EXHIBIT 99.2
NUVILEX, INC.
Unaudited Pro Forma Combined Financial Statements
On January 12, 2009, Nuvilex, Inc. and Freedom-2 Holdings, Inc. entered into a Share Exchange agreement pursuant to which Nuvilex has agreed to acquire 100% of the issued and outstanding securities of Freedom-2 from Freedom-2s' shareholders in exchange for the issuance of 48,205,000 shares of Nuvilex common stock.
On March 2, 2009, Nuvilex exchanged these shares at $0.055 per share for a total purchase price of $2,651,275. The following unaudited pro forma combined balance sheet presents the historical financial position combined with Freedom-2 as if the acquisition and the financing for the acquisition had occurred on April 30, 2008, and includes adjustments which give effect to events that are directly attributable to the transaction and that are factually supportable, regardless of whether they have a continuing impact or are nonrecurring. The unaudited pro forma combined statements of income present the combined results of our operations with Freedom-2 as if the acquisition and the financing for the acquisition had occurred at the beginning of each of the periods presented and include adjustments that are directly attributable to the acquisition, are expected to have a continuing impact on the combined results, and are factually supportable. The pro forma financial statements are not necessarily indicative of what our financial position or results of operations actually would have been had we completed the merger at the dates indicated. In addition, the unaudited pro forma combined financial information does not purport to project the future financial position or operating results of the combined company.
The unaudited pro forma combined financial statements should be read in conjunction with the:
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accompanying Notes to the Unaudited Pro Forma Combined Financial Statements;
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separate historical financial statements included in our Annual Report on Form 10-KSB for the year ended April 30, 2008 and Form 10-Q as of and for the nine months ended January 31, 2009; and
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Freedom-2 Holdings, Inc. Audited Consolidated Financial Statements included as Exhibit 99.1 to this Current Report on Form 8-K.
We prepared the unaudited pro forma combined financial information using the purchase method of accounting. Accordingly, our estimated cost to acquire Freedom-2 of $2,265,635 has been allocated to the assets acquired and liabilities assumed according to their estimated fair values at the date of acquisition. Any excess of the purchase price over the estimated fair value of the net assets acquired has been recorded as goodwill. We are currently determining the fair values of a significant portion of these net assets. The preliminary work performed in estimating the fair values is reflected in these unaudited pro forma combined financial statements. The final determination of these fair values will be completed as soon as possible but no later than one year from the acquisition date.
This final valuation will be based on the actual assets acquired and liabilities assumed at the acquisition date. Although the final determination may result in asset and liability fair values that are different than the preliminary estimates of these amounts included herein, it is not expected that those differences will be material to an understanding of the impact of this transaction to our financial results.
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NUVILEX, INC. & SUBSIDIARIES | ||||||||||
Unaudited Pro Forma Combined Balance Sheets | ||||||||||
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| Nuvilex, Inc. April 30, 2008 | Freedom-2 Holdings, Inc. December 31, 2008 | Pro Forma Adjustments 1 (Note 4) |
| Pro Forma Adjustments 2 (Note 5) | Combined | |
Assets |
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Current Assets |
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| Cash |
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| $ 1,513,541 | $ 25,229 | $ 186,501 | a | $ - | $ 1,725,271 | |
| Marketable Securities |
| - | - | - |
| - | - | ||
| Accounts Receivable |
| 376,495 | - | - |
| - | 376,495 | ||
| Inventory |
| 242,901 | 47,913 | - |
| - | 290,814 | ||
| Prepaid Expenses |
| 1,489,267 | 220,744 | - |
| - | 1,710,011 | ||
| Loan Receivable |
| 113,125 | - | - |
| - | 113,125 | ||
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| Total Current Assets | 3,735,329 | 293,886 | 186,501 |
| - | 4,215,716 | ||
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Property & Equipment, Net |
| 23,188 | 2,578,337 | - |
| - | 2,601,525 | |||
Intangible Assets, Net |
| 863,403 | - | - |
| - | 863,403 | |||
Prepaid Expenses & Other |
| 2,994,294 | 15,760 | - |
| - | 3,010,054 | |||
Goodwill |
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| - | - | - |
| 1,895,401 | 1,895,401 | ||
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Total Assets |
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| $ 7,616,214 | $ 2,887,983 | $ 186,501 |
| $ 1,895,401 | $ 12,586,099 | ||
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Liabilities & Stockholders' Equity (Deficit) |
