UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
Exhibit 99.4
UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
The following unaudited pro forma combined financial data are presented to illustrate the effect of the following acquisitions (“the Acquisitions”):
1. | On February 13, 2023, MDwerks, Inc. (the “Company”) entered into a Merger Agreement (the “Merger Agreement”), by and between the Company, MD-TT Merger Sub, Inc., a wholly owned subsidiary of the Company (“Merger Sub”) and Two Trees Beverage Co. (“Two Trees”). The Merger Agreement was amended on February 16, 2023, September 11, 2023, and December 7, 2023. The Company, Merger Sub and Two Trees may be referred to herein collectively as the “Parties” and separately as a “Party.” The Merger closed on December 8, 2023. In consideration of the Merger Agreement, at the effective time of the Merger, each of the holders of Two Trees stock, subject to certain exceptions set forth in the Merger Agreement, shall have the right to convert all of the shares of Two Trees stock into a total of 60,000,000 shares of Company common stock, which shall be apportioned between the Two Trees stockholders, pro rata, based on the number of shares of Two Trees stock held by each of the Two Trees stockholders as of the closing of the Merger (the “Merger Consideration”), and |
2. | On January 19, 2023, MDwerks, Inc. (the “Company”) entered into an Exchange Agreement (the “Exchange Agreement”), dated as of January 19, 2023, by and between the Company, RF Specialties LLC (“RFS”) and Xxxxx X. Xxxx as the sole member of RFS. Pursuant to the terms of the Exchange Agreement, the Company agreed to acquire from Xx. Xxxx, and Xx. Xxxx agreed to sell to the Company, 100% of the equity interests and membership interests of RFS, in exchange for the issuance by the Company to Xx. Xxxx of 7,500,000 shares of the Company’s common stock (the “Exchange”). Immediately following the Exchange, RFS will be a wholly owned subsidiary of the Company. The Exchange closed on December 27, 2023. |
Collectively, the acquired companies of Two Trees and RFS will be referred to as the “Acquired Businesses.”
The following unaudited pro forma combined balance sheet data as of September 30, 2023, is presented as if the Merger had occurred on September 30, 2023. The following unaudited pro forma combined statements of operations data for the nine months ended September 30, 2023, and the year ended December 31, 2022, is presented as if the Merger occurred on January 1, 2022.
The pro forma adjustments are based upon available information and certain assumptions that the Company believes are reasonable under the circumstances; however, the actual results could differ. The pro forma adjustments are directly attributable to the Merger and are expected to have a continuing impact on the results of operations of the Company. Management believes that all adjustments necessary to present fairly the unaudited pro forma combined financial statements have been made. The unaudited pro forma combined financial statements are presented for informational purposes only and are not necessarily indicative of the results of operations that would have resulted had the Merger been consummated on the dates indicated and should not be construed as being representative of the Company’s future results of operations or financial position.
The acquired assets, liabilities and results of operations presented herein were derived from the audited financial statements of the Acquired Businesses for the year ended December 31, 2022 and the unaudited interim financial statements for the nine months ended September 30, 2023 (collectively, the “Financial Statements”).
The unaudited pro forma combined financial statements included herein constitute forward-looking information and are subject to certain risks and uncertainties that could cause actual results to differ materially from those anticipated. See the sections titled “Risk Factors” and “Cautionary Statement Regarding Forward-Looking Information” in the Initial Registration Statement and the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2023, as filed with the Commission.
