EXHIBIT 99.3
CLOUDCOMMERCE, INC.
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION
The following unaudited pro forma condensed combined financial information is based on the historical financial statements of CloudCommerce, Inc. (the "Company") and Indaba Group, LLC ("Indaba") after entering into an agreement on June 26, 2015, giving effect to the Company's acquisition of Indaba which was consummated on October 1, 2015. The notes to the unaudited pro forma condensed financial information describes the reclassifications and adjustments to the financial information presented.
The unaudited pro forma condensed combined balance sheet and the statement of operations as of and for the year ended June 30, 2015, and as of and for the three months ended September 30, 2015 are presented as if the acquisition of Indaba had occurred on July 1, 2014 and were carried forward through the periods presented.
The allocation of the purchase price used in the unaudited pro forma condensed combined financial information is based upon the respective fair values of the assets and liabilities of Indaba as of the date of acquisition.
The unaudited pro forma condensed combined financial information is not intended to represent or be indicative of the Company's consolidated results of operations or financial position that the Company would have reported had the Indaba acquisition been completed as of the dates presented, and should not be taken as a representation of the Company's future consolidated results of operation or financial position.
The unaudited pro forma condensed consolidated financial statements do not give effect to the potential impact of current financial conditions, regulatory matters or any anticipated synergies, operating efficiencies or cost savings that may be associated with the acquisition. The unaudited pro forma condensed consolidated financial data also do not include any integration costs, cost overlap or estimated future transaction costs.
The historical financial information has been adjusted to give effect to events that are directly attributable to the Acquisition, factually supportable and, with respect to the statements of operations, expected to have a continuing impact on the results of the combined company. These unaudited pro forma consolidated financial statements should be read in conjunction with the historical financial statements and;
The unaudited pro forma condensed combined financial information should be read in conjunction with the historical consolidated financial statements and accompanying notes of the Company and Indaba included in the annual report on form 10-K for the year ended June 30, 2015 and contained elsewhere in this Form 8-K/A.
CLOUDCOMMERCE, INC. (FORMERLY WARP 9, INC.)
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
AS OF SEPTEMBER 30, 2015
CloudCommerce, Inc. | Indaba Group, LLC | Pro Forma Adjustments | Pro Forma | |||||
(Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | |||||
ASSETS | ||||||||
CURRENT ASSETS | ||||||||
Cash | $ 28,075 | $ 22,772 | $ - | $ 50,847 | ||||
Accounts receivable, net | 111,726 | 318,360 | - | 430,086 | ||||
Prepaid and other current assets | 3,334 | 3,000 | - | 6,334 | ||||
TOTAL CURRENT ASSETS | 143,135 | 344,132 | - | 487,267 | ||||
PROPERTY & EQUIPMENT, at cost | ||||||||
Furniture, fixtures & equipment | 10,533 | 18,216 | - | 28,749 | ||||
Computer equipment | 16,941 | 88,968 | - | 105,909 | ||||
Computer software | 1,904 | 1,698 | - | 3,602 | ||||
Leasehold improvements | - | 9,025 | - | 9,025 | ||||
29,378 | 117,907 | - | 147,285 | |||||
Less accumulated depreciation | (21,447) | (47,839) | - | (69,286) | ||||
NET PROPERTY AND EQUIPMENT | 7,931 | 70,068 | - | 77,999 | ||||
OTHER ASSETS | ||||||||
Lease deposit | 5,955 | 3,500 | - | 9,455 | ||||