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Current Liabilities |
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| Accounts Payable and Accrued Expenses | $ 173,058 | $ 1,679,116 | $ (1,403,081) | b | $ - | $ 449,093 | |||
| Deferred Revenue |
| 7,500 | - | - |
| - | 7,500 | ||
| License Fee Payable |
| - | 100,000 | - |
| - | 100,000 | ||
| Current Portion of Notes Payable | - | 573,333 | (573,333) | c | - | - | |||
| Current Portion of Mortgage Payable | - | 88,011 | - |
| - | 88,011 | |||
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| Total Current Liabilities | 180,558 | 2,440,460 | (1,976,414) |
| - | 644,604 | ||
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Non-Current Liabilities |
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| Mortgage Payable, Net of Current Portion | - | 1,511,989 | 404,228 | a,b | - | 1,916,217 | |||
| License Fee Payable, Net of Current Portion | - | - | 300,000 | b | - | 300,000 |
| Bridge Notes Payable |
| - | 816,000 | (796,000) | d,a,b | - | 20,000 | ||
| Tenant Deposits |
| - | 3,987 | - |
| - | 3,987 | ||
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| Total Non-Current Liabilities | - | 2,331,976 | (91,772) |
| - | 2,240,204 | ||
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Total Liabilities |
| 180,558 | 4,772,436 | (2,068,186) |
| - | 2,884,808 | |||
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Commitments & Contingencies |
| - | - | - |
| - | - | |||
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Stockholders' Equity (Deficit) |
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| Preferred Stock |
| 1 | 3,703 | (3,703) | e | - | 1 | ||
| Common Stock |
| 19,192 | 8,109 | 87,437 | a,b,c,d,e | (90,725) | 24,013 | ||
| Additional Paid-in Capital |
| 30,866,539 | 6,996,628 | 2,170,953 | a,b,c,d,e | (6,906,767) | 33,127,353 | ||
| Comprehensive Income (Loss) | - | - | - |
| - | - | |||
| Accumulated Deficit |
| (23,450,076) | (8,892,893) | - |
| 8,892,893 | (23,450,076) | ||
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| Total Stockholders' Equity (Deficit) | 7,435,656 | (1,884,453) | 2,254,687 |
| 1,895,401 | 9,701,291 | ||
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Total Liabilities & Stockholders' Equity (Deficit) | $ 7,616,214 | $ 2,887,983 | $ 186,501 |
| $ 1,895,401 | $ 12,586,099 | ||||
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The accompanying notes are an integral part of these pro forma financial statements |
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NUVILEX, INC. & SUBSIDIARIES | |||||||||
Unaudited Pro Forma Combined Statements of Operations | |||||||||
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| Nuvilex, Inc. for the Year Ended April 30, 2008 | Freedom-2 Holdings, Inc. for the Year Ended December 31, 2008 | Pro Forma Adjustments 1 (Note 4) |
| Pro Forma Adjustments 2 (Note 5) | Combined |
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Revenues |
| $ 1,189,954 | $ 207,297 | $ - |
| $ - | $ 1,397,251 | ||
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Cost of Goods Sold |
| 266,202 | 216,153 | - |
| - | 482,355 | ||
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Gross Profit |
| 923,752 | (8,856) | - |
| - | 914,896 | ||
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Operating Expenses |
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| Sales & Marketing |
| 204,593 | 813,056 | - |
| - | 1,017,649 | |
| Research and Development |
| 412,882 | 1,572,468 | - |
| - | 1,985,350 | |
| Consulting |
| 3,321,941 | - | - |
| - | 3,321,941 | |
| Legal Settlements |
| - | 214,196 | - |
| - | 214,196 | |
| General & Administrative |
| 733,580 | 1,972,661 | - |
| - | 2,706,241 | |
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| Total Operating Expenses |
| 4,672,996 | 4,572,381 | - |
| - | 9,245,377 |
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Operating Income (Loss) |
| (3,749,244) | (4,581,237) | - |
| - | (8,330,481) | ||
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Other Income (Expense) |
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| Interest Income |
| 26,223 | 28,535 | - |
| - | 54,758 | |
| Dividend Income |
| 7,800 | - | - |
| - | 7,800 | |
| Interest Expense |
| (2,953) | (164,999) | - |
| - | (167,952) | |
| Gain (Loss) on Sale of Marketable Securities | (73,792) | (5) | - |
| - | (73,797) | ||
| Royalty Income |
| - | 164,093 | - |
| - | 164,093 | |
| Rent Income |
| - | 17,030 | - |
| - | 17,030 | |
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| Total Other Income (Expense) |
| (42,722) | 44,654 | - |
| - | 1,932 |
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Net Income (Loss) Before Income Taxes |
| (3,791,966) | (4,536,583) | - |
| - | (8,328,549) | ||
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Provision for Income Taxes |
| - | (7,703) | - |
| - | (7,703) | ||
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Net Income (Loss) |
| $ (3,791,966) | $ (4,544,286) | $ - |
| $ - | $ (8,336,252) | ||
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Income (Loss) Per Share-Basic and Diluted |
| $ (0.02) | $ (0.56) |
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| $ (0.05) | ||
