Exhibit 99.2
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION
On April 30, 2021, American Cannabis Companies, Inc. (the “Company”) entered into an asset purchase agreement (the “Asset Purchase Agreement”) with pursuant to which the Company acquired (the “Transaction”) the assets of Medihemp LLC and Medical Cannabis Caregivers, Inc.’s (hereafter “Naturaleaf” or the “Assets”). The aggregate consideration paid for the Assets was $2,890,000, which consisted of (i) a cash payment of $1,100,000, (ii) the issuance of a promissory note to the owner of Naturaleaf in the principal amount of $1,100,000 (the “Seller Note”), and (iii) the issuance of 3,000,000 shares of the Company’s restricted common stock valued at $0.23 per share or $690,000. The closing of the transaction occurred on April 30, 2021.
The following tables and accompanying notes (collectively the “Pro forma Financial Statements”) present the Company’s statements of income and balance sheet on a pro forma consolidated basis after giving effect to the Transaction. The information in the tables below under the heading “Unaudited Pro Forma Condensed Consolidated Statement of Operations” for the year ended December 31, 2020 give effect to the Transaction as if it had taken place on January 1, 2020, (the “Unaudited Pro Forma Condensed Consolidated Statements of Operations”). The information in the table below under the heading “Unaudited Pro Forma Condensed Consolidated Balance Sheet” as of December 31, 2020 gives effect to the Transaction as if it had taken place on December 31, 2020 (the “Unaudited Pro Forma Condensed Consolidated Balance Sheet”).
The pro forma adjustments are based upon currently available information and certain assumptions that the Company’s management believes are reasonable. The unaudited pro forma combined financial information is presented for informational purposes only and is not intended to present or be indicative of what the results of operations or financial position would have been had the events actually occurred on the dates indicated, nor is it meant to be indicative of future results of operations or financial position for any future period or as of any future date. The unaudited pro forma combined financial information does not give effect to the potential impact of current financial conditions, or any anticipated revenue enhancements, cost savings or operating synergies that may result from the Transaction.
The historical financial information of the Assets being presented in these Unaudited Pro Forma Condensed Consolidated Financial Statements is based on the audited combined statement of operations for the year ended December 31, 2020 and the audited balance sheet at December 31, 2020, which were prepared in accordance with US GAAP.
AMERICAN CANNABIS COMPANY, INC.
UNAUDITED CONDENSED CONSOLIDATED PRO FORMA BALANCE SHEET
DECEMBER 31, 2020
American Cannabis | MediHemp/MCC | Pro Forma Adjustments* | Pro Forma Combined | |||||||||||||||||
ASSETS | ||||||||||||||||||||
Current Assets | ||||||||||||||||||||
Cash and Cash Equivalents | $ | 1,723,132 | $ | 436,269 | (533,977 | ) | 2,3,4 | $ | 1,625,424 | |||||||||||
Accounts Receivable | 24,955 | 24,955 | ||||||||||||||||||
Inventory | 62,402 | 14,820 | 77,222 | |||||||||||||||||
Other Current Assets | 53,197 | 53,197 | ||||||||||||||||||
Total Current Assets | 1,863,686 | 451,089 | 1,780,798 | |||||||||||||||||
Property, Plant and Equipment, net | 24,655 | 102,175 | 126,830 | |||||||||||||||||
Other Assets | ||||||||||||||||||||
Right of Use Asset | — | — | 221,307 | 5 | 221,307 | |||||||||||||||
Goodwill | — | — | 1,111,160 | 4 | 1,111,160 | |||||||||||||||
Intangible Assets | — | — | 1,666,741 | 4 | 1,666,741 | |||||||||||||||
Other Assets | — | 6,000 | 6,000 | |||||||||||||||||
