EX-99.3 4 phot_ex993.htm UNAUDITED PRO FORMA FINANCIAL INFORMATION Blueprint
 
Exhibit 99.3
 
GrowLife, Inc. and EZ-Clone Enterprises, Inc.
 
Summary of Unaudited Pro Forma Consolidated Financial Statements
 
On October 15, 2018, GrowLife, Inc. (the “Company”), closed the Purchase and Sale Agreement (the “Agreement”) with EZ Clone Enterprises, Inc., a California corporation (“EZ Clone”). EZ Clone is the manufacturer of multiple award-winning products specifically designed for the commercial cloning and propagation stage of indoor plant cultivation including cannabis, food, and other hydroponic farming. The Company acquired 51% of EZ Clone for $2,040,000, payable as follows: (i) a cash payment of $645,000; and (ii) the issuance of 107,307,692 restricted shares of the Company’s common stock at a price of $0.013 per share or $1,395,000.
 
The company has the obligation to acquire the remaining 49% of EZ Clone within one year for $1,960,000, payable as follows: (i) a cash payment of $855,000; and (ii) the issuance of 85,000,000 shares of the Company’s common stock at a price of $0.013 per share or $1,105,000.
 
The unaudited pro forma balance sheet as of December 31, 2017 and September 30, 2018 and the unaudited consolidated statement of operations for the year ended December 31, 2017 and the nine months ended September 30, 2018 presented herein gives effect to the acquisition as if the transaction had occurred at the beginning of such period and includes certain adjustments that are directly attributable to the transaction, which are expected to have a continuing impact on the Company, and are factually supportable, as summarized in the accompanying notes.
 
The unaudited pro forma consolidated financial information is provided for illustrative purposes only. The unaudited pro forma consolidated financial information presented herein is based on management’s estimate of the effects of the acquisition, had such transaction occurred on the dates indicated herein, based on currently available information and certain assumptions and estimates that the Company believes are reasonable under the circumstances. The unaudited pro forma consolidated financial information is not necessarily indicative of the results of operations or financial position that actually would have been achieved had the acquisition been consummated on the dates indicated, or that may be achieved in the future.
 
The unaudited pro forma consolidated financial information presented herein should be read in conjunction with the financial statements of the Company contained elsewhere in this Current Report on Form 8-K, as filed with the Securities and Exchange Commission, GrowLife’s Annual Report on Form 10-K/A for the fiscal year ended December 31, 2017, as filed with the Securities and Exchange Commission on July 9, 2018, and GrowLife’s Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2018, as filed with the Securities and Exchange Commission on November 14, 2018.
 
 
1
 
 
GROWLIFE, INC. AND EZ-CLONE ENTERPRISES, INC.
PRO FORMA CONSOLIDATED BALANCE SHEETS
 
 
 
 
 
 
EZ-Clone
 
 
 
 
 
 
 
 
 
 
 
 
 GrowLife, Inc.
 
 
 Enterprises, Inc.
 
 
 Pro Forma
 
 
 
 
 
 Total
 
 
 
December 31, 2017
 
 
December 31, 2017
 
 
Adjustments
 
 
 
 
 
December 31, 2017
 
ASSETS
 
(Audited)
 
 
(Audited)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
CURRENT ASSETS:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
 $69,191 
 $18,829 
 $130,000 
  a 
 $218,020 
Accounts receivable
  - 
  99,959 
  - 
    
  99,959 
Inventory, net
  465,678 
  549,629 
  - 
    
  1,015,307 
Prepaid costs
  - 
  16,611 
  - 
    
  16,611 
Deposits
  24,308 
  6,100 
  - 
    
  30,408 
Total current assets
  559,177 
  691,128 
  130,000 
    
  1,380,305 
 
    
    
    
    
    
EQUIPMENT, NET
  302,689 
  351,864 
  (105,306)
  b 
  549,247 
INTANGIBLE ASSETS
  - 
  - 
  3,036,300 
  c 
  3,036,300 
 
    
    
    
    
    
TOTAL ASSETS
 $861,866 
 $1,042,992 
 $3,060,994 
    
 $4,965,852 
 
    
    
    
    
    
LIABILITIES AND STOCKHOLDERS' (DEFICIT)
    
    
    
    
    
 
    
    
    
    
    
CURRENT LIABILITIES:
    