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Weighted Average Number of Shares |
| 167,925,432 | 8,097,632 |
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| 167,925,432 | ||
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The accompanying notes are an integral part of these pro forma financial statements |
3
NUVILEX, INC. & SUBSIDIARIES | |||||||
Unaudited Pro Forma Combined Statements of Cash Flows | |||||||
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| Nuvilex, Inc. for the Year Ended April 30, 2008 | Freedom-2 Holdings, Inc. for the Year Ended December 31, 2008 | Pro Forma Adjustments 1 (Note 4) |
| Pro Forma Adjustments 2 (Note 5) | Combined |
Cash Flows from Operating Activities |
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Net Income (Loss) | $ (3,791,966) | $ (4,544,286) | $ - |
| $ - | $ (8,336,252) | |
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Adjustments to reconcile net loss to net cash used in operating activities: |
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| Depreciation & Amortization | 6,380 | 119,009 | - |
| - | 125,389 |
| Stock Based Compensation | 5,324,821 | 43,225 | - |
| - | 5,368,046 |
| Share-Based Payment | - | 20,000 | - |
| - | 20,000 |
| Legal Settlements | - | 214,196 | - |
| - | 214,196 |
| Royalty Income | - | (164,093) | - |
| - | (164,093) |
Changes in operating assets and liabilities: |
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| Accounts Receivable | (145,024) | - | - |
| - | (145,024) |
| Inventory | (242,901) | (47,913) | - |
| - | (290,814) |
| Prepaid Expenses and Deposits | (2,449,415) | 73,538 | - |
| - | (2,375,877) |
| Shareholder Advances | 14,983 | - | - |
| - | 14,983 |
| Accounts Payable and Accrued Expenses | 54,252 | 758,308 | - |
| - | 812,560 |
| Loans Receivable | (13,125) | - | - |
| - | (13,125) |
| Deferred Revenue | 7,500 | - | - |
| - | 7,500 |
| License Fee Payable | - | (100,000) | - |
| - | (100,000) |
| Tenant Deposits | - | 3,987 | - |
| - | 3,987 |
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Net Cash Used in Operating Activities | (1,234,495) | (3,624,029) | - |
| - | (4,858,524) | |
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Cash Flows from Investing Activities |
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| Sales (Purchases) of Marketable Securities | (2,524) | 850,000 | - |
| - | 847,476 |
| Purchase of Property and Equipment | (7,049) | (238,360) | - |
| - | (245,409) |
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Net Cash Used in Investing Activities | (9,573) | 611,640 | - |
| - | 602,067 | |
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Cash Flows from Financing Activities |
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| Due to Related Party | - | (135,326) | - |
| - | (135,326) |
| Proceeds from Mortgage Note on Property | - | 1,600,000 | 150,000 | a | - | 1,750,000 |
| Proceeds from Bridge Notes | - | 816,000 | 35,000 | a,d | - | 851,000 |
| Proceeds from Exercise of Stock Options | - | 625 | 1,501 | a | - | 2,126 |
| Contribution of Capital | 164,000 | - | - |
| - | 164,000 |
| Proceeds from Sale of Preferred Stock | 1,000,000 | - | - |
| - | 1,000,000 |
| Proceeds from Sale of Common Stock | 484,500 | - | - |
| - | 484,500 |
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Net Cash Provided by Financing Activities | 1,648,500 | 2,281,299 | 186,501 |
| - | 4,116,300 | |
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Net Increase (Decrease) in Cash | 404,432 | (731,090) | 186,501 |
| - | (140,157) | |
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Cash Beginning of Period | 1,109,109 | 756,319 | - |
| - | 1,865,428 | |
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Cash End of Year | $ 1,513,541 | $ 25,229 | $ 186,501 |
| $ - | $ 1,725,271 | |
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Supplemental Disclosure of Cash Flow Information: |
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| Cash Paid during the period for interest | $ - | $ 122,836 | $ - |
| $ - | $ 122,836 |
| Cash Paid during the period for income taxes | - | 7,703 | - |
| - | 7,703 |
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The accompanying notes are an integral part of these pro forma financial statements |
4
NUVILEX, INC. & SUBSIDIARIES
NOTES TO UNAUDITED COMBINED PRO FORMA FINANCIAL STATEMENTS
Note 1 Description of Transaction and Basis of Presentation
On March 2, 2009, Nuvilex, Inc., exchanged 48,205,000 shares for all of the outstanding shares of Freedom-2 Holdings, Inc. at $0.047 per share for a total purchase price of $2,265,635. The merger has been accounted for as a purchase under accounting principles generally accepted in the United States (GAAP). Under the purchase method of accounting, the assets and liabilities of Freedom-2 are recorded as of the completion of the merger, at their respective fair values, and consolidated with our assets and liabilities. The results of operations of Freedom-2 will be consolidated beginning on the date of the merger. Our financial statements issued after completion of the merger will reflect these values, but will not be restated retroactively to reflect the historical financial position or results of operations of Freedom-2.
