statements
On May 19, 2014, Worlds Online Inc. (the “Company”) entered into a Membership Interest Purchase Agreement (the “Agreement”) between MariMed Advisors Inc. (“MariMed”), a wholly owned subsidiary of the Company, Sigal Consulting LLC (“Sigal”), a Massachusetts limited liability company, and the Members of Sigal (“Sellers”). The transaction was completely closed on September 29, 2014, and an 8-K was filed on October 3, 2014. Pursuant to the Agreement, the Company acquired all of the interest in Sigal Consulting LLC through MariMed in consideration to Sellers for an aggregate amount of (i) The Company’s common stock equal to 50% of the Company’s outstanding common stock on the Closing Date; (ii) three million stock options of the Company to purchase the Company’s common stock which are exercisable over five years with various exercise price and (iii) 49% of MariMed’s outstanding common stock on the Closing Date. As a result, the Company indirectly owned 51% of Sigal Consulting LLC through its 51% ownership in MariMed.
The transaction is accounted for as a purchase acquisition/merger wherein the Company is both accounting acquirer and legal acquirer. Accordingly, the accounting acquirer records the assets purchased and liabilities assumed as part of the merger and the portion that fair value of common stock issued and options granted for acquisition over the book value of Signal is recorded as goodwill, which is impaired in full subsequently.
A= Subsequently record 31,954,236 new common shares issued to Sellers. The fair value of the stock issuance was determined by the market value of the Company’s common stock on the granted date at a price of approximately $.19 per share.
B= Subsequently record 3,000,000 stock options granted to Sellers. The fair value of the stock options was measured using the Black-Scholes valuation model on the grant date.
C =Eliminate negative members capital in Sigal, which increased the impairment loss on goodwill by the same amount. The impairment loss on goodwill in total amount of $6,738,078 was not included in pro forma income statement since it was material nonrecurring charge directly resulting from the transaction.
D =Reflect the 49% minority interest in Sigal.
E= The denominator in computing pro forma loss per shares is 31,954,236 shares, representing outstanding shares affected by the transaction per 8-K above, excluding 3,000,000 stock options due to their anti-dilutive feature.