Internet domain | 20,202 | - | 20,202 | |||||
Intangible assets | 10,000 | - | - | 10,000 | ||||
Goodwill | - | - | 1,701,764 | A | 1,701,764 | |||
TOTAL OTHER ASSETS | 36,157 | 3,500 | 1,701,764 | 1,741,421 | ||||
TOTAL ASSETS | $ 187,223 | $ 417,700 | $ 1,701,764 | $ 2,306,687 | ||||
LIABILITIES AND SHAREHOLDERS' EQUITY/(DEFICIT) | ||||||||
CURRENT LIABILITIES | ||||||||
Accounts payable | $ 147,746 | $ 111,019 | $ - | $ 258,765 | ||||
Accrued expenses | 72,987 | 8,445 | - | 81,432 | ||||
Convertible notes and interest payable, current, net | 654,960 | - | - | 654,960 | ||||
Derivative liability | 6,311,091 | - | - | 6,311,091 | ||||
Customer deposit | 3,998 | - | - | 3,998 | ||||
TOTAL CURRENT LIABILITIES | 7,190,782 | 119,464 | - | 7,310,246 | ||||
LONG TERM LIABILITIES | ||||||||
Convertible notes and interest payable, net | 246,305 | - | - | 246,305 | ||||
Accrued expenses, long term | 216,903 | - | - | 216,903 | ||||
TOTAL LONG TERM LIABILITIES | 463,208 | - | - | 463,208 | ||||
TOTAL LIABILITIES | 7,653,990 | 119,464 | - | 7,773,454 | ||||
SHAREHOLDERS' EQUITY/(DEFICIT) | ||||||||
Preferred stock, $0.001 par value; | ||||||||
5,000,000 authorized shares; no shares issued and outstanding | - | - | - | - | ||||
Series A preferred stock, $0.001 par value; | ||||||||
10,000 shares authorized, issued and outstanding | - | - | 2,000,000 | B | 2,000,000 | |||
Common stock, $0.001 par value; | ||||||||
2,000,000,000 authorized shares; | ||||||||
105,790,195 and 100,878,825 shares issued and outstanding, respectively | 105,790 | - | - | 105,790 | ||||
Additional paid in capital | 7,784,326 | - | - | 7,784,326 | ||||
Members' equity | - | 298,236 | (298,236) | C | - | |||
Accumulated deficit | (15,356,883) | - | - | (15,356,883) | ||||
TOTAL SHAREHOLDERS' EQUITY/(DEFICIT) | (7,466,767) | 298,236 | 1,701,764 | (5,466,767) | ||||
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY/(DEFICIT) | $ 187,223 | $ 417,700 | $ 1,701,764 | $ 2,306,687 |
See notes to unaudited pro forma condensed combined financial information.
CLOUDCOMMERCE, INC.(FORMERLY WARP 9, INC.)
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED JUNE 30, 2015
Pro Forma Adjustments | Pro Forma | |||||||
CloudCommerce, Inc. | Indaba Group, LLC | (Unaudited) | (Unaudited) | |||||
REVENUE | $ 598,345 | $ 2,419,932 | $ - | $ 3,018,277 | ||||
OPERATING EXPENSES | ||||||||
Selling, general and administrative expenses | 1,284,165 | 2,106,121 | - | 3,390,286 | ||||
Stock option expense | 150,610 | - | - | 150,610 | ||||
Depreciation and amortization | 6,073 | 22,490 | - | 28,563 | ||||
TOTAL OPERATING EXPENSES | 1,440,848 | 2,128,611 | - | 3,569,459 | ||||
INCOME (LOSS) FROM OPERATIONS BEFORE OTHER INCOME AND TAXES | (842,503) | 291,321 | - | (551,182) | ||||
OTHER INCOME/(EXPENSE) | ||||||||
Other income (expense) | 300 | (7) | - | 293 | ||||
Gain on insurance settlement | - | 19,194 | - | 19,194 | ||||
Gain/(Loss) on extinguishment of debt | 118,492 | - | - | 118,492 | ||||
Gain/(Loss) on changes in derivative liability | 892,614 | - | - | 892,614 | ||||
Interest expense | (570,037) | (9,242) | - | (579,279) | ||||
TOTAL OTHER INCOME (EXPENSE) | 441,369 | 9,945 | - | 451,314 | ||||
INCOME (LOSS) FROM OPERATIONS BEFORE PROVISION FOR TAXES | (401,134) | 301,266 | - | (99,868) | ||||
PROVISION FOR INCOME (TAXES)/BENEFIT | ||||||||
Income taxes paid | (3,076) | - | - | (3,076) | ||||
PROVISION FOR INCOME (TAXES)/BENEFIT | (3,076) | - | - | (3,076) | ||||
NET INCOME (LOSS) | $ (404,210) | $ 301,266 | $ - | $ (102,944) | ||||
LOSS PER SHARE | ||||||||
BASIC AND DILUTED | $ (0.00) | $ - | $ - | $ (0.00) | ||||
WEIGHTED-AVERAGE COMMON SHARES OUTSTANDING | ||||||||
BASIC AND DILUTED | 104,363,874 | - | - | 104,363,874 |
See notes to unaudited pro forma condensed combined financial information.
