As of February 28, 2022 | |||||||||||||
Historical As Reported | Transaction Accounting Adjustments | Pro Forma | |||||||||||
ASSETS | |||||||||||||
Current assets | |||||||||||||
Cash and cash equivalents | $ | 1,999,241 | $ | 3,268,537 | (a) | $ | 5,267,778 | ||||||
Accounts receivable, net | 936,809 | — | 936,809 | ||||||||||
Inventories | 2,191,844 | — | 2,191,844 | ||||||||||
Prepaid expenses | 30,867 | — | 30,867 | ||||||||||
Income tax receivable | 17,730 | — | 17,730 | ||||||||||
Total current assets | 5,176,491 | 3,268,537 | 8,445,028 | ||||||||||
Leasehold assets | 11,423,035 | 837,023 | (b) | 12,260,058 | |||||||||
Property and equipment, net | 2,248,500 | — | 2,248,500 | ||||||||||
Property and equipment held for sale, net | 433,410 | (433,410 | ) | (c) | — | ||||||||
Leasehold, utilities, and ERP deposits | 829,001 | — | 829,001 | ||||||||||
Other assets | |||||||||||||
Intangible assets, net | 242,088 | — | 242,088 | ||||||||||
TOTAL ASSETS | $ | 20,352,525 | $ | 3,672,150 | $ | 24,024,675 | |||||||
LIABILITIES & STOCKHOLDERS' EQUITY | |||||||||||||
Current liabilities | |||||||||||||
Accounts payable | $ | 555,974 | $ | — | $ | 555,974 | |||||||
Accrued commissions | 59,208 | — | 59,208 | ||||||||||
Accrued payroll liabilities | 505,248 | — | 505,248 | ||||||||||
Accrued liabilities | 329,492 | — | 329,492 | ||||||||||
Customer deposits and prepayments | 112,791 | — | 112,791 | ||||||||||
Other accrued liabilities | 424,799 | — | 424,799 | ||||||||||
Current portion of long-term lease liabilities | 1,417,386 | 140,108 | (b) | 1,557,494 | |||||||||
Current portion of long-term debt | 472,431 | — | 472,431 | ||||||||||
Total current liabilities | 3,877,329 | 140,108 | 4,017,437 | ||||||||||
Long-term debt | 1,527,569 | — | 1,527,569 | ||||||||||
Long-term leasehold liabilities | 10,833,399 | 696,915 | (b) | 11,530,314 | |||||||||
Long-term deferred tax liability | — | — | — | ||||||||||
Total liabilities | 16,238,297 | 837,023 | 17,075,320 | ||||||||||
Stockholders' equity | |||||||||||||
Common stock, no par value, 20,000,000 shares authorized, 4,236,821 and 3,818,770 shares issued and outstanding at February 28, 2022, respectively; and 4,204,553 and 3,786,502 shares issued and outstanding at May 31, 2021, respectively | 12,318,375 | — | 12,318,375 | ||||||||||
Accumulated deficit | (8,204,147 | ) | 2,835,127 | (d) | (5,369,020 | ) | |||||||
Total stockholders' equity | 4,114,228 | 2,835,127 | 6,949,355 | ||||||||||
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | $ | 20,352,525 | $ | 3,672,150 | $ | 24,024,675 |
(a) Adjustment to reflect cash consideration received in the transaction. | |||
(b) Adjustment to recognize operating lease right-of-use asset and operating lease liability for leaseback executed as part of the transaction. | |||
(c) Adjustment to derecognize the net assets sold in the transaction. | |||
(d) Adjustment to reflect the impact of the gain on sale and transaction costs. |
Year Ended May 31, 2021 | |||||||||||||
Historical As Reported | Transaction Accounting Adjustments | Pro Forma | |||||||||||
Net sales | $ | 7,864,350 | $ | — | $ | 7,864,350 | |||||||
Cost of revenue | 4,593,588 | — | 4,593,588 | ||||||||||
Gross profit | 3,270,762 | — | 3,270,762 | ||||||||||
Operating expenses | |||||||||||||
General, administrative and sales | 12,045,174 | 150,414 | (a) | 12,195,588 | |||||||||
Impairment of intangible assets | 903,422 | 903,422 | |||||||||||
Transaction costs | 125,167 | 125,167 | |||||||||||