    
    
    
    
Accounts payable - trade
 $821,398 
 $147,661 
 $- 
    
 $969,059 
Accrued expenses
  133,988 
  37,109 
  - 
    
  171,097 
Accrued expenses - related parties
  37,776 
  - 
  - 
    
  37,776 
Derivative liability
  2,660,167 
  - 
  - 
    
  2,660,167 
Current portion of convertible notes payable
  3,015,021 
  - 
  775,000 
  d 
  3,790,021 
Current portion of notes payable
  - 
  148,269 
  (148,269)
  e 
  - 
Current portion of notes payable- related parties
  - 
  89,131 
  - 
    
  89,131 
Current portion of capital lease
  - 
  6,141 
  - 
    
  6,141 
Deferred revenue
  10,000 
  - 
  - 
    
  10,000 
Total current liabilities
  6,678,350 
  428,311 
  626,731 
    
  7,733,392 
 
    
    
    
    
    
LONG TERM LIABILITIES:
    
    
    
    
    
Long term portion of notes payable
  - 
  439,602 
  (439,602)
  f 
  - 
Capital leases
  - 
  10,704 
  - 
    
  10,704 
Total long term liabilites
  - 
  450,306 
  (439,602)
    
  10,704 
 
    
    
    
    
    
COMMITMENTS AND CONTINGENCIES
  - 
  - 
  - 
    
  - 
 
    
    
    
    
    
STOCKHOLDERS' DEFICIT
    
    
    
    
    
Preferred stock
  - 
  - 
  - 
    
  - 
Common stock
  236,752 
  10,000 
  731 
  g 
  247,483 
Additional paid in capital
  123,678,069 
  60,000 
  1,324,269 
  h 
  125,062,338 
Accumulated deficit
  (129,731,305)
  94,375 
  (491,136)
  i 
  (130,128,066)
Total stockholders' deficit
  (5,816,484)
  164,375 
  833,864 
    
  (4,818,245)
 
    
    
    
    
    
NON CONROLLING INTEREST IN EZ CLONE ENTERPRISES, INC.
  - 
  - 
  2,040,001 
  j 
  2,040,001 
 
    
    
    
    
    
TOTAL LIABILITIES, STOCKHOLDERS' DEFICIT AND NON CONTROLLING INTEREST
 $861,866 
 $1,042,992 
 $3,060,994 
    
 $4,965,852 
 
 
See accompanying notes to these condensed consolidated financial statements.
 
 
2
 
 
GROWLIFE, INC. AND EZ-CLONE ENTERPRISES, INC.
PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
 
 
 
  Year Ended,              
 
 
 
 
 
 
EZ-Clone
 
 
 
 
 
 
 
 
 
 GrowLife, Inc.
 
 
 Enterprises, Inc.
 
   
 
 Total
 
 
 
December 31,
2017
 
 
December 31,
2017
 
 
Pro Forma
Adjustments
 
 
December 31,
2017
 
 
 
(Audited)
 
 
(Audited)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
NET REVENUE
 $2,452,104 
 $2,648,873 
 $- 
 $5,100,977 
COST OF GOODS SOLD
  2,180,603 
  1,310,455 
  - 
  3,491,058 
GROSS PROFIT
  271,501 
  1,338,418 
  - 
  1,609,919 
GENERAL AND ADMINISTRATIVE EXPENSES
  2,320,455 
  1,396,471 
  - 
  3,716,926 
AMORTIZATION OF INTANGIBLE ASSETS- EZ-CLONE ENTERPRISES, INC.
  - 
  - 
  607,405k
  607,405 
OPERATING LOSS
  (2,048,954)
  (58,053)
  (607,405)
  (2,714,412)
 
    
    
    
    
OTHER INCOME (EXPENSE):
    
    
    
    
Change in fair value of derivative
  496,305 
  - 
  - 
  496,305 
Interest expense, net
  (1,281,083)
  (39,581)
  - 
  (1,320,664)
Other (expense) income
  15,577 
  - 
  - 
  15,577 
Loss on debt conversions
  (2,502,819)
  - 
  - 
  (2,502,819)
Loss on sale of fixed assets
  - 
  (30,128)
  - 
  (30,128)
Total other (expense) income
  (3,272,020)
  (69,709)
  - 
  (3,341,729)
 
    
    