CLOUDCOMMERCE, INC. (FORMERLY WARP 9, INC.)
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2015
Pro Forma Adjustments | Pro Forma | |||||||
CloudCommerce, Inc. | Indaba Group, LLC | (Unaudited) | (Unaudited) | |||||
REVENUE | $ 113,559 | $ 661,342 | $ - | $ 774,901 | ||||
OPERATING EXPENSES | ||||||||
Selling, general and administrative expenses | 394,934 | 709,974 | - | 1,104,908 | ||||
Stock option expense | 105,293 | - | - | 105,293 | ||||
Depreciation and amortization | 737 | 6,343 | - | 7,080 | ||||
TOTAL OPERATING EXPENSES | 500,964 | 716,317 | - | 1,217,281 | ||||
LOSS FROM OPERATIONS BEFORE OTHER INCOME AND TAXES | (387,405) | (54,975) | - | (442,380) | ||||
OTHER INCOME/(EXPENSE) | ||||||||
Other income | - | 868 | - | 868 | ||||
Other expense | - | (982) | - | (982) | ||||
Loss on changes in derivative liability | (4,166,890) | - | - | (4,166,890) | ||||
Loss on disposal of fixed assets | - | (1,004) | - | (1,004) | ||||
Interest expense | (200,382) | (2,737) | - | (203,119) | ||||
TOTAL OTHER INCOME (EXPENSE) | (4,367,272) | (3,855) | - | (4,371,127) | ||||
LOSS FROM OPERATIONS BEFORE PROVISION FOR TAXES | (4,754,677) | (58,830) | - | (4,813,507) | ||||
PROVISION FOR INCOME (TAXES)/BENEFIT | ||||||||
Income taxes paid | - | - | - | - | ||||
Income tax (provision)/benefit | - | - | - | - | ||||
PROVISION FOR INCOME (TAXES)/BENEFIT | - | - | - | - | ||||
NET LOSS | $ (4,754,677) | $ (58,830) | $ - | $ (4,813,507) | ||||
LOSS PER SHARE | ||||||||
BASIC AND DILUTED | $ (0.04) | $ - | $ - | $ (0.04) | ||||
WEIGHTED-AVERAGE COMMON SHARES OUTSTANDING | ||||||||
BASIC AND DILUTED | 105,790,195 | - | - | 105,790,195 |
See notes to unaudited pro forma condensed combined financial information.
CLOUDCOMMERCE, INC.
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION
1. BASIS OF PRO FORMA PRESENTATION
The unaudited pro forma condensed combined balance sheet and the unaudited pro forma condensed statements of operations as of and for the year ended June 30, 2015, and as of and for the three months ended September 30, 2015, are based on the historical financial statements of the Company and Indaba after giving effect to the Company's acquisition that was consummated on October 1, 2015 and adjustments described in the accompanying notes to the unaudited pro forma condensed combined financial information.
The Company accounts for business combinations pursuant to Accounting Standards Codification ASC 805, Business Combinations. In accordance with ASC 805, the Company uses it best estimates and assumptions to accurately assign fair value to the assets acquired and the liabilities assumed at the acquisition date. Goodwill as of the acquisition date is measured as the excess of the purchase consideration over the fair value of the assets acquired and the liabilities assumed.
The fair values assigned to Indaba's assets acquired and liabilities assumed are based on management's estimates and assumptions. The estimated fair values of these assets acquired and liabilities assumed are considered preliminary and are based on the information that was available as of the date of acquisition. The Company believes that the information provides a reasonable basis for estimating the fair values of assets acquired and liabilities assumed.