UNAUDITED PRO FORMA COMBINED BALANCE SHEET
AS OF SEPTEMBER 30, 2023
Historical Two Trees Beverage Company | Historical MDwerks, Inc. | Two Trees Acquisition Pro Forma | Historical RF Specialties LLC | RF Specialties Pro Forma | Combined Pro Forma | |||||||||||||||||||
September 30, 2023 | September 30, 2023 | Adjustments (See Notes) | September 30, 2023 | Adjustments (See Notes) | September 30, 2023 | |||||||||||||||||||
ASSETS | ||||||||||||||||||||||||
Current Assets | ||||||||||||||||||||||||
Cash | $ | 30,064 | $ | 166,048 | $ | - | $ | 97,894 | - | $ | 294,006 | |||||||||||||
Accounts receivable, net | 81,246 | - | - | 78,443 | - | 159,689 | ||||||||||||||||||
Loans receivable | - | 75,000 | (75,000 | )(a) | - | - | - | |||||||||||||||||
Inventory | 207,134 | - | - | - | - | 207,134 | ||||||||||||||||||
Prepaid expenses | 11,170 | - | - | - | - | 11,170 | ||||||||||||||||||
Total current assets | 329,614 | 241,048 | (75,000 | ) | 176,337 | 671,999 | ||||||||||||||||||
Non-current Assets | ||||||||||||||||||||||||
Right-of-use asset | 337,155 | - | - | 820,192 | - | 1,157,347 | ||||||||||||||||||
Intangible Assets, net | - | 18,864 | - | - | - | 18,864 | ||||||||||||||||||
Property & Equipment, net | 180,379 | 61,856 | - | 188,112 | - | 430,347 | ||||||||||||||||||
Other Assets, net | - | - | - | 16,010 | - | 16,010 | ||||||||||||||||||
Note receivable | 95,000 | - | - | 95,000 | ||||||||||||||||||||
Goodwill | - | 604,652 | (b) | 12,933 | (e) | 617,585 | ||||||||||||||||||
TOTAL ASSETS | $ | 847,148 | $ | 416,768 | $ | 529,652 | $ | 1,200,651 | $ | 12,933 | $ | 3,007,152 | ||||||||||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||||||||||||||||||
Current liabilities | ||||||||||||||||||||||||
Accounts payable & accrued expenses | $ | 328,060 | $ | 6,640 | $ | - | $ | - | $ | - | $ | 334,700 | ||||||||||||
Advances payable | - | 203,504 | - | - | - | 203,504 | ||||||||||||||||||
Notes Payable, current | 21,584 | - | - | 22,342 | - | 43,926 | ||||||||||||||||||
Loan Payable – Related Party | 75,000 | - | (75,000 | )(a) | - | - | - | |||||||||||||||||
Deferred Revenue | 44,759 | - | - | - | 44,759 | |||||||||||||||||||
Accrued expenses | 57,768 | - | 82,836 | - | 140,604 | |||||||||||||||||||
Right-of-use liability, current portion | 119,549 | - | 93,931 | - | 213,480 | |||||||||||||||||||
Total current liabilities | 646,720 | 210,144 | (75,000 | ) | 199,109 | - | 980,973 | |||||||||||||||||
Long-term loans payable | 63,214 | - | 63,214 | |||||||||||||||||||||
Right-of-use Liability, net of current portion | 220,081 | 726,262 | - | 946,343 | ||||||||||||||||||||
Total liabilities | 866,801 | 210,144 | (75,000 | ) | 988,584 | - | 1,990,529 | |||||||||||||||||
Mezzanine | ||||||||||||||||||||||||
Preferred stock, par value $0.0001; 2,045,940 shares authorized of which 2,045,940 shares are issued and outstanding as of September 30, 2023 | 3,325,099 | (3,325,099 | )(c) | - | ||||||||||||||||||||
Members’ Equity (Deficit) | ||||||||||||||||||||||||
Members’ equity (deficit) | (587,805 | ) | 587,805 | (f)) | ||||||||||||||||||||
Stockholders’ Equity (Deficit) | ||||||||||||||||||||||||
Preferred stock, par value .0001; 10,000,000 shares authorized, of which 8,957,500 are issued and outstanding as of September 30, 2023 | 8,958 | - | 8,958 | |||||||||||||||||||||
Common stock, par value $0.0001; 9,999,605 shares authorized of which 9,999,605 shares are issued and outstanding as of September 30, 2023 | 1,000 | (1,000 | )(c) | - | - | |||||||||||||||||||
Common stock, par value .0001, 300,000,000 shares authorized, of which 122,260,208 shares issued and outstanding as of September 30, 2023 | 127,492 | 60,000 | (d) | - | 7,500 | (g) | 194,992 | |||||||||||||||||
Additional paid-in capital | 3,762,385 | 593,602 | (3,237,385 | )(c),(d) | - | 217,500 | (g) | 1,336,101 | ||||||||||||||||
Accumulated deficit | (7,108,137 | ) | (523,428 | ) | 7,108,137 | (c) | 799,872 | (799,872 | )(f) | (523,428 | ) | |||||||||||||
Total stockholders’ equity (deficit) | (3,344,752 | ) | 206,624 | 3,929,751 | 212,067 | 12,933 | 1,016,623 | |||||||||||||||||
TOTAL LIABILITIES, MEZZANINE, MEMBERS’ AND STOCKHOLDERS’ EQUITY (DEFICIT) | $ | 847,148 | $ | 416,768 | $ | 529,652 | $ | 1,200,651 | $ | 12,933 | $ | 3,007,152 |
See the accompanying notes to these unaudited proforma consolidated financial statements.