Total Other Assets | — | 6,000 | 3,005,208 | |||||||||||||||||
TOTAL ASSETS | $ | 1,888,341 | $ | 559,264 | $ | 4,912,836 | ||||||||||||||
LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||||||||||||||||
Current Liabilities | ||||||||||||||||||||
Accounts Payable and Accrued Liabilities | $ | 62,397 | $ | 22,499 | (22,499 | ) | 3 | $ | 62,397 | |||||||||||
Advances from Clients | 88,843 | 88,843 | ||||||||||||||||||
Note Payable | 109,914 | 1,100,000 | 4 | 1,209,914 | ||||||||||||||||
Total Current Liabilities | 261,154 | 22,499 | 1,361,154 | |||||||||||||||||
Long Term Liabilities | ||||||||||||||||||||
Advances Payable, related party | — | 391,826 | (391,826 | ) | 3 | — | ||||||||||||||
Right of Use Liability | — | — | 221,307 | 5 | 221,307 | |||||||||||||||
Stockholders' Equity | ||||||||||||||||||||
Common Stock | 707 | 86 | 2,4 | 793 | ||||||||||||||||
Additional Paid In Capital | 9,634,748 | 1,688,229 | 2,4 | 11,322,977 | ||||||||||||||||
Member's Equity | — | (309,750 | ) | 309,750 | 6 | — | ||||||||||||||
Retained Earnings | (8,008,268 | ) | 454,689 | (439,816 | ) | 3, 6 | (7,993,395 | ) | ||||||||||||
1,627,187 | 144,939 | 3,330,375 | ||||||||||||||||||
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | $ | 1,888,341 | $ | 559,264 | $ | 4,912,836 |
*Pro Forma Adjustments:
Note 2 - Financing Transaction through Sale of Common Stock
Note 3 - Acquisition Related Transactions
Note 4 - Preliminary Purchase Price Allocation
Note 5 - Lease Obligations
Note 6 - Elimination Entry
AMERICAN CANNABIS COMPANY, INC.
UNAUDITED CONDENSED CONSOLIDATED PRO FORMA STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2020
American Cannabis | MediHemp/MCC | Pro Forma Adjustments* | Pro Forma Combined | |||||||||||||||||
Revenues | ||||||||||||||||||||
Consulting Services | $ | 505,363 | $ | — | $ | 505,363 | ||||||||||||||
Soil Products & Equipment | 1,064,431 | — | 1,064,431 | |||||||||||||||||
Cannabis Products | — | 2,266,617 | 2,266,617 | |||||||||||||||||
Total Revenue | 1,569,794 | 2,266,617 | 3,836,411 | |||||||||||||||||
Cost of Revenues | ||||||||||||||||||||
Cost of Consulting Services | 108,706 | — | 108,706 | |||||||||||||||||
Cost of Products and Equipment | 740,409 | — | 740,409 | |||||||||||||||||
Cost of Cannabis Products | — | 1,273,202 | 1,273,202 | |||||||||||||||||
Total Cost of Revenues | 849,115 | 1,273,202 | 2,122,317 | |||||||||||||||||
Gross Profit | 720,679 | 993,415 | 1,714,094 | |||||||||||||||||
Operating Expenses | ||||||||||||||||||||
General and Administrative | 1,010,902 | 595,069 | 1,605,971 | |||||||||||||||||
Selling and Marketing | 298,937 | 37,883 | 336,820 | |||||||||||||||||
Stock Based Compensation Expense | 29,970 | — | 29,970 | |||||||||||||||||
Bad Debt Expense | 4,910 | — | 4,910 | |||||||||||||||||
Total Operating Expenses | 1,344,719 | 632,952 | 1,987,671 | |||||||||||||||||
Loss from Operations | — | |||||||||||||||||||
— | ||||||||||||||||||||
Other Income (Expense) | — | |||||||||||||||||||
Interest (expense) | (1,786 | ) | — | (1,786 | ) | |||||||||||||||
Other income | 93,413 | — | 93,413 | |||||||||||||||||
Total Other Income | 91,627 | — | 91,627 | |||||||||||||||||
Net Loss | (532,413 | ) | 360,463 | (171,950 | ) | |||||||||||||||
Income Tax Expense | — | — | — | |||||||||||||||||
NET LOSS | $ | (532,413 | ) | 360,463 | $ | (171,950 | ) | |||||||||||||
Basic net loss per common share | $ | (0.01 | ) | $ | (0.00 | ) | ||||||||||||||
— | ||||||||||||||||||||
Basic and diluted weighted average common shares outstanding | 57,548,474 | 3,000,000 | 4 | 66,048,474 | ||||||||||||||||
5,500,000 | 2 |
*Pro Forma Adjustments:
Note 2 - Financing Transaction through Sale of Common Stock
Note 4 – Preliminary Purchase Price Allocation
AMERICAN CANNABIS COMPANIES, INC.