The unaudited pro forma condensed combined financial information is not intended to represent or be indicative of the Company's consolidated results of operations or financial position that the Company would have reported had the Indaba acquisition been completed as of the dates presented, and should not be taken as a representation of the Company's future consolidated results of operation or financial position.
The unaudited pro forma condensed combined financial information should be read in conjunction with the historical consolidated financial statements and accompanying notes of the Company and Indaba included in the annual report on form 10-K for the year ended June 30, 2015 and contained elsewhere in this Form 8-K/A.
Accounting Periods Presented
For purposes of these unaudited pro forma condensed combined financial information, Indaba's historical financial statements for the year ended June 30, 2015, have been aligned to more closely conform to the Company's financial information, as explained below. Certain pro forma adjustments were made to conform Indaba's accounting policies to the Company's accounting policies as noted below.
The unaudited pro forma condensed combined balance sheet and statement of operations as of and for year ended June 30, 2015, and as of and for the three months ended September 30, 0215 are presented as if the acquisition of Indaba had occurred on July 1, 2014 and were carried forward through each of the period presented.
Reclassifications
The Company reclassified certain accounts in the presentation of Indaba's historical financial statements in order to conform to the Company's presentation.
2. ACQUISITION OF INDABA GROUP, LLC
On October 1, 2015, the Company acquired 100% of the tangible and intangible assets of Indaba in a transaction accounted for under ASC 805, for the total purchase price of two million dollars ($2,000,000.00), paid in the form of the issuance of ten thousand (10,000) shares of the Company's Series A Convertible Preferred Stock, at a liquidation preference of two hundred dollars ($200.00) per share. Indaba is engaged in the business of providing technology services and solutions specializing in enterprise software development, ecommerce, creative services, and customer
2. ACQUISITION OF INDABA GROUP, LLC (continued)
experience management. The acquisition is designed to enhance our services for ecommerce solutions. Indaba is now a wholly-owned subsidiary of the Company.
Under the purchase method of accounting, the transactions will be valued for accounting purposes at $2,000,000, which will be the estimated fair value of the Company at date of acquisition. The assets and liabilities of Indaba will be recorded at their respective fair values as of the date of acquisition, and the following table summarizes these values.
Purchase Price Allocation September 30, 2015 |
|||||||||
Assets acquired |
|
|
|||||||
Current assets |
|
|
|||||||
Cash |
$ 22,772 |
|
|||||||
Accounts receivable, net |
318,360 |
|
|||||||
Prepaid and other current assets |
3,000 |
|
|||||||
Total current assets |
344,132 |
|
|||||||
|
|||||||||
Tangible assets subject to depreciation |
|
||||||||
Property and equipment, net of depreciation |
70,068 |
|
|||||||
|
|||||||||
Other assets |
|
||||||||
Lease deposits |
3,500 |
|
|||||||
Goodwill |
1,701,764 |
|
|||||||
Total Other assets |
1,705,264 |
|
|||||||
|
|||||||||
Total Assets acquired |
$ 2,119,464 |
|
|||||||
|
|||||||||
Liabilities assumed |
|
||||||||
Accounts payable |
$ 111,019 |
|
|||||||
Accrued expenses |
8,445 |
|
|||||||
Total Liabilities assumed |
|
$ 119,464 |
|
||||||
Net assets acquired |
$ 2,000,000 |
|
|||||||
3. PRO FORMA ADJUSTMENTS
The following pro forma adjustments are included in the Company's unaudited pro forma condensed combined financial information:
(A) To record the preliminary estimate of goodwill for the Company's acquisition of Indaba. The preliminary estimate of goodwill represents the excess of the purchase consideration over the estimated fair value of the assets acquired and the liabilities assumed.
(B) Record the purchase of 100% of Indaba's members' interest through the issuance of the Series A Preferred stock, valued at $2,000,000
(C) To eliminate Indaba's historical members' interest.