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2023
Consolidated Historical Two Trees Beverage Company September 30, 2023 | Historical September 30, 2023 | Historical RF Specialties September 30, 2023 | Pro Forma Adjustments | Combined Pro Forma September 30, 2023 | ||||||||||||||||
Total Income | $ | 1,251,408 | $ | - | $ | 512,502 | $ | - | $ | 1,763,910 | ||||||||||
Cost of Goods Sold | 751,789 | - | 149,325 | - | 901,114 | |||||||||||||||
Gross profit | 499,619 | - | 363,177 | - | 862,796 | |||||||||||||||
Operating expenses: | ||||||||||||||||||||
General & Administrative Expense | 1,002,082 | 234,659 | 182,456 | - | 1,419,197 | |||||||||||||||
Xxxxxx and Wages | 431,653 | - | - | - | 431,653 | |||||||||||||||
Depreciation & Amortization Expense | 44,607 | - | 35,246 | - | 79,853 | |||||||||||||||
Total operating expenses | 1,478,342 | 234,659 | 217,702 | - | 1,930,703 | |||||||||||||||
Income (loss) from operations | (978,723 | ) | (234,659 | ) | 145,475 | - | (1,067,907 | ) | ||||||||||||
Other income (expense): | ||||||||||||||||||||
Other Income | 959 | - | - | - | 959 | |||||||||||||||
Interest Expense – Net | (605 | ) | (9,908 | ) | (5,873 | ) | - | (16,386 | ) | |||||||||||
Gain on Sale of Asset | - | 168,855 | - | - | 168,855 | |||||||||||||||
Total other income (expense) | 354 | 158,947 | (5,873 | ) | - | 153,428 | ||||||||||||||
Income (loss) before income taxes | (978,369 | ) | (75,712 | ) | 139,602 | - | (914,479 | ) | ||||||||||||
Income tax benefit | - | - | - | - | - | |||||||||||||||
Net income (loss) | $ | (978,369 | ) | $ | (75,712 | ) | $ | 139,602 | $ | - | (914,479 | ) | ||||||||
- | ||||||||||||||||||||
Income (loss) per common share | ||||||||||||||||||||
Basic | $ | (0.00 | ) | $ | (0.00 | ) | $ | (0.00 | ) | |||||||||||
Shares used in computing earnings/(loss) per common share | ||||||||||||||||||||
Basic | - | 124,077,691 | - | 67,500,000 | 191,577,691 |
See the accompanying notes to these unaudited proforma consolidated financial statements.