Research & development | 83,130 | 83,130 | |||||||||||
Total operating expenses | 13,156,893 | 150,414 | 13,307,307 | ||||||||||
Operating loss | (9,886,131 | ) | (150,414 | ) | (10,036,545 | ) | |||||||
Gain on sale of property and equipment | — | — | |||||||||||
Bargain purchase gain | 1,138,808 | 1,138,808 | |||||||||||
Forgiveness of PPP loans | — | — | |||||||||||
Interest income (expense), net | (19,038 | ) | (19,038 | ) | |||||||||
Other income (expense), net | 273,023 | (17,671 | ) | (b) | 255,352 | ||||||||
Income (loss) before income taxes | (8,493,338 | ) | (168,085 | ) | (8,661,423 | ) | |||||||
Income tax provision (benefit) from continuing operations | (403,666 | ) | (46,423 | ) | (c) | (450,089 | ) | ||||||
Net income (loss) | $ | (8,089,672 | ) | $ | (121,661 | ) | $ | (8,211,333 | ) | ||||
Net income (loss) per common share: | |||||||||||||
Basic | $ | (2.15 | ) | $ | (2.18 | ) | |||||||
Weighted average number of common shares, basic | 3,765,783 | 3,765,783 | |||||||||||
Diluted | (2.15 | ) | $ | (2.18 | ) | ||||||||
Weighted average number of common shares, diluted | 3,765,783 | 3,765,783 |
(a) Adjustment to remove historical depreciation expense recognized on disposed assets and add operating lease expense under the leaseback. |
(b) Adjustment to remove historical lease income recognized. |
(c) Adjustment to reflect the tax effect of pro forma adjustments to income (loss) before taxes, at the estimated statutory rate of 27.6%. |
Nine Months Ended February 28, 2022 | |||||||||||||
Historical As Reported | Transaction Accounting Adjustments | Pro Forma | |||||||||||
Net sales | $ | 8,570,053 | $ | — | $ | 8,570,053 | |||||||
Cost of revenue | 3,618,925 | — | 3,618,925 | ||||||||||
Gross profit | 4,951,128 | — | 4,951,128 | ||||||||||
Operating expenses | |||||||||||||
General, administrative and sales | 11,604,964 | 124,075 | (a) | 11,729,039 | |||||||||
Impairment of intangible assets | — | — | — | ||||||||||
Transaction costs | — | — | — | ||||||||||
Research & development | 25,616 | — | 25,616 | ||||||||||
Total operating expenses | 11,630,580 | 124,075 | 11,754,655 | ||||||||||
Operating loss | (6,679,452 | ) | (124,075 | ) | (6,803,527 | ) | |||||||
Gain on sale of property and equipment | 4,598,095 | — | 4,598,095 | ||||||||||
Bargain purchase gain | — | — | — | ||||||||||
Forgiveness of PPP loans | 2,059,826 | — | 2,059,826 | ||||||||||
Interest income (expense), net | (37,811 | ) | — | (37,811 | ) | ||||||||
Other income (expense), net | 323,589 | (29,098 | ) | (b) | 294,491 | ||||||||
Income (loss) before income taxes | 264,247 | (153,173 | ) | 111,074 | |||||||||
Income tax provision (benefit) from continuing operations | 14,618 | (42,305 | ) | (c) | (27,687 | ) | |||||||
Net income (loss) | $ | 249,629 | $ | (110,868 | ) | $ | 138,761 | ||||||
Net income (loss) per common share: | |||||||||||||
Basic | $ | 0.07 | $ | 0.04 | |||||||||
Weighted average number of common shares, basic | 3,790,022 | 3,790,022 | |||||||||||
Diluted | 0.07 | $ | 0.04 | ||||||||||
Weighted average number of common shares, diluted | 3,813,675 | 3,813,675 |
(a) Adjustment to remove historical depreciation expense recognized on disposed assets and add operating lease expense under the leaseback. |
(b) Adjustment to remove historical lease income recognized. |
(c) Adjustment to reflect the tax effect of pro forma adjustments to income (loss) before taxes, at the estimated statutory rate of 27.6%. |