Note 2 Purchase Price
For the purposes of this pro forma analysis, the purchase price has been preliminarily allocated based on an estimate of the fair value of assets and liabilities acquired as of the date of acquisition. The determination of estimated fair value requires management to make significant estimates and assumptions. The final valuation of net assets is expected to be completed as soon as possible but no later than one year from the acquisition date. We will adjust our estimates as needed based upon the final valuation.
Elements of Purchase Consideration | |||
Common Stock Issued for Freedom-2's Outstanding Shares |
| $ 2,265,635 | |
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Purchase Price Allocation | |||
Cash |
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| $ 211,730 |
Inventory |
| 47,913 | |
Prepaid Expenses & Other |
| 236,504 | |
Property and Equipment |
| 2,578,337 | |
Goodwill |
| 1,895,401 | |
Accounts Payable and Accrued Expenses |
| (276,035) | |
License Fee Payable |
| (400,000) | |
Mortgage Payable |
| (2,004,228) | |
Bridge Notes Payable |
| (20,000) | |
Tenant Deposits |
| (3,987) | |
Total |
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| $ 2,265,635 |
In accordance with the requirements of Statement of Financial Accounting Standard (SFAS) No. 142, Goodwill and Other Intangible Assets, any goodwill associated with the merger will not be amortized, but will be evaluated for impairment on a periodic basis.
Goodwill for the allocation of the purchase price was based on the fair value of the net assets acquired on the date of acquisition. Goodwill presented in the unaudited combined balance sheet was based on the net assets as if the acquisition had occurred on March 2, 2009.
Note 3 - Accounting Policies and Financial Statement Classifications
As a result of our review of Freedom-2's accounting policies and financial statement classifications, we determined that is was not necessary to make reclassifications to their audited financial statements to conform to accounting policies and classifications that are consistent with our practices.
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Note 4 - Pro Forma Adjustments 1
Adjustments included in the column under the heading Pro Forma Adjustments 1 primarily relate to Freedom-2 Holdings, Inc. transactions that relate to the Merger on March 2, 2009 but occurred subsequent to the audit report dated December 31, 2008 and include the following:
a-The adjustments to cash include a $150,000 received for an increase to the Mortgage Payable, $35,000 received for an increase to Bridge Notes (d) and $1,501 received for the conversion of all outstanding stock options.
b-The adjustments to Accounts Payable and Accrued Expenses include ($833,853) relating to various parties converting payable amounts due to common stock in Freedom-2, ($15,000) relating to the conversion of amounts due to Bridge Notes Payable (c), ($300,000) relates to a subsequent contract amendment for License Fees Payable, and ($254,228) relates to a subsequent vendor agreement whereby the vendor converted a trade payable to a secured note collateralized by the building and land.
c-The adjustment to Notes Payable ($573,333) represents the conversion of this loan to common stock.
d-The adjustments to Bridge Notes include $35,000 received in cash, $15,000 relating to the conversion of accounts payable and accrued expenses (b), and the conversion of ($846,000) to Common Stock.
e-The adjustments to Preferred Stock of ($3,703) represents the conversion of all outstanding preferred stock to common.
Note 5 - Pro Forma Adjustments 2
Adjustments included in the column under the heading Pro Forma Adjustments 2 relate to the elimination of Freedom-2, Inc.'s equity and Nuvilex, Inc.'s allocation of the purchase price to Goodwill.
Elimination of Freedom-2 Equity |
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Common Stock |
| $ (95,546) | |
Additional Paid-in Capital |
| (9,167,581) | |
Accumulated Deficit |
| 8,892,893 | |
Total |
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| (370,234) |
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Nuvilex Purchase Price |
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Common Stock |
| 4,821 | |
Additional Paid-in Capital |
| 2,260,814 | |
Accumulated Deficit |
| - | |
Total |
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| 2,265,635 |
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Adjustment Totals |
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Common Stock |
| (90,725) | |
Additional Paid-in Capital |
| (6,906,767) | |
Accumulated Deficit |
| 8,892,893 | |
Total (Goodwill) |
| $ 1,895,401 |
6