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2022
Historical Two Trees Beverage December 31, 2022 | Historical December 31, 2022 | Historical RF Specialties December 31, 2022 | Pro Forma Adjustments | Combined Pro Forma December 31, 2022 | ||||||||||||||||
Total Income | $ | 2,602,058 | $ | - | $ | 552,792 | $ | - | $ | 3,154,850 | ||||||||||
Cost of Goods Sold | 1,489,036 | - | 226,120 | - | 1,715,156 | |||||||||||||||
Gross profit | 1,113,022 | - | 326,672 | - | 1,439,694 | |||||||||||||||
Operating expenses: | ||||||||||||||||||||
Selling, general and administrative expenses | 2,288,731 | 153,713 | 160,675 | - | 2,602,939 | |||||||||||||||
Salaries and Wages | 1,148,364 | - | - | - | 1,148,364 | |||||||||||||||
Depreciation and Amortization | 108,439 | - | 20,643 | - | 129,082 | |||||||||||||||
Total operating expenses | 3,545,534 | 153,713 | 181,318 | - | 3,880,385 | |||||||||||||||
Income (loss) from operations | (2,432,332 | ) | (153,713 | ) | 145,354 | - | (2,440,691 | ) | ||||||||||||
Other (income) expense: | ||||||||||||||||||||
Gain on Sale of Assets | - | - | (4,848 | ) | - | (4,848 | ) | |||||||||||||
Interest Income | - | - | (2,751 | ) | - | (2,751 | ) | |||||||||||||
Interest Expense | 10,996 | - | 3,052 | - | 14,048 | |||||||||||||||
Total other (income) expense | 10,996 | - | (4,547 | ) | - | 6,449 | ||||||||||||||
Income (loss) before income taxes | (2,443,508 | ) | (153,713 | ) | 149,901 | - | (2,440,691 | ) | ||||||||||||
Income tax benefit | - | - | ||||||||||||||||||
Net income (loss) | $(2, 423,508) | $ | (153,713 | ) | $ | 149,901 | $ | - | $ | (2,447,140 | ) | |||||||||
Income (loss) per common share | ||||||||||||||||||||
Basic | $ | (0.01 | ) | $ | (0.03 | ) | ||||||||||||||
Shares used in computing earnings/(loss) per common share | ||||||||||||||||||||
Basic | 24,565,003 | 67,500,000 | 95,065,003 |
See the accompanying notes to these unaudited proforma consolidated financial statements.
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
1. | DESCRIPTION OF TRANSACTIONS |
Two Trees Merger Agreement
On February 13, 2023, MDwerks, Inc. (the “Company”) entered into a Merger Agreement (the “Merger Agreement”), dated as of February 13, 2023, by and between the Company, MD-TT Merger Sub, Inc., a wholly owned subsidiary of the Company (“Merger Sub”) and Two Trees Beverage Co. (“Two Trees”). The Company, Merger Sub and Two Trees may be referred to herein collectively as the “Parties” and separately as a “Party.”
The Merger Agreement provides that, subject to the terms and conditions set forth in the Merger Agreement, the Parties wish to effect a business combination through a merger of Merger Sub with and into Two Trees (the “Merger”), subject to the terms and conditions set forth in the Merger Agreement, with Two Trees continuing as the surviving corporation (“Surviving Corporation”). As a result of the Merger, the certificate of incorporation of Two Trees as in effect immediately prior to the closing date will be the certificate of incorporation of the Surviving Corporation, and the bylaws of Two Trees as in effect immediately prior to the closing date will be the bylaws of the Surviving Corporation.
Pursuant to the terms of the Merger Agreement, at the closing of the Merger, the Company’s Board of Directors (the “Company Board”) will be expanded and a number of persons as named by Two Trees will be named to the Company Board such that such persons comprise a majority of the Company Board, and the Company Board as such newly constituted will name or replace any officers of the Company as it may determine. In addition, at the closing of the Merger, the directors and officers of Two Trees as in place immediately prior to the closing will remain in place as the directors and officers of the Surviving Corporation.
The transaction closed on December 8, 2023 and will be accounted for as a business combination under ASC 805.
RF Specialties Exchange Agreement
As disclosed in the Current Report on Form 8-K filed with the United States Securities and Exchange Commission (the “SEC”) by MDwerks, Inc. (the “Company”) on January 25, 2023, the Company entered into an Exchange Agreement dated as of January 19, 2023 (the “Exchange Agreement”) with Xxxxx X. Xxxx, the sole member of RF Specialties LLC (“RFS”) as amended on December 20, 2023 (the “Exchange”). Pursuant to the terms of the Exchange Agreement, the Company agreed to acquire from Xx. Xxxx, and Xx. Xxxx agreed to sell to the Company, 100% of the equity interests and membership interests of RFS, in exchange for the issuance by the Company to Xx. Xxxx of 7,500,000 shares of the Company’s common stock (the “Exchange Shares”).
On December 27, 2023, the Company completed the acquisition of RFS and the Exchange and issued to Xx. Xxxx 7,500,000 shares of the Company’s common stock, $0.001 par value per share (the “Common Stock”). Immediately following the completion of the Exchange, RFS became a wholly owned subsidiary of the Company and the number of shares of the Company’s Common Stock outstanding is 198,391,536.
The Exchange Shares are subject to a 24-month lock-up; provided, however, that (i) one-third of the Exchange Shares will be released from the lock-up restrictions on the 12-month anniversary of the closing of the Exchange, and (ii) one-third of the Exchange Shares will be released from the lock-up restrictions on the 18-month anniversary of the closing of the Exchange. The remaining one-third of the Exchange Shares will be released from the lock-up restrictions on the 24-month anniversary of the closing of the Exchange.
The transaction closed on December 27, 2023, and will be accounted for as a business combination under ASC 805.
2. | BASIS OF PRESENTATION |
The accompanying unaudited pro forma combined financial statements are based on the Company’s, and the Acquired Businesses’ historical financial as adjusted to give effect to the pro forma adjustments necessary to reflect the Merger and the Company’s new equity issuance to finance the acquisition. The unaudited pro forma combined statement of operations for the nine months ended September 30, 2023, and the year ended December 31, 2022, gives effect to the Acquired Businesses as if it had occurred on January 1, 2022, respectively and the pro forma combined balance sheet as of September 30, 2023, gives effect to the Merger as if it had occurred on September 30, 2023.
3. | PRELIMINARY PURCHASE PRICE ALLOCATIONS |
The preliminary purchase prices for the Acquired Businesses have been allocated to the assets acquired and liabilities assumed for purposes of this pro forma financial information based on their estimated relative fair values. The purchase price allocations herein are preliminary. The final purchase price allocations for the Acquired Businesses will be determined after completion of a thorough analysis to determine the fair value of all assets acquired and liabilities assumed but in no event later than one year following completion of the Merger. Accordingly, the final merger accounting adjustments could differ materially from the accounting adjustments included in the pro forma financial statements presented herein. Any increase or decrease in the fair value of the assets acquired and liabilities assumed, as compared to the information shown herein, could also change the portion of purchase price allocable to goodwill and could impact the operating results of the Company following the merger due to differences in purchase price allocation, depreciation and amortization related to some of these assets and liabilities.
Two Trees Preliminary Purchase Price Allocation
The merger with Two Trees is being accounted for as a business combination under Financial Accounting Standards Board Accounting Standards Codification (ASC) 805. The following information summarizes the provisional purchase consideration and preliminary allocation of the fair values assigned to the assets at the purchase date:
Preliminary Purchase Price: | ||||
60,000,000 common share @ $0.01 per share | $ | 660,000 | ||
Total preliminary purchase consideration | $ | 660,000 | ||
Preliminary Purchase Price Allocation | ||||
Cash | $ | 30,064 | ||
Accounts receivable | 81,246 | |||
Inventory | 207,134 | |||
Prepaid expenses | 11,170 | |||
Other assets | 337,155 | |||
Fixtures and equipment | 180,379 | |||
Liabilities assumed | (866,801 | ) | ||
Goodwill | 604,652 | |||
Net assets acquired | $ | 660,000 |
RF Specialties LLC Preliminary Purchase Price Allocation
Preliminary Purchase Price: | ||||
7,500,000 common share @ $0.03 per share based on closing price of the Company’s common stock at December 27, 2023 | $ | 225,000 | ||
Total preliminary purchase consideration | $ | 225,000 | ||
Preliminary Purchase Price Allocation | ||||
Cash | $ | 97,894 | ||
Accounts receivable | 78,443 | |||
Other assets | 16,010 | |||
Fixtures and equipment | 188,112 | |||
Right of use assets | 820,192 | |||
Liabilities assumed | (988,584 | ) | ||
Goodwill | 12,933 | |||
Net assets acquired | $ | 225,000 |
Proforma adjustments
(a) | To eliminate working capital balance between Two Trees and the Company. | |
(b) | To recognize the preliminary purchase price acquisition of Two Trees acquisition. | |
(c) | To eliminate historical equity accounts of Two Trees. | |
(d) | To recognize the estimated fair value of common shares issued in the Merger based on the closing price of the Company’s common stock on December 8, 2023. | |
(e) | To recognize preliminary price acquisition of the RF Specialties acquisition. | |
(f) | To recognize the estimated fair value of common shares issued in the Exchange based on the closing price of the Company’s common stock on December 27, 2023. |