    
    
(LOSS) BEFORE INCOME TAXES
  (5,320,974)
  (127,762)
  (607,405)
  (6,056,141)
 
    
    
    
    
Income taxes - current benefit
  - 
  (800)
  - 
  (800)
 
    
    
    
    
NET (LOSS)
 $(5,320,974)
 $(126,962)
 $(607,405)
 $(6,055,341)
 
    
    
    
    
Basic and diluted (loss) per share
 $(0.00)
 $- 
    
 $(0.00)
 
    
    
    
    
Weighted average shares of common stock outstanding- basic and diluted
  2,044,521,389 
  - 
  107,307,692 
  2,151,829,081 
 
See accompanying notes to these condensed consolidated financial statements.
 
 
3
 
 
GROWLIFE, INC. AND EZ-CLONE ENTERPRISES, INC.
PRO FORMA CONSOLIDATED BALANCE SHEETS
 
 
 
 
 
 
EZ-Clone
 
 
 
 
 
 
 
 
 
 
 
 
 GrowLife, Inc.
 
 
 Enterprises, Inc.
 
 
 Pro Forma
 
 
 
 
 
 Total
 
 
 
September 30, 2018
 
 
September 30, 2018
 
 
Adjustments
 
 
 
 
 
September 30, 2018
 
ASSETS
 
(Unaudited)
 
 
(Audited)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
CURRENT ASSETS:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
 $197,180 
 $28,450 
 $130,000 
  a 
 $355,630 
Accounts receivable
  - 
  37,950 
  - 
    
  37,950 
Inventory, net
  486,661 
  494,145 
  - 
    
  980,806 
Prepaid costs
  - 
  2,438 
  - 
    
  2,438 
Deposits
  32,921 
  6,100 
  - 
    
  39,021 
Total current assets
  716,762 
  569,083 
  130,000 
    
  1,415,845 
 
    
    
    
    
    
EQUIPMENT, NET
  502,397 
  317,734 
  (90,891)
  b 
  729,240 
INTANGIBLE ASSETS
  - 
  - 
  3,037,027 
  c 
  3,037,027 
 
    
    
    
    
    
TOTAL ASSETS
 $1,219,159 
 $886,817 
 $3,076,136 
    
 $5,182,112 
 
    
    
    
    
    
LIABILITIES AND STOCKHOLDERS' (DEFICIT)
    
    
    
    
    
 
    
    
    
    
    
CURRENT LIABILITIES:
    
    
    
    
    
Accounts payable - trade
 $954,218 
 $191,529 
 $- 
    
 $1,145,747 
Accrued expenses
  244,910 
  78,215 
  - 
    
  323,125 
Accrued expenses - related parties
  47,726 
  - 
  - 
    
  47,726 
Derivative liability
  1,118,107 
  - 
  - 
    
  1,118,107 
Current portion of convertible notes payable
  2,319,687 
  - 
  775,000 
  d 
  3,094,687 
Current portion of notes payable
  - 
  139,125 
  (139,125)
  e 
  - 
Current portion of notes payable- related parties
  - 
  101,636 
  - 
    
  101,636 
Current portion of capital lease
  - 
  10,704 
  - 
    
  10,704 
Deferred revenue
  10,000 
  - 
  - 
    
  10,000 
Total current liabilities
  4,694,648 
  521,209 
  635,875 
    
  5,851,732 
 
    
    
    
    
    
LONG TERM LIABILITIES:
    
    
    
    
    
Long term portion of notes payable
  - 
  397,993 
  (397,993)
  f 
  - 
Total long term liabilites
  - 
  397,993 
  (397,993)
    
  - 
 
    
    
    
    
    
COMMITMENTS AND CONTINGENCIES
  - 
  - 
  - 
    
  - 
 
    
    
    
    
    
STOCKHOLDERS' DEFICIT
    
    
    
    
    
Common stock
  305,411 
  10,000 
  731 
  g 
  316,142 
Additional paid in capital
  134,527,801 
  60,000 
  1,324,269 
  h 
  135,912,070 
Accumulated deficit
  (138,308,701)
  (102,385)
  (446,746)
  i 
  (138,857,832)
Total stockholders' deficit
  (3,475,489)
  (32,385)
  878,254 
    
  (2,629,620)
 
    
    
    
    
    
NON CONROLLING INTEREST IN EZ CLONE ENTERPRISES, INC.
  - 
  - 
  1,960,000 
  j 
  1,960,000 
 
    
    
    
    
    
TOTAL LIABILITIES, STOCKHOLDERS' DEFICIT AND NON CONTROLLING INTEREST
 $1,219,159 
 $886,817 
 $3,076,136 
    
 $5,182,112 
 
See accompanying notes to these condensed consolidated financial statements.
 