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
Note 1 — Basis of presentation
The historical consolidated financial statements have been adjusted in the unaudited pro forma condensed consolidated financial statements to give effect to pro forma events that are (1) directly attributable to the business combination, (2) factually supportable and (3) with respect to the pro forma condensed combined statements of operations, expected to have a continuing impact on the combined results following the business combination.
The asset acquisition was accounted for under the acquisition method of accounting in accordance with ASC Topic 805, Business Combinations. As the acquirer for accounting purposes, the Company has estimated the fair value of Medihemp LLC and Medical Cannabis Caregivers, Inc.’s (hereafter “Naturaleaf’s”) assets acquired and conformed the accounting policies of Naturaleaf to its own accounting policies.
The unaudited pro forma condensed consolidated financial statements do not necessarily reflect what the combined company’s financial condition or results of operations would have been had the acquisition occurred on the dates indicated. They also may not be useful in predicting the future financial condition and results of operations of the combined company. The actual financial position and results of operations may differ significantly from the pro forma amounts reflected herein due to a variety of factors.
The pro forma financial information does not reflect the realization of any expected cost savings or other synergies from the acquisition of Naturaleaf as a result of restructuring activities and other planned cost savings initiatives following the completion of the Assets.
Note 2 — Financing Transaction through Sale of Common Stock
The Company financed the $1,100,000 cash payment of the acquisition, in part, through the sale of its restricted common stock during the three months ended March 31, 2021, the Company issued 5,550,000 shares of its restricted common stock for funds of $998,292 which were used to support operations and as part of the cash portion of the purchase price.
Note 3 – Acquisition Related Transactions
As part of the acquisition of Naturaleaf, certain transactions were made regarding the outstanding balances of cash, accounts payables and related party advances. As part of the acquisition, the owners of Naturaleaf retained the outstanding cash balance on the date of the acquisition and had agreed to the payment of all outstanding accounts payables and related party advances. Adjustments as follow have been made to reflect that payment in full of outstanding accounts payables and advances payable, related party and the retention of cash by the owners as follows:
Debit | Credit | |
Accounts Payable | 22,499 | |
Advances Payable, Related Party | 391,826 | |
Cash and Cash Equivalents | 436,269 | |
Retained Earnings | 21,944 |
Note 4 — Preliminary Purchase Price Allocation
The Company completed the acquisition of Naturaleaf for $2,890,000 consisting of $1,100,000 in cash, $1,100,000 promissory note and the issuance of 3,000,000 shares of its restricted common stock valued at $690,000 (a price of $0.23 per share, the market price on April 30, 2021).
The Company has performed a preliminary valuation analysis of the fair market value of Naturaleaf’s assets and liabilities. The following table summarizes the allocation of the preliminary purchase price as of the acquisition date:
Cash | $ | -- | ||
Inventory | 13,575 | |||
Property, plant and equipment | 92,523 | |||
Long Term Deposits | 6,000 | |||
Identifiable intangible assets | 1,111,161 | |||
Goodwill | 1,666,741 | |||
Accounts payable | — | |||
Total consideration | $ | 2,890,000 |
Note 5 – Lease Obligations
As a result of the transaction, the Company entered into real estate leases to take over Naturaleaf’s physical locations. The leases are subject to ASC 842 and as such the Company has recognized a right of use assets and liabilities totaling $221,307 as part of its pro forma presentation.