 
4
 
 
GROWLIFE, INC. AND EZ-CLONE ENTERPRISES, INC.
PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
 
 
 
Nine Months Ended,
 
 
 
 
 
 
EZ-Clone
 
 
 
 
 
 
 
 
 
 
 
 
 GrowLife, Inc.
 
 
 Enterprises, Inc.
 
 

 
 
 
 
 
 Total
 
 
 
September 30,
2018
 
 
September 30,
2018
 
 
Pro Forma
Adjustments
 
 
 
September 30,
2018
 
 
 
(Unaudited)
 
 
(Audited)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
NET REVENUE
 $953,949 
 $1,513,699 
 $  
       
 $2,467,648 
COST OF GOODS SOLD
  898,962 
  674,848 
  - 
       
  1,573,810 
GROSS PROFIT
  54,987 
  838,851 
  - 
       
  893,838 
GENERAL AND ADMINISTRATIVE EXPENSES
  1,116,724 
  918,635 
  - 
       
  2,035,359 
AMORTIZATION OF INTANGIBLE ASSETS- EZ-CLONE ENTERPRISES, INC.
  - 
  - 
  455,554 
k
  455,554 
OPERATING LOSS
  (1,061,737)
  (79,784)
  (455,554)
       
  (1,597,075)
 
    
    
    
       
    
OTHER INCOME (EXPENSE):
    
    
    
       
    
Change in fair value of derivative
  (120,286)
  - 
  - 
       
  (120,286)
Interest expense, net
  (365,859)
  (28,876)
  - 
       
  (394,735)
Impairment of acquired assets- Go Green
  (60,000)
  - 
  - 
       
  (60,000)
Loss on debt conversions
  (645,483)
  - 
  - 
       
  (645,483)
Total other (expense) income
  (1,191,628)
  (28,876)
  - 
       
  (1,220,504)
 
    
    
    
       
    
(LOSS) BEFORE INCOME TAXES
  (2,253,365)
  (108,660)
  (455,554)
       
  (2,817,579)
 
    
    
    
       
    
Income taxes - current benefit
  - 
  (1,100)
  - 
       
  (1,100)
 
    
    
    
       
    
NET (LOSS)
 $(2,253,365)
 $(107,560)
 $(455,554)
       
 $(2,816,479)
 
    
    
    
       
    
Basic and diluted (loss) per share
 $(0.00)
 $- 
    
       
 $(0.00)
 
    
    
    
    
    
Weighted average shares of common stock outstanding- basic and diluted
  2,996,701,771 
  - 
  107,307,692 
    
  3,104,009,463 
 
See accompanying notes to these condensed consolidated financial statements.
 
 
5
 
 
(a)
Reflects cash received of $775,000 from the issuance of a convertible debenture, less $640,000 paid to EZ-Clone at closing.
(b)
Reflects the retirement of fixed assets at closing.
(c)
Reflects intangible assets booked related to the 51% acquisition of EZ-Clone, less the amortization of one year.
(d)
Reflects cash received of $775,000 from the issuance of a convertible debenture.
(e)
Reflects the retirement of current portion of debt at closing.
(f)
Reflects the retirement of long-term debt at closing.
(g)
Reflects the issuance of 107,307,692 restricted shares of the Company’s common stock for the 51% interest in EZ-Clone, offset by the elimination of the EZ-Clone common stock.
(h)
Reflects the issuance of 107,307,692 restricted shares of the Company’s common stock at a price of $0.013 per share or $1,395,000 for the 51% interest in EZ-Clone, offset by the elimination of the EZ-Clone additional paid in capital.
(i)
Reflects the amortization of the intangible asset for one year of an estimated five year life and the reversal of shareholder distributions.
(j)
Reflects the 49% non-controlling interest in EZ-Clone.
(k)
Reflects the amortization of the intangible asset for one year of an estimated five year life.
